Morgan Stanley
  • Now, What's Next? Podcast
  • Nov 17, 2021

When Just-in-Time Is Too Late

Transcript

Sonari Glinton:

In the wee small hours of April 6, 2020, Andy Artenstein started the six hour drive to his dealer in New Jersey.

Dr. Andy Artenstein:

There was one thing going through my mind, I have to come home with something. I couldn't bear coming home empty-handed.

Sonari Glinton:

This was a big deal in every way.

Dr. Andy Artenstein:

Millions of dollars, at that point, would've been changing hands for this. I had to get involved. One, I want to see it with my own eyes and two, if I'm responsible for this, I want to actually be there when this transaction occurs.

Sonari Glinton:

The rest of Andy's team flew in on a private jet and they all met at an industrial warehouse.

Dr. Andy Artenstein:

It was a classic unit. You pull in the back and there's a bunch of loading docks. You pull in the front and there's just a storefront. It's on a strip mall with a bunch of other storefronts. And we meet up with the point person. They actually had product. We open some of the boxes randomly, and it was atmosphere of excitement at that point. That was the closest we'd gotten in weeks and there was hundreds of thousands, if not more. I thought we were in business.

Sonari Glinton:

Andy's team was getting ready to load the goods onto semi-trailers disguised as refrigerated food trucks. And then ...

Dr. Andy Artenstein:

I got a tap on the shoulder from the dealer, told me that the FBI wanted to talk to me.

Sonari Glinton:

It may have sounded pretty shady, but Andy wasn't breaking the law. Dr. Artenstein is an infectious disease specialist and he's in charge of pandemic response at Baystate Health in Springfield, Massachusetts. Now he was trying to get personal protective equipment, or PPE, for the thousands of workers in his hospitals and labs. When he got that tap from the FBI, COVID-19 was hitting the entire Northeast incredibly hard, and his staff had only a weak supply of masks. He was willing to do just about anything to keep them safe.

Sonari Glinton:

I'm Sonari Glinton. And on this episode of Now, What's Next, an original podcast from Morgan Stanley, how the just in time supply chain model failed us just when we needed it most. Now look, no one really wants to spend a whole lot of time recalling the early days of the pandemic. We all know what a scary moment that was, especially for healthcare professionals struggling to find PPE.

Dr. Andy Artenstein:

It's like a firefighter going into a fire without adequate protection. You wouldn't do it. It'd be deadly.

Sonari Glinton:

As far as hospital in the US go, Baystate was well prepared to deal with outbreaks like COVID-19. They followed what was happening around the world and made early preparations. But when Dr. Artenstein's team tried to get more PPE in February and March ...

Dr. Andy Artenstein:

At that point, our traditional suppliers had already dried up in their capabilities.

Sonari Glinton:

In normal times, Baystate has a small supply chain team who keep the staff kitted out. They have systems in place that get what's needed when they need it in a cost effective way with little to no waste. This just in time model works most of the time. That is, well, until the pandemic.

Dr. Andy Artenstein:

We had amplified our supply chain by about tenfold from three or four people to 30 or 40 people working around the clock, literally 24 hours a day, seven days a week to source leads. And we were taking every lead from every place. Many of them were while goose chases.

Sonari Glinton:

While goose chases, backroom deals, the FBI. Now, how did it get to this point? Well, Dr. Artenstein says there were a few key factors at play. Number one, the US government didn't have the PPE stockpile it needed, or I should say didn't have it in anymore.

Dr. Andy Artenstein:

After 9/11 actually, there was a lot of interest in bio terrorism and there was a lot of interest in national stockpiles. That's when they were created in 2001 and two. The problem is that over time they weren't replenished.

Sonari Glinton:

To be clear, experts like Dr. Artenstein had been warning about how unprepared we were for an inevitable pandemic for years. But ...

Dr. Andy Artenstein:

When governments looked for ways to cut costs and resources like the rest of us, human nature, what are the things we're not using that we can afford to go without?

Sonari Glinton:

At the same time, more and more PPE manufacturing moved to China and it was produced on an a just in time inventory model. Now that means you don't get the supplies until you need them and then you only get what you need without a lot of buffer. And in this case, it was coming in on ships from Asia.

Dr. Andy Artenstein:

The downside of that, of course, is number one, that a lot of us manufacturers have dried up, and number two, when Asia runs into a problem, everyone runs into a problem. When you put all your eggs in one basket and that basket gets disrupted, you have broken eggs.

Sonari Glinton:

Say for instance, when a virus breaks out in China and all the factories there grind to a halt and the ports close down slowing shipping to a standstill.

Dr. Andy Artenstein:

The just in time became not enough time, and it's too late to be thinking about US manufacturing when it's the doors have been closed on some of these things. And so the supply chain was literally broken. The pandemic broke the supply chain.

Sonari Glinton:

I think that bears repeating. The pandemic broke the supply chain. And in those early months, too many doctors and nurses were improvising PPE out of whatever they could cobble together. Like Dr. Artenstein, they were figuring out how to solve a broken supply chain on their own, often by going through unorthodox channels and unproven dealers. So when a promising lead came in, Dr. Artenstein's team went for it and he went along to make sure it happened.

Dr. Andy Artenstein:

Well, I mean, we were talking at that point about a million N95 masks, which would've been a pretty good score for anybody. And we were also talking about a lot of money, but my biggest concern was letting our staff down, who were literally feeling like they were risking life and limb.

Sonari Glinton:

So let's go back to that warehouse in April 2020, when Dr. Artenstein's elation at landing all that PPE was cut short by the FBI.

Dr. Andy Artenstein:

And sure enough, there were two agents there. I asked to see their badges. One was an FBI agent and the other was with Homeland Security. They told me they were there to check my credentials to make sure that this was not going to a black marketeer or some other opportunist.

Sonari Glinton:

The agents seemed to believe his story. They said they needed to make some calls, hours went by then Dr. Artenstein got word the shipment might be sent somewhere else.

Dr. Andy Artenstein:

I was heartbroken momentarily when I learned all that. It wasn't about me. It was about expectation that we'd be coming back with something to help our folks, was all about hope.

Sonari Glinton:

But there was no way he was throwing in the towel. Dr. Artenstein called his CEO and asked him to call their local member of Congress for help. Then Dr. Artenstein crossed his fingers and headed back home to Springfield.

Dr. Andy Artenstein:

I left our supply chain people in the warehouse with instructions they couldn't leave until they saw wheels up on the trucks. And so this was like a classic Good Fellows movie.

Sonari Glinton:

Hours later, Dr. Artenstein finally got word that their trucks were loaded and on their way to the hospital's warehouse, a PPE warehouse that they had never needed in the past.

Dr. Andy Artenstein:

Because of this pandemic, we actually leased 24 hour secure, double locked warehouse space with a live security presence and cameras and everything else just because of the environment.

Sonari Glinton:

And he got a photo and a phone call just after midnight and he saw the boxes of N95 mass getting unloaded.

Dr. Andy Artenstein:

It felt fabulous. It felt like finally something had gone right. I mean, I can't tell you how happy people were and how good they felt that our health system would go to any length to get what they needed.

Sonari Glinton:

The pandemic forced leaders like Dr. Artenstein to take risks, solve new problems and fill in gaps of the broken supply chain all while keeping their own team members afloat.

Vanessa Iarocci:

I felt a real personal imperative to try to figure something out. It felt like I was on like some kind of rescue mission.

Sonari Glinton:

Vanessa Iarocci is an angel investor, and she teaches at the University of Toronto's Business School. But at the start of the pandemic, she was running McCarthy's, it's a school uniform company that suddenly had no customers when schools shut down indefinitely. Tell me the world of running a uniform in business when a pandemic hits.

Vanessa Iarocci:

There was one word for it, and it was that it stopped. And it was like this moment where we thought, "Oh my God, what on earth are we supposed to do?" And so I thought about our team and all the families and how if the business shut down that they would be really severely impacted. Not figuring out a way forward, I didn't even think that was an option.

Sonari Glinton:

Now even before the crisis here, you were paying attention to what was happening in Italy. Why was that?

Vanessa Iarocci:

So my uncle was on the front line in Italy. Most all doctors in Italy were funneled into COVID crisis management. And in and around January, he called and said he's been putting in 14-hour days of the hospital and some people were just dying on stretchers, waiting for treatment. And they did close schools in Italy in February as well.

Sonari Glinton:

Staying in to her uncle's situation to help Vanessa make decisions about her own business. She sat down with pen and paper to break the company down to assess it.

Vanessa Iarocci:

We help communities do their jobs and learn together. We have warehouses. We have supplier relationships. We really understand how public procurement works and looked at the situation at hand, which was global pandemic, and tried to find some kind of intersection between those two things.

Sonari Glinton:

In March 2020, the demand for medical grade PPE was very high in healthcare settings and later in schools. And as we well know now, supply was low and Vanessa could get it.

Vanessa Iarocci:

We are lucky in that we take a relationship first approach with our supply chain. And so in March, I was able to connect with suppliers who trusted our team and who I trusted and we were able to actually secure that critical PPE very early on in the crisis from overseas.

Sonari Glinton:

When you say relationship first, what does that mean? How does that show up?

Vanessa Iarocci:

Really, I just made that up. Really, what it means is there's no official. I don't think that's any kind of official term, but essentially what it means is our suppliers are running businesses just like us and they're humans and they're people, they have families, their factory is their business. And so I made it a rule that you need to get to know your suppliers. You need to get on a plane and you need to go see them. You need to break bread with them. Certainly, that's what I did. I spent a lot of time in Asia and the Middle East, in fact, visiting my suppliers multiple times a year and we developed a relationship.

Vanessa Iarocci:

And when these factories had multiple people coming at them for PPE, they were more willing to do business with us.

Sonari Glinton:

Vanessa says long distance supply chain relationships too often are transactional. They get dehumanized. She took a different approach, building and nurturing relationships with her suppliers, which would prove to be critical to saving her business. And in the spring of 2020, those relationships made it easier for Vanessa to wire a million dollars for PPE, which is a lot for a small company.

Vanessa Iarocci:

At the time, it was a little bit like the wild west. It was an all cash economy in March 2020. And what I mean by that was normally when you order overseas, you might put something like a deposit down or get a letter of credit. There was none of that happening. It was basically, if you want to secure resources, you need to wire us the money in an hour.

Sonari Glinton:

McCarthy's donated a lot of medical grade PPE and sold the rest at a low margin to keep the lights on. At the same time, Vanessa was thinking long term and decided to pivot again, this time making kids masks.

Vanessa Iarocci:

And so that led us to talks to our supplier in Egypt.

Sonari Glinton:

Give me a window into some of those conversations.

Vanessa Iarocci:

Give you a window and you'll think it's pretty hilarious, because this is not at all how business would've been done in my previous life. It was pretty much a text that would say like, "Hey Sam, can you make cotton masks?" And he'd say, 'Sure. What kind of masks do you need?" And because supply chains were taking so long, this is where the trust comes in again. Normally in production like this, you would design something, you would prototype it, they would send it to us, there'd be all this QC. I was pretty comfortable with his quality standards and his fabrication already.

Sonari Glinton:

Is that normal? I mean, how common are these types of relationships?

Vanessa Iarocci:

It's not common. It's not. And the reason it's not common is because most businesses have pivoted to more of a just in time model where they just want the cheapest input. And so many, many businesses are constantly pivoting their supply chain and you really saw the consequences of this during the global crisis.

Sonari Glinton:

The just in time manufacturing model began with the auto industry. Henry Ford noodled with the idea, but it didn't take hold in the US until much later. Just in time's principles came from the Toyota production system, or what's called the Toyota way in the 1930s. And in a lot of ways, it was born out a necessity. As it developed in post World War II Japan, there wasn't much money for big investments as industries rebuilt themselves, and Japan doesn't have a lot of space or natural resources to begin with. The just in time model was meant to be efficient.

Sonari Glinton:

It's also called lean manufacturing. The idea cut down on inventory that you don't need. Your supplies arrive just when you absolutely need them. The system has gone global sense, and in many ways is central to how the supply chain works now. From car manufacturing to retail inventory management to PPE procurement, its principles were meant to save time, resources and money. And they have in many ways, but only if the system is working essentially perfectly. Vanessa says there are three assumptions that underpin the just in time inventory model. One ...

Vanessa Iarocci:

You can make things other places cheaper than here.

Sonari Glinton:

Two ...

Vanessa Iarocci:

You can get those things from another place into your country through air, ocean, and other sort of carbon intensive methods.

Sonari Glinton:

And three ...

Vanessa Iarocci:

You can sell it all.

Sonari Glinton:

Vanessa thinks the just in time model is going to remain a central part of the supply chain.

Vanessa Iarocci (16:01):

But in some ways, I think we found some pretty critical points of failure.

Sonari Glinton:

She goes back to the three assumptions, noting that China is certainly not that cheapest place to manufacture anymore and that companies are too often producing more than they can sell, which is just one of the environmental downsides.

Vanessa Iarocci:

I'll give you an example. I remember holding this mask, this $6 mask and I was thinking, this mask just flew from China to Vancouver in an airplane and then it was on a truck from Vancouver to Toronto, and then now I'm flying it to Yukon. What's the real cost of this mask? It's way more than $6.

Sonari Glinton:

The real cost of just in time also comes into play when the supply chain breaks down. The time and expense Vanessa invested in her supplier relationships, for example, really getting to know Sam in Egypt, that helped save her business and restore it to her profitability and that was central to her role as the company's turnaround CEO. With her mission accomplished, she left McCarthy's via a family buyout and now invests in new businesses and lectures at the University of Toronto, where she passes on what she learned to her students.

Vanessa Iarocci:

Any business is just a whole variety of humans connected in some kind of system. If you very deeply understand your customer and you treat your employees and suppliers as part of your extended work family, it's like an organic being, like you can continuously adapt and change it.

Sonari Glinton:

Kind of like how leaders have had to adapt and change to respond to the pandemic.

Vanessa Iarocci:

There's an expression that in good times, you lead from the back, but in crisis, you lead from the front.

Sonari Glinton:

That's something Gaurav Manchanda can relate to. He worked in Liberia in west Africa in 2007, a few years after the civil war ended helping to create a national health system from scratch.

Gaurav Manchanda:

This certainly brought out some similar feelings in terms of crisis response and the need for coordination and organization and multi-stakeholder engagement. And there were certainly days when it was hard to keep going on four hours of sleep, but it wasn't ever a question. It was just you are built for this, go and ask questions later.

Sonari Glinton:

Today, Gaurav is director of medical market development at Formlabs. Now that's a company that makes 3D printing tech analogy. And in March of 2020, he found himself running a supply chain solution network just as his wife started a new job as an ER doctor in Boston.

Gaurav Manchanda:

So we were certainly paying close attention to the PPE shortage and not only within my wife's hospital, but as my phone started ringing from the hospitals that Formlabs work with as well.

Sonari Glinton:

It may have once been the stuff of science fiction, but hospitals and other industries are using 3D printing technology, also known as additive manufacturing, more and more. Using a digital design, the printer precisely lays down layer after layer of a material, usually plastic, to form a solid three dimensional object. In medicine, 3D printers are making everything from surgical instruments to joint replacements. They can even use cells to print living tissue. Gaurav got into 3D printing after learning how it could help his own son who has cerebral palsy and uses ankle foot orthotics, or AFOs.

Sonari Glinton:

They're usually made using plaster casts and old fashioned, often uncomfortable methods. Gaurav's son had to go through that painful process in the past, but not anymore.

Gaurav Manchanda:

I'm proud to say that we sent him off to school in 3D printed AFOs that we printed here at the office. They fit him better, their lighter weight. They cost quite a bit less than the traditional devices as well. So, I'm a firm believer in the value prop that I've been talking about.

Sonari Glinton:

Back in March 2020, he was getting calls from other firm believers, physicians and hospitals, who had 3D printers and wanted to use them to make what the supply chain wasn't supplying.

Gaurav Manchanda :

There were really three buckets of supply chain issues. The first was PPE, as everyone is likely aware of at this point, the second was ventilators or ventilation systems, and the third was testing or test kits.

Sonari Glinton:

Gaurav remembers getting a text from a physician he worked with before, Dr. Summer Decker in Tampa.

Gaurav Manchanda:

Just said, "Can you call me? It's urgent." And what Dr. Decker and her colleague informed me of was that they had designed a nasopharyngeal swab, or an NP swab, that could be used to replace the traditional NP swabs, which were out of stock as the supply chain was completely disrupted.

Sonari Glinton:

These are the swabs that they used for COVID tests, you know the ones that go right up there making me squeamish to even talk about. Well, the doctors wanted to know how they could 3D print as many swabs as possible, and whether Formlabs had enough of the material to print them.

Gaurav Manchanda:

To get ahead of myself a little bit, that NP swab design ended up being printed about 75 million times last year, and used for COVID testing around the world.

Sonari Glinton:

As word got around that PPE and other supplies were dwindling around the country, Gaurav remembers the calls and requests coming in fast.

Gaurav Manchanda:

From another hospital or from another health agency or another state health department, or another volunteer saying, hi, I'm either a high school student, or I'm a medical student, or I'm a PhD, or I'm a surgeon, or I'm a dentist. How can I help? So there was just an outpouring of good will and on the other side, desperation where these clinicians were only innovating because they had to. I mean, it was really a sort of a crisis response or almost wartime response effort that was unfolding in late March of last year.

Sonari Glinton:

PPE designs were coming in from all over, but they needed first to be tested for use in clinical settings. Through partnerships with the National Institute of Health and the Veteran's Health Administration, a few mass designs were validated safe for use.

Gaurav Manchanda:

And I want to contrast that to traditional medical devices that take years to validate. So if you look at design, validation and manufacturing, it is significantly faster in terms of end to end design to patient or clinician use.

Sonari Glinton:

Speed of validation is just one reason healthcare systems turn to 3D printing to solve their pandemic supply chain problems. Another one, well, manufacturing what they needed when they needed it and where they were going to use it.

Gaurav Manchanda:

There was no truck to get on or container to ship the supplies on. It was printed within the hospital walls or within the health agency's walls itself.

Sonari Glinton:

Gaurav says 3D printing is a perfect example of bridge manufacturing.

Gaurav Manchanda:

So what do you do when traditional manufacturing shuts down or is not an option? And that bridge can be a one month bridge or can be a six month bridge or longer. Bridge manufacturing was really a theory in the past, now it's one that's been confirmed in a very public way.

Sonari Glinton:

And after getting a taste of what 3D printers can actually do, healthcare systems now see they have even more potential.

Gaurav Manchanda:

One phrase we've heard on that front from hospitals themselves is that 3D printers are an insurance policy for their supply chain. So you don't need to commit to a certain supply. You're committing to the infrastructure of the platform. It's the platform they can use to create whatever they need in the future.

Sonari Glinton:

While he's excited about that future, Gaurav is still processing the highs and lows of navigating the pandemic and running a 3D printing command center.

Gaurav Manchanda:

I get asked the question on a regular basis, what do you think we're going to need this year? And I hope it's nothing. And the supply chains certainly are stronger than they were last year and we all learned quite a bit. But we're one of the wealthiest nations on the country, or in the world rather, and it's hard to think about more resource limited settings or lower income countries who don't have the same resources.

Sonari Glinton:

Gaurav is disheartened that we're not out of the woods yet, but he's grateful to have had a role to play in helping out the best way he could.

Gaurav Manchanda:

I mean, it was really an honor to be part of that process last year, where it was all hands on deck across, dare I say, political lines and across national lines and as a really global movement with one goal. And I have a lot of relief and a lot of gratitude for living where we do when we do and the technology available and the people who worked and dedicated their lives to the COVID response effort.

Sonari Glinton:

The just in time model grew out of a time of scarcity in Japan and now strong leadership, new ideas, approaches and innovations are emerging from the pandemic. They're built around human ingenuity and networks of people working together, leveraging strong relationships across time zones and oceans to build new business ideas, save jobs and save lives. Now, supply chain resilience doesn't come from digital optimization or ditching one manufacturing model for another. It comes from us and the ways we bridge these critical moments together.

Sonari Glinton:

On the next episode, how the shipping container shortage and supply chain breakdowns are disrupting Santa's workshop for this holiday season and who's stepping up to save toy land. I'm Sonari Glinton. Thanks for listening to Now What's Next, an original podcast from Morgan Stanley.

 

Host Sonari Glinton delves into the workings of the just-in-time inventory model and how it let down millions of frontline workers at the start of the pandemic. We find out how relationships along the supply chain are deeply critical, and how new technology is provoking a rethink in healthcare manufacturing.

In this episode, we meet Dr Andy Artenstein, an infectious disease specialist and Chief Physician at Baystate Health in Massachusetts who went to extremes to get PPE for his staff of thousands. Vanessa Iarocci tells us about how supply chain relationships helped save her business as she pivoted from selling uniforms to PPE. Guarav Manchanda, Director of Medical Market Development at FormLabs, describes being at the hub of a PPE supply chain solution network and what 3-D technology could mean for the future of healthcare manufacturing.