SC Coordination and the Second Wave of Covid Infections in India

The on-going pandemic made several terms as part of household conversation. “Supply Chains” was one of them. From news anchors to government officials, all became experts overnight and started explaining the global pandemic and its economic consequences through flow of goods and services across borders. But that is where the analysis stopped. We can see how lack of deep understanding in the bureaucracy of how disparate supply chains are managed has led to a phenomenal crisis in managing of the pandemic and the vaccination process in the country. It is true that the recent second wave of infections has inappropriate social behavior at its heart, but then crisis management is all about tying up all ends left loose by others, isn’t it, while changing social behavior in the long run.

Supply chain management is about coordination. Without coordination, the supply chain remains a loose set of suppliers and producers and financiers and inventory managers and warehouses and distributers – all acting to their own beat and often out of step with each other – each optimizing their own objectives and the overall goals of the supply chain remain underserved. The decisions across the supply chain for fighting the pandemic were at loggerheads with each other. This is exactly the situation in which we find ourselves as we struggle to manage this new and a debilitating wave of treatment of infections from Covid across the country.

Let us look at what happened. Around the latter half of the first wave, hospitals were finally geared up – beds, medicines for treating Corona, complementary devices like syringes, ventilators etc. were available; the supply of masks, PPE, oxygen cylinders, medicines like remdesivir got ironed out – their producers increased the production capacities, secured their raw material through forward contracts, and planned their inventories; inventories were built up and placed across the supply chain, with wholesalers, distributors, hospitals etc. The RT-PCR kits were adequately in supply and easily accessible. You could say that the supply chain was “loaded.” Then a very textbook and predictable “bullwhip effect” took control of situation. The supply chain was never coordinated and State Level Planning Centers for Covid lost track of each echelon that comprised this multiproduct, multi-level, and multi-country supply chain. As the infection rates and consequently the demand for tests, ventilators, medicines, beds, and even doctors and para-medical staff etc. decreased, inventory across the entire supply chain started to grow. Organizations supplying these key materials reduced production. Many closed down productive capacities; distributors desperately reduced their inventory levels by finding export markets for many of these products; hospitals slowly removed beds deployed for Covid Wards; and markets for key resources like oxygen moved to other sectors. During the first wave, while a slight increase in demand for Covid prevention and treatment led to a high buildup of excess inventory across the entire supply chain, during the second wave we find that the entire supply chain’s inventory of goods and people and capacities had been dismantled thereby leading to acute shortages that we are seeing these days – beds in hospitals, oxygen cylinders, remdesiver, ambulances etc. – all have become scarce. The capacities have to be again added or re-purposed and inventory has to be built. And this will take time. Lets remember, history tells us that there will be other waves before this pandemic dies out. What can we learn from how supply chains are coordinated?

To plan for effectively managing the supply chain for addressing the spread of pandemic, the government and the industry need to make the following changes in their approach to manage the herculean effort – the supply chain has to be coordinated. Given that we are addressing a national disaster, there has to be a central planner that is planning across the entire supply chain, how so ever distributed it is in ownership and geographical location. First, coordination happens when there is cooperation – visibility of information to all players involved. Its not enough for a firm that produces Remdesivir to declare their production quantities but also for all to know its intermediate and raw material inventories and planned requirements (forecast) of others who are going to consume this medicine. They also need to know what the government is planning to do daily. Second, long lead time items need to be identified and appropriate inventories planned. Critical vulnerabilities in key ingredients have to be negotiated with contracts that cover a range of demand scenarios. Third, orders to plants or suppliers of beds and related accessories need to be done in as small batches and as regularly as possible so as to not create spike in requirements because small spikes in order size would lead to large signals of perceived demand upstream of the supply chain thereby leading to higher inventories than needed as well as unnecessary additions to capacities. The current surge in demand is bound to cause this problem once the surge subsides, if there is poor coordination at the planners end. Fourth, there is a need to reduce  production and delivery lead times to reduce the fluctuations across the supply chains. Inventories can sit along the supply chain but they must be allocated according to a central plan based on shifting demand. Transport of Covid material must be done on priority. And finally, flexibility in configuring hospitals to vary Covid related capacity requires a quick changeover planning – most hospitals were caught wanting on the same. It requires both dynamic allocation of beds as well as key materials required. When uncertainty is high, flexible capacity is the answer.

One can rarely add capacity during the peak demand with ease. You have to forecast and plan during the trough. The golden period between Nov-Jan last year was wasted by the planners. ICMR’s Serosurvey of December should have become an input for any forecaster and planner for resetting the resources across the supply chain. But it was read with a Kahneman-Tversky’s cognitive bias – reading the February data as small percent of population been infected rather than as many more would be getting infected even in normal circumstances since the vaccine roll out would take time. The later is what a planner-forecaster should have read.

But the current second wave was predictable. The wedding season, municipal elections in several cities, and the cricket match in Ahmedabad were the canary in the mine. The planners in the country knew that elections in several states were going to come and that Kumbh would bring large number of people together. Schools and colleges were encouraged to open albeit gingerly. Simulation models of the spread of virus were also available. Yet we allowed inventories to deplete, capacities to lapse and hospitals to go unprepared. We either became complacent in our planning or we just did not have the expertise to build a coordinated supply chain to fight the pandemic.  The government allowed firms to operate independently within the market and they optimized their side chains. The “country plan” never got updated. The entire supply chain has to act like a single firm to meet the challenge that the infections are throwing and  then save lives. All three,  Indian Pharmaceutical Association and Indian Medical Association and the Government must come together to create a single integrated plan – coordinated planning and decentralized execution is the only answer.

To prepare for the peak of this wave or the next wave or for the next mutant (because we do not know what is in store for us), we must coordinate all activities across the supply chain. The virus is not vanishing soon (and the socially appropriate behavior is perhaps a far cry to expect in India), but at least we can be ready to manage its aftermath.