B2B Marketplaces Take-on PPE Supply Chain Challenges

Before the events of 2020, PPE wasn't a household name. This specialized equipment was a standard piece of equipment, focused on by procurement officers within certain industries. Then, COVID-19 changed everything.
 
During the early days of the pandemic, the challenges with the PPE supply chain quickly became apparent. Here's what you need to know about PPE supply chain challenges, the B2B PPE market, and what Hope.Tech is doing to improve this fractured system.

Early COVID-19 PPE Transactions

During the initial COVID-19 outbreak in Wuhan, China, the PPE supply chain worked solely through social media applications. "They used WeChat a lot," says Dr. Opher Baron, a Professor of Operations Management at the University of Toronto. This highlights the importance to the PPE supply chain of technology companies that ease the flow of information.

Apps like WeChat and WhatsApp were replaced with more sophisticated technology platforms. Nonetheless, one year into the pandemic and supply chains are still struggling to meet demand. Many manufacturers still lack crucial e-commerce and logistics management technologies. At the same time, many buyers are working from home to limit the spread of the virus, further disrupting typical purchasing processes.

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PPE Demand and COVID-19

According to data from the nonprofit, Get Us PPE, requests for PPE rose 260% between November and December 2020. 63% of facilities had no supply remaining of at least one type of PPE in December. They also report that the demand for PPE is far more expansive than just hospitals. Less than 1% of December requests came from hospitals, but instead from facilities such as nursing homes and clinics. 

The United States International Trade Commission (USITC) recently reported that "for certain COVID-19 goods, supply constraints are not expected to wane until 2022." These facts reflect a major ongoing challenge to the PPE supply chain.

There is a global need to replace more traditional supply chain infrastructure with a more streamlined approach that meets current needs and promises protection against the next crisis.

As the virus spread around the globe in 2020, healthcare buyers in every country found that they were unable to fulfill their PPE needs through their traditional procurement sources and methods. This hastened newer suppliers who pivoted from other markets to focus on PPE. For example, alcohol brands pivoted to making hand sanitizer, Tesla to manufacturing ventilators, 3-D printing companies to printing face shields, and some clothing brands to crafting face masks. 

The Introduction of Online Business-to-Business Marketplaces

 
Enter online business-to-business marketplaces (OB2BM's). OB2BM's started exploring all procurement options, including these newer pivot companies. The most successful among these OB2BM's began helping buyers filter reliable vendors from fraudsters when entering into deals with new vendor companies. This process protects buyers who could otherwise lose money to criminals or wait for orders that don't get filled.
 
With the development of OB2BM's, sellers, buyers, and suppliers could now reach new potential partners to meet demand. At HoPPE.Tech, we provide free instruction to buyers about their procurement options. Buyers often start out knowing only a few brand names, such as Nitrile, 3M, or Latex. Our mission is to educate buyers on what other products from lesser-known suppliers are out there that might also meet their needs. For example, some buyers demand FDA certification, or PPE made in the USA, etc. . Hope.Tech can help buyers access these off-brand products, creating efficiency and maximizing returns for all involved.
 

How the PPE Supply Chain Should Work

 
In a healthy supply chain, information flowing between suppliers and buyers. This communication allows everyone to make informed decisions about the what, who, and how much of any given deal. But in the spring of 2020, the original PPE supply chain broke, and people did not know whom to talk to or how to talk to them.
 
Before COVID-19, the people who needed PPE were well-known. they were healthcare workers, factory workers, etc. The process had a lot of certainty and little variability. Additionally, the market contained several very specific suppliers and several very specific buyers. When COVID-19 hit, the demand for PPE increased, and the supply chain shattered. Current suppliers didn't have enough capacity. New suppliers wanting to join the market to meet the higher demand didn't know how to sell their items.

 

PPE Supply Chain Challenges for Buyers and Suppliers

 
Some suppliers lost out because of barriers to entry. According to the USITC, "new entrants in the medical field often find it more challenging to sell their products, as purchasers tend to be cautious when buying from new suppliers. This was exacerbated during the pandemic by fraud and illicit products, making buyers even warier."
 
Within the larger supplier umbrella, newer manufacturers sometimes fail to complete the intensive vetting and contract process that sellers need. This challenges the creation of new relationships between manufacturers and sellers.
 
According to the USITC report, "Many products need regulatory approvals or must comply with relevant standards and certification requirements before they can be sold in the United States." Established suppliers know how to navigate these requirements. New firms are starting without those requirements in place.
 
What does this mean for the PPE supply chain? There's plenty of valuable PPE available that's held up in red tape— a big deal when lives are on the line.
 
Some buyers lost out because traditional supply chains can sometimes forget about smaller buyers during a supply crisis. Sellers often focus on funneling their scarce supply to larger customers, like hospital systems. Some buyers lost out because of price gouging due to market shortages (see below). Still, others wound up waiting for months only to receive damaged goods.
 

The Matching Market Model

 
Many OB2BM's take advantage of one of the most robust practices in Supply Chain Management: the Matching Market. The idea is to remedy market pains by matching suppliers with buyers. We see this with companies like Uber, Airbnb, and Doordash. Although these companies operate in diverse industries, they use the Matching Market business model. That is, they externalize the means of production. They do not own homes or hire drivers; instead, they profit from orchestrating networks of external buyers and suppliers.
 
Tycoons like Amazon, Google, and Facebook have also used Matching Market models to varying degrees. The goal is to reach a broader scale. Although, many of these companies do not provide full visibility to either side of the market, as explained below.
 
The key to the Matching Market model is that it uses modern technology (the internet) to cut short the supply chain. So what happens when an unexpected delay occurs at the supply source of a long supply chain? Information diffuses slowly through each link of the chain. As such, it takes a long time for the buyer to see the response from the supplier.
 
The Matching Market model takes advantage of modern technology to cut out the middlemen so that information flows quickly. This gets rid of the lag time and smaller profit margins associated with long supply chains. A shorter supply chain and greater visibility are tried and true solutions, and in a crisis situation, they can save lives.
 
Now, look at the context of the COVID-19 pandemic. There's a big shortage, and people who are willing to help, but they don't know how. In this situation, the Matching Market is the right application.ehimetalor-akhere-unuabona-u7IEjcuQnC8-unsplash

 

Challenges Faced by OB2BMMM's

 
OB2BM's employing the Matching Market model are known as OB2BMMM's. These companies have faced several unique challenges over the course of the pandemic. These challenges have spurred further structural innovation.
 

Challenge One: Creating the Platform

 
One of the first hurdles OB2BMMM must overcome is the creation of its platform. The platform needs to be efficient, user-friendly, have a good database behind it that allows the platform host to make good matches. A good platform takes a lot of time and investment to think about and build.
 
Visibility is a crucial aspect of the OB2BMMM's platform.
 
One of the greatest strengths of online platforms is that they allow buyers to register their demand. Meanwhile, suppliers can register their supply. The central system creates visibility from both sides of the market--like in fruit and vegetable markets. This visibility of what is available in supply and what is required by demand allows better matching of supply and demand in general.
 
At HoPPE.Tech, we are building a visible, deal-closing engine. Our Alliance Portal offers alliance members the ability to see supply and demand via up-to-date tickets that track your request and show its progress. We are also currently transitioning from a static to a dynamic ticketing system.
 
Visibility in the PPE market can be achieved with accessible databases. These databases allow users to look up a product and see all available sub-types and suppliers. The platform lets users compare:
  • supplier offerings
  • price
  • quality assurance standards
  • minimum batch size requirements
  • compliance needs
Suppliers can also use the platform to look at buyers and see what the demand is in the market.
 

Visibility and Market Flow

 
One commonality among most markets is that information flows in one direction. For example, with Amazon's platform, the buyer can go there and see the supply and the prices. Suppliers that go there cannot see what the demand is and the prices buyers are willing to pay. This issue is common to many platforms.
 
Take Uber as another example. When passengers put their offer out there, the Uber platform shares it with a few drivers. Drivers and passengers can choose, but neither side sees the entire market.
 
Thus, one of the key issues in improving transparency is to create visibility from both sides. That is, suppliers can see buyers, and buyers can see customers. This shortens the supply chain. As such, suppliers can react faster to perceived changes in demand and build the right capacities to meet it. It also gives buyers the ability to plan ahead by seeing what supply is available.
 

Challenge Two: Creating the Demand

 
In the first months of the pandemic, there was a clear demand in the market but few connections among buyers and sellers. Some OB2BMMM's emailed long-term-care homes. Some contacted some suppliers. Most took a hands-on approach to securing deals for each party, for better or worse.

 

Challenge Three: The Shortage in the Market

In those first months, supplies came in with very high prices because they were the only supplies available, and suppliers didn't have enough to cover the demand. There were shortages of different items at different times. For instance, the first shortage was with face masks; the second shortage was gloves; then it was gowns.

In times of crisis, supply shortages compounded by lack of visibility can create the right conditions for companies to maximize profitability through price gouging. Many countries responded to the pandemic by relaxing existing national procurement laws, allowing public buyers to purchase PPE quickly, in large quantities, and with few restrictions. As a result, incidents in Brazil, the U.S., and Germany show price gouging behavior that distorted the market. In some cases, governments purchased masks at 25 times the original price. At the same time, many countries restricted exports of PPE, which also drove up prices.

 

OB2BMM's and Natural Price Reductions

 
At HoPPE Alliance, we provide access to deals both locally and internationally. By shortening the supply chain, we naturally reduce prices through efficiency gains. Take, Kukbo, a Korean face mask supply company, for example. Kukbo is one of three new HoPPE Alliance members that are eager to do business internationally. We are also working on our made in USA consortium, HoPPE Alliance America. Our members include PQM Manufacturing and solvetogether.com. Focusing first on the U.S., HoPPE Alliance America will serve buyers who need access to top-grade products made locally.
 
Governments deserve some of the blame for the ongoing supply shortage. In the U.S., the Trump administration made promises about using the Defense Production Act to ramp up production but failed to follow through. For example, back in May, they promised to increase the national supply by 300 million N95 masks in the following 90 days. "By mid-November, the U.S. Strategic National Stockpile and the Federal Emergency Management Agency held only 142 million N95 masks." According to the Washington Post, there is a disconnect between what's thought to be in the stockpile and the needs on the front-line.
 
While there has been some progress, it is nowhere near enough. Before the pandemic, the U.S. manufactured about 20 million N95 respirator masks monthly. This number has increased to 150 million since. Even so, problems persist.
 
Many states report not receiving the promised PPE from the federal government. Others say they have received damaged goods. Many states have shifted their focus to private vendors instead.
 
A survey by the American Nurses Association indicated 42% of nurses said they are still experiencing PPE shortages. More than half indicated that they have to reuse PPE for up to five days. Health workers in Albany, Chicago, Tacoma, and Pennsylvania went on strike in December to protest insufficient PPE.
 

Challenge #4 Quality Assurance

 
Supply shortages are becoming less common. The problem now is quality assurance--making sure the PPE has been tested and that it serves the needs of buyers. According to the USITC report:
 
"a significant increase in the number of counterfeit, illicit, and flawed products in the market made it harder to find legitimate products and made some firms more reluctant to import or purchase products from lesser-known suppliers. In addition, some available foreign products allowed to enter during a national health emergency may not meet U.S. regulatory standards."
 
One thing that OB2BMMM's can do to help with the quality of supply is sharing with buyers any quality certification from the suppliers.
 
At HoPPE.Tech, when a buyer or supplier posts an inquiry on our Portal, they provide all the data that we need to validate the tangibility and viability of that deal request. We make all negotiations and legal paperwork visible and attached to the deal. We also keep the status of the deal up-to-date as it moves through our pipeline. We're also working on a third-party integration with a Know-Your-Customer software. This feature will allow us to vet and validate individuals and organizations much faster and more completely.
 

tom-barrett-U9ViHc21c5I-unsplashFixing the Broken PPE Supply Chain

 
Most countries have a difficult healthcare system. This fact is especially true in the U.S.
 
Each hospital is typically responsible for its own procurement, although some hospital networks work together. In a time of crisis like the COVID-19 outbreak, when there is low supply, this created some internal competition. Countries and even states within countries tried to outbid each other for the same equipment. There were even hospitals within the same state trying to outbid each other. This behavior is counterproductive and results in sky-high prices, pointing to the faults of a decentralized system. As the U.S. has yet to create a decentralized database for medical gear, online B2B marketplaces employing the Market Matching model appear to be leading the way forward.
 
OB2BMMM's will likely be critical in the coming months. As schools and the economy continue to reopen during flu season and before universal vaccination, there will be an increase in cases. Then the demand for PPE will spike as it did at the start of the pandemic. What we found last time is that there is a lag of about three months between the change in demand and the responding change in supply to meet it. OB2BMMM's can help shorten this lag by letting suppliers respond faster. This can be crucial in a market with as much fluctuation as the current PPE market.
 
For us at HoPPE.Tech, the most important thing is that we are helping. Our mission is to ethically evolve the fractured, global healthcare industry. We'll do this with a platform designed to help B2B marketplace Buyers and Sellers connect and transact with increased speed, clarity, and trust.
 
By enabling the flow of millions of items of PPE from supply to individuals, we do our part to save lives. The fact that there is PPE out there means that people can get outside and go about some version of their routine. As of now, it is still very dangerous, but COVID-19, like pandemics of the past, will eventually become "just a flu." HoPPE.Tech plans to hasten that development by improving the PPE supply chain.
 
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