By Stephen A. Hamill (Academy Fellow)
Supply chain challenges during the pandemic have become a focal point for Public Procurement Professionals. The overnight demand for personal protective equipment (PPE) shattered traditional public agency supply sources. It exposed other previously unimaginable weaknesses in public agencies’ capacity to respond effectively to a national emergency.
A catastrophic demand overload compromised the manufacturing capacity supporting trusted public agency suppliers. Scarcity ensued, and prices surged, reaching new all-time highs for products and transportation, all of which contributed to the high and stubborn inflation that continues today.
Recently the California Association of Public Procurement Officials (CAPPO) hosted a webinar- Demystifying the Public Procurement Supply Chain. The National Academy of Public Administration (the Academy) and the Public Purchasing Exchange (PPEx) co-sponsored the webinar.
The purpose of the webinar was a public procurement pandemic look back and a look forward focused on three critical concerns:
- Why did the supply chain chaos occur?
- What lessons emerged from the chaos?
- How can supply chain chaos be mitigated in future national emergencies?
A panel of Public Procurement and Public Supplier experts, who worked together during the pandemic to mitigate the supply chain chaos, led the webinar representing 2 of the top 5 Counties in the country, a multinational Fortune 100 Company, and a regional family-owned company:
- Gerald Plummer, Division Manager, Purchasing, Los Angeles County.
- Jack Pellegrino, Director Purchasing & Contracting, San Diego County.
- Sean Behan, Chief Purchasing & Contracting Operations, San Diego County.
- Michael Dunnuck, Regional Sales Manager, Honeywell.
- Lee Jackson, General Manager, Waxie
The Panel was moderated by the Public Purchasing Exchange (PPEx):
- Stephen A. Hamill, Co-Founder and Exchange Administrator.
- Dave Trudnowski, Co-Founder and Exchange Administrator.
Supply Chain Chaos Overnight-Why?
The panel confirmed that they worked in a multi-sectoral intergovernmental partnership throughout the pandemic in what was likely the most chaotic, disruptive, costly, and challenging time in the history of public procurement.
The panel also confirmed that reliable and trusted supplier partners could not meet the massive and sudden overnight demand for PPE. Competition among public agencies contributed significantly to the chaos. The Federal government openly competed with States and Localities for scarce PPE, a situation that was unprecedented in a national or local disaster. A bright spot was localities sharing information to locate reliable resources.
The proliferation of unknown and recently formed PPE brokers, lacking relevant knowledge and experience, confused the PPE landscape. Brokers generally overpromised and underdelivered. PPE Brokers were a distraction from the public procurement mission to find reliable resources. Demands for extraordinary cash deposits, a crazy quilt of outdated ordering and fulfillment processes, and the absence of online access and digital applications were ongoing diversions from the PPE acquisition mission.
Price increases were shocking, quality control was compromised, and delivery was uncertain. A single mask that was cents on the dollar pre-pandemic became $9 overnight. Agency inventories were nonexistent or outdated, traditional supplier shelves were bare, and manufacturing support was in shambles. Public Procurement Professional due diligence efforts to achieve fair and reasonable quality and pricing fell victim to competition among public agencies, product scarcity, and the constant search for product.
Out of Chaos the Hard-Fought Supply Chain Lessons-What?
The panelists concurred that leadership challenges were constant companions during the pandemic. Two leadership principles became pandemic themes:
- Wisdom is the result of good judgment, and good judgment is the result of bad judgment.
- If you don’t accept and learn from a challenging experience, you are bound to repeat it.
The panelists related and discussed several procurement lessons learned from the pandemic challenge. Each lesson seemed to follow the rocky road from challenge to bad judgment to good judgment and finally to the wisdom gained from the lesson learned over time.
Just-in-time delivery wasn’t. Public agency-ready inventory of critical disaster supplies and warehousing capacity shrunk as just-in-time supplier deliveries grew. While a positive in reducing public agency overhead in disaster-free times, this reality quickly became a troublesome negative during the pandemic as public agencies competed and struggled for scarce PPE.
Trusted suppliers lacked inventory and essential manufacturing support to catch up with PPE demand. Public agencies relied on trusted Suppliers that were market brokers and, in turn, relied on 3rd party manufacturers for inventory. Understanding Supplier manufacturing relationships was a critical missing link as the pandemic unfolded.
Traditional supply methods and assurances simply do not work in a disaster. New start-up brokers using the pandemic as an opportunity for profit are unreliable and disappear after the disaster. Lack of disaster preparation with trusted suppliers in advance of a disaster is critical.
Addressing supplier disaster contract pricing, inventory, quality, and delivery before the pandemic were the key barriers to effective and timely disaster response. The absence of intergovernmental partnerships built to share information, resources, and contracts during a disaster was also a challenge to effective disaster response.
Mitigating Future Supply Chain Chaos-A Supply Chain Flight Plan-How?
Each panelist survived the pandemic supply chain meltdown and gained valuable wisdom necessary to plan for inevitable future disasters while mitigating a future supply chain breakdown. The panel shared their knowledge and advice.
Prepare Now. The next disaster is just on the horizon–monkey pox, another pandemic, flood, earthquake, hurricane, and wildfires.
Form Intergovernmental Partnerships. Collaborate. Public agencies share a common challenge and need for advanced planning, critical supplies, and Suppliers to address pandemics and other disasters. Share contracts, resources, and suppliers. Panelists of San Diego and Los Angeles Counties related success in sharing information and locating critical, reliable, and cost-effective PPE sources through an ongoing intergovernmental pandemic partnership.
Initiate Supplier Partnerships. Public procurement and Supplier relationships have fundamentally changed due to the pandemic experience. There is a new awareness of the need for public-private partnerships to meet critical supply demands during a disaster. Building stronger ties to Supplier local representatives strengthens disaster response capacity.
Panelists Waxie and Honeywell, as a broker and manufacturer, respectively, reported success working in partnership with San Diego and Los Angeles Counties to timely meet PPE demand at reasonable and fair pricing. The panelists collectively related public-private partnership considerations moving from a transactional Supplier relationship to a strategic relationship based on metrics and outcomes:
- Build transparency and a win/win into public agency & Supplier relationships.
- Ask the right questions and complete due diligence in advance of a disaster.
- Use multiple Suppliers in critical need areas to mitigate supply risk.
- Be creative. Employ disaster clauses to address pricing, inventory, quality & delivery.
- Build Supplier inventory & manufacturing due diligence into solicitations & awards.
- Understand vertical and horizontal supply chains.
- Use Standby arrangements where the supplier does not have manufacturing capacity.
- Pre-qualify existing suppliers on the capacity to ramp up to meet emergency demand.
Establish Ready Inventory. Provide a window for Suppliers and manufacturers to catch up with emergency demand. Public agencies should consider a minimum 90-day inventory of critical disaster and disease-related supplies as a key element of preparation. Restore the required minimum warehouse capacity-insource or outsource to accommodate a 90-day “bubble” of inventory.
Leverage Technology. Establish online visibility & transparency to available products. Track orders through delivery online. Build intergovernmental Marketplace partnerships among State, regional and local agencies to empower agency cooperation and direct sharing of disaster and other related contracts.
Notes:
Stephen A. Hamill is a Fellow of the National Academy of Public Administration (the Academy) and Co-Founder & Exchange Administrator of the Public Purchasing Exchange (PPEx)-a technology hub empowering Public Agencies to directly share and access government contracts, improve the overall procurement experience, and deliver online procurement collaboration & leadership resources.
For more information about the Center for Intergovernmental Partnerships at the National Academy of Public Administration, contact Nancy Augustine at naugustine@napawash.org.
Contact information for the individual panelists and moderators is as follows: