Abstract

Supply chain failed during the initial phase of the COVID-19 pandemic. Irrational consumer behaviour created a panic buying and led to bullwhip effects. The United States government response to the pandemic from manufacturing vaccines to distribution to consumers in a very short period of time created further uncertainty as the local authorities where vaccines were to be administrated were unprepared for implementing the vaccine supply chain. The federal pandemic supply chain, Operations Wrap Speed (OWS) actually contributed to confusion, uncertainty and the panic environment at the local level. Panic for the fear of virus and confusion ensued until the end of March 2021. Lack of communication and information sharing among stakeholders are to blame for such an inefficient and ineffective pandemic supply chain execution. Once information filtered through the local level, the pandemic supply chain functioned well as it should have performed. This study suggests that a pandemic supply chain infrastructure should be in place at the local level for future emergency deployment.

Keywords

commercial supply chain, pandemic supply chain, monopolistic market, oligopolistic market, information sharing

1. Introduction

During the COVID-19 pandemic, supply chain became a “whipping boy” blaming for shortages of almost everything from toilet paper to test kits. Never before has supply chain been in the main stream news media around the world during the COVID-19 pandemic. A few samples include; “U.S. Food Supply Chain Is Strained as Virus Spreads” (The New York Times, April 13, 2020), “World Economy Shudders as Coronavirus Threatens Global Supply Chains” (The Wall Street Journal, February 23, 2020), “COVID-19 crisis has laid bare weaknesses in supply chains” (Financial Time, May 12, 2020), “People are hoarding toilet paper. The truth about the supply chain” (CNN, March 18, 2020). The public were under the impression that supply chain is outdated and is the main source of such disruption of daily life. Unlike the Spanish flu of 1918, which became an international epidemic over the course of a year, COVID-19 has spread to every continent within weeks, outpacing our supply chain’s ability and healthcare system to test, track, deliver, and contain people with suspected infection” (Keesara, Jonas, and Schulman, 2020). Supply chain simply was not equipped and prepared for such a sudden change in almost every aspect of the supply chain function (sourcing, manufacturing, and distribution). Irrational consumer behaviour dominated markets creating bullwhip effects along the supply chain map. Panic buying and stock piling of critical supplies leading to shortages of many consumer products. A single positive Corona case in a community can cause demand for PPE to increase from 300% to 1,700% (Mahmoodi et al., 2021). In spite of the unprecedent change in landscape in consumer markets, supply chain including pandemic supply chain (Katz, et al.,2021) adopted rather quickly to the new “norm” restoring normalcy in consumer markets within 6 months.
During the initial phase of the pandemic, most of resources and supply chain planning have been limited to three areas in pandemic supply chain; product design, manufacturing and distribution. Product design in vaccine supply chain mandates a special set of requirements. Vaccine rollouts are normally planned with a known vaccine for a known population (Duizer, Jaarsveld and Dekker, 2018). However, this is not the case for sudden outbreak pandemic like Covid-19 virus. First, a vaccine has to be developed, produced and distributed in a very short time period to immunize the entire population with a scale up capacity in almost every aspect of the supply chain; supplies, sourcing, manufacturing, packaging with special equipment, warehousing for storage, distribution and delivery of the product to the population (last miles) within a relatively short period of time. We simply did not have such capacity and knowledge with the COVID-19 pandemic. One study even claims that scale up production doesn’t work in a vaccine production (Neergraard, 2020) and quality of the vaccine effectiveness may be in jeopardy (Johnson, 2021). In spite of many challenges that supply chain encountered during the initial pandemic phase, supply chain quickly adopted to this new “norm” and delivered products to population within an incredibly short period of time from the outbreak of pandemic in December 2019 to January 2021 when a vaccine has been distributed to the point of users. Although a long way is ahead of us to perfect vaccine supply chain, the future is promising that supply chain professionals can and will deliver products (vaccine) to the consumers.
Vaccine supply chain is complex and different from commercial supply chain. The government (major player) is interested in the acquisition of vaccines to minimize the social costs while manufacturers are seeking the acceptable return on investment. Because of yield uncertainty and cost of production uncertainty, the vaccine supply chain is known as misalignment of objectives and decentralized decision making in multiple dimensions. For example, manufacturers do not fully design their own products and end users are typically not the ones paying for the products (Chick, Hasija and Nasiry, 2017). Furthermore, the buyers of vaccines are often non-profit organizations (e.g., governments), whereas suppliers are for-profit companies (Herlin and Pazirandeh, 2012).
Multiple factors will make the rollout of a COVID-19 vaccine more complex than any other previous vaccine efforts. The coronavirus vaccine has been developed four times faster than other vaccines. The consequence of this pace of clinical development is that governments and policy makers have had far less time than previously to prepare for a robust vaccination program and supply chain execution. Accordingly, the COVID-19 situation may require vaccinating more than half the adult population with two doses from Pfizer’s vaccine. Globally, that means billions of people could seek the vaccine (Agrawal, et al, 2020). Massive production with urgency forced supply chain planners to “skip” several steps (processes) along the supply chain process. In short, pandemic supply chain had to operate with a “broken” chain in order to speed product delivery.
Criticism on supply chain dealing with this unprecedent pandemic is misplaced and unfair as we were dealing with a completely different sets of circumstances. The purpose of this study is to investigate pandemic vaccine supply chain from sourcing to the last mile of delivery in the United States. Pandemic supply chain will be explained and analyzed in comparison with commercial supply chain that we have been accustomed. A comparative analysis of these two supply chain models should give us why and how the pandemic supply chain initially failed but resurrected. Lessons learned from COVID-19 pandemic supply chain should shed some light for future pandemic supply chain preparation.
This paper is organized as follows. Two comparative supply chain models (commercial and pandemic) will be discussed to highlight unique characteristics of each supply chain. This comparative analysis will illustrate how the pandemic supply chain operates in comparison with commercial supply chain and hopefully provides reasons why the pandemic supply chain responded the way it did. We hope this paper illustrates that criticism of supply chain operations during the initial phase of pandemic is unfair and unwarranted. Based on two supply chain models presented and discussed in the previous section, critical supply chain elements in each model will be contrasted and discussed. Conclusion and lesson-learned will be presented in the last section of this paper.

2. Commercial Supply Chain

Figure 1 illustrates a generic commercial supply chain map. Supply chain is a process, a journey from the origin (product design) to the end (customer experiences). Each node (player) has a unique role to play in order to maximize return for investment. Value added to each node creates societal surplus where every player including the general population benefit in the long run. Once information is collected, analyzed and shared with supply chain partners based on market intelligence, product design is launched which determines the type of supplies/suppliers, sourcing, and modes of transportation to the end customers. The last mile of delivery is crucial to complete the supply chain cycle. Early detection of the “weakest” link in the chain assures the maximum benefit for all participants (Slone, Mentzer and Pittman, 2007). Complexity of supply chain becomes more challenging as the supply chain becomes the global scale powered by technologies. Suppliers are scattered around the world, production facilities are located across the different continents with different regulations and compliances, multiple transportation modes being utilized to maximize return on investment. If and when any one of the links (player) performs at less than optimum level, the entire supply chain suffers. Communication and information sharing among and between players along the chain become a critical success factor. Research indicates that trust-based commitment plays an important role moving each player along the supply chain map that minimizes major disruptions (Kwon and Suh, 2004 and 2005; Shin, Yoo and Kwon, 2020). Disruption along the chain by one member immediately sends a warning signal to the rest of the supply chain partners for corrective action. The weakest link will be highlighted and addressed. Production and distribution schedules will be accordingly adjusted to minimize potential loss caused by disruption. Last mile delivery is a measure of supply chain success; efficiency (cost) and effectiveness (customer experiences).

Figure 1. Commercial Supply Chain

3. Pandemic Supply Chain

On May 15, 2020, Operation Warp Speed (OWS) was announced in response to pandemic vaccine distribution. In a nutshell, OWS is a mini pandemic supply chain under extreme urgency. OWS is a partnership of the Department of Health and Human Services (HHS), the Department of Defense (DOD), and the private sector to control the COVID-19 pandemic by advancing development, manufacturing, and distribution of vaccines, therapeutics, and diagnostics (Reiser, 2021). OWS is providing support to promising candidates and enabling the expeditious, parallel execution of the necessary steps toward approval or authorization of a safe vaccine approved by the Food and Drug Administration (FDA). OWS’s role is to enable, accelerate, harmonize, and advise the companies developing the selected vaccines. The pharmaceutical companies will execute the clinical or process development and manufacturing plans, while OWS leverages the full capacity of the U.S. government to ensure that no technical, logistic, or financial hurdles hinder vaccine development and/or distribution. Thus, each player along this chain has been assured of acceptable financial returns for their investment. OWS planned vaccine distribution at the end of 2020 or early 2021. The plan calls for process development and scale up manufacturing while their vaccines are in preclinical or very early clinical stages (Moncef and Hepburn, 2020).
Since September, 2020, OWS has held weekly table-top exercises to help practice the distribution of the vaccine with partners including McKesson, FedEx and UPS as distributors. OWS began to hold working groups in the summer 2020 with distribution. The summer meetings helped the government to understand the companies’ capacity and distribution networks. Unfortunately, such practice did not extend to the local supply chain networks (last mile delivery) which caused much supply chain confusion at the local level and created inefficient supply chain execution.
Figure 2 illustrates a snapshot of the OWS supply chain process. The scientists design the COVID-19 vaccine under extreme stressful circumstances in terms of time. A special feature of the influenza vaccine industry is that a manufacturer does not decide the product design, rather a handful of scientists design the vaccine components based on knowledge available at that time period. On one hand, the production process is complex and highly uncertain; on the other hand, there is a tight time window left between the announcement of the composition and the start of the COVID-19 vaccine production. The production of a vaccine that matches the newly emerged influenza strain cannot begin until after a pandemic virus has emerged. Thus, a well-matched vaccine is unlikely to be available before the virus begins to spread which delayed the product design phase in the supply chain. In addition, makers of COVID-19 vaccines need everything to go right as they scale up production to hundreds of millions of doses and any small mishap could cause a delay. Delay in production creates a ripple effect along the supply chain map. Some of their ingredients have never before been produced at the sheer volume needed. Making small amounts of mRNA in a research lab is easy but prior to this pandemic, no one made a billion doses or 100 million or even a million doses of mRNA. In addition, production depends on enough ingredients. Although Pfizer and Moderna insisted that they have reliable suppliers, it has been reported shortages of certain materials such as glass vial, to syringes, to sophisticated cooling systems, special refrigerators, dry ice, etc., that hampered and delayed vaccine production. With shifts running 24/7, if there is one raw material missing, capacity will be lost forever (Neergaard, 2021). In addition, production capacity was lost during the first month of U.S. response due to the fact that a highly centralized regulatory system prevented many laboratories from joining production efforts. Once a pathway was opened, leaders of most clinical laboratories either didn’t know how to navigate regulations or lacked the capacity and resources to produce their own tests. (Botti-Lodovico, et al, 2021).

Figure 2. Pandemic Supply Chain

Unfortunately, the OWS roadmap for vaccine distribution stops at the state distribution centers as final destinations and not at the point of users, local political entities. The fact that OWS plan addresses only state level as a final destination left the local political entities unprepared for “last mile” vaccine delivery. As a result, OWS supply chain initiative created a false “security” that vaccines would be available for the general population at the end of 2020 or early 2021. Communication and lack or absence of information sharing with public and states and local levels created confusion and distrust of the government COVID-19 vaccine policy. The level of mistrust exacerbated by the pocket of population who do not trust the vaccination itself (Weintraub et. al: 2021). One recent study shows that one-third of the population are reluctant buyers of vaccine (Lee and Chen, 2021). The level of mistrust is alarmingly high in the minority communities. Black and Hispanic communities have been hard hit by COVID-19, yet they have historical reasons to mistrust healthcare or defer vaccinations (Cerise, Morgan, and Bhavan, 2021).
Lack of communication on quantity and timing of vaccine availability at the local levels created unnecessary confusion and anxiety. They failed the fundamental supply chain requirement; communication and information sharing among and between players.

4. Comparative analysis of two supply chains

Table 1 illustrates differences of key indicators of two types of supply chains. In commercial supply chain, engineers and supply chain professionals are initially involved in product design based on market intelligence. While engineers participate from product specification prospective, supply chain professionals participate from logistics prospective; sourcing, locations of production, packaging, storage, selection of transportation modes (Jenjevic, Goentzel, and Winkenbach, 2020). Product design in the pandemic vaccine supply chain is limited mostly to scientists. As such, consumer’s choice of vaccines is very limited in the pandemic supply chain. Whereas return on investment is the guideline in commercial supply chain, speed and safety are the principal driving forces in the pandemic vaccine supply chain. Cost of production, distribution and administration do not enter into the investment decision. Vaccines in general and a pandemic vaccine in particular is considered as “public goods”.
Supply chain professionals in commercial supply chain work very closely with various stakeholders in an organization especially with marketing departments to assess the product lifecycle in preparation of second-generation products. Accordingly, supplier engagement with supply chain professionals is based on long-term collaborative arrangement whereas no such collaborative relationship exists in pandemic supply chain. While the cost/price of goods is one of the important factors in building a long-term relationship with suppliers in the commercial supply chain, costs rarely enter into the negotiation process in a pandemic supply chain. As such, suppliers usually dictate cost/price of goods they provide in pandemic supply chain. Saving life is the ultimate goal in pandemic supply chain. Commercial supply chain is flexible enough to deal with local, regional and global markets whereas the target market for pandemic supply chain is local specifics where recipients of the vaccine do not have a choice of products such as Pfizer-BioNTech, Moderna, or Johnson & Johnson’s Janssen nor a choice of market places (hospitals, pharmacies, special designated places, doctor’s office, etc.).
Production capacity in commercial supply chain is flexible whereas production capacity in pandemic supply chain is limited and inflexible due to the sudden outburst of a new and untested virus. Commercial supply chain utilizes every distribution channel to meet the last mile delivery that include brick-and-motor, omnichannel and online shipping modes. Choice of transportation modes in pandemic supply chain is limited to air and special transportation modes such as cold chain and specially designated distribution centers which are equipped with special facilities to preserve vaccine characteristics.

Table 1

Characteristics of Commercial, Flu and Pandemic Vaccine Supply Chain

Source: authors

Commercial supply chain operates in highly competitive markets whereas pandemic supply chain operates in a highly monopolistic market as a sole seller of the vaccine and at the same time behaves like an oligopolistic agent as a sole buyer of certain materials needed in vaccine production on a large scale. In short, the government in pandemic supply chain plays as an important player in both types of markets, seller of vaccines and buyer of certain materials in producing vaccine. Return on investment (ROI) is a key metric in commercial supply chain whereas safety (effectiveness) and speed are two important indicators of pandemic supply chain. Efficiency (cost) is not a critical factor in pandemic supply chain.

5. Conclusion and Lessons Learned

Supply chain was tested and challenged during the initial phase of the COVID-19 pandemic outbreak. Consumers panicked in creating bullwhip affect in the market while the government did not have a clear direction in dealing with this unprecedent national health crisis. Supply chain professionals were overwhelmed with the severity and intensity of this pandemic. Lack of information and communication between and among decision makers at the highest-level hampered supply chain professionals in their efforts to cope with this crisis. Unfortunately, the national vaccine distribution networks (OWS) in the United States of America ended at individual state levels, the constituent regional political entities, leaving the local government unprepared for the last mile delivery. Confusion and panic spread at places where the vaccine is administrated. Making the situation worse, lack of communication on quantity and timing of vaccine delivery to the local market exacerbated the situation to the point that many people lost the trust of the entire vaccine supply chain.
Once government policies became clear and relayed to consumers at the local levels, supply chain performed as it should have; capacity (volume) is secured and transportation from manufacturers to final destinations (locals) was in place. Communication and information sharing between and among all stakeholders became a crucial factor to address the emergency situation that people were unaccustomed. Consumers are known as rational once information is fully provided and digested. Panic behaviour sets in when information is partial and unreliable.
Another area that we learned from this pandemic supply chain is that preparation of infrastructure should be in place at the local level. Initial response to the COVID-19 pandemic was failure due to lack and/or absence of infrastructure at the local level where vaccine is to be administrated. Once information became available at the local level, healthcare and supply chain professionals executed vaccines almost flawlessly without major disruptions. When the pandemic response infrastructure is in place at the local level, a frequent stress test of the pandemic supply chain infrastructure, similar to the stress test instituted after the 2008 financial crisis, should assure that future pandemic outbreaks will be managed with in orderly fashion (Simchi-Levi, and Simchi-Levi, 2020). In short, we learned that information sharing and local supply chain infrastructure are key elements for successful implementation of pandemic supply chain.