Against the backdrop of a year-long global pandemic that seems to spread at a slow burn, companies around the world are downsizing in response to falling revenues in major global economies. Millions of workers around the world are losing their jobs. Surprisingly, some of the companies doing the layoffs operate in sectors integral to a worldwide recovery from COVID-19.
3M, a Minnesota-based manufacturing company and the largest U.S. domestic manufacturer of N95 masks, recently announced that it would cut 2,900 jobs, or 3% of its global workforce, through layoffs and trimming the positions through attrition. This cut comes after 3M laid off 1,500 people in January as the company struggled in the trade war between China and the United States .
Other multinational PPE corporations seem to be following the same strategy as 3M. Baxter International, which manufactures hospital products, recently announced plans to lay off 1,400 people, or 5% of its non-manufacturing staff .
These layoffs in companies that own the bulk of the PPE market seem counterintuitive to the market’s rapid growth. Fortune Business Insights quotes a 92B PPE market value globally by 2027, almost doubling from 52B in 2019 . “Research and Markets says surging demand, partly joined with panic buying, hoarding, and misuse of PPE, has disrupted global supplies and risked lives across the world” .
The World Health Organization (WHO) estimates that 89 million medical masks are required for the COVID-19 response each month, along with 76 million examination gloves and 1.6 million medical goggles. WHO also estimates that the industry must increase manufacturing by 40% and urges governments to act quickly to boost supply .
At the current rate, the U.S. is far below these recommended PPE production levels. For example, 3M has received enough government funding to nearly triple its production of N95 masks and is currently producing just over 1.5 million a day. In contrast, Chinese production of N95 and other surgical masks rose 30 times in less than three months, reaching nearly half a billion a day .
Of course, companies like 3M have multiple verticals outside of the healthcare sector that have been negatively impacted by the present global economic downturn. While sales for 3M’s healthcare sector jumped more than 25% in its most recent earnings period, the company experienced a 5% overall drop in sales last quarter . This drop in sales is the motivating factor behind its most recent layoffs. Similarly, Baxter International's layoff announcement came after its third-quarter earnings results showed sales falling 8% .
With multinational conglomerates struggling to prioritize and meet domestic buyers' needs, increased demand has generated several small to midsize companies to help revamp the U.S. supply chain.
Phoenix Quality Manufacturing (PQM), a newly founded American PPE company, has recently completed construction of their first factory in south-central Ohio, and is already at market with their first product the FreedomAir civilian masks. Their mission is to prioritize domestic needs for critical PPE while creating jobs in an economically disadvantaged region . According to PQM, “the political winds are shifting towards a second American manufacturing revolution” . By taking control of the supply chain, PQM hopes to deliver the deals its buyers, i.e., hospitals and frontline healthcare workers, deserve and guarantee the quality and timely delivery of products.
But new U.S. factories take time to achieve all the necessary certifications. Many of the monitoring agencies, like the FDA and NIOSH are backlogged. As requests for product approvals and clearances increase, so does the time to get the certifications .
Moreover, new U.S. factories are also navigating production roadblocks. According to Behnam Pourdeyhimi, the Director of the Nonwovens Institute at North Carolina State University, back in April, “the wait for a machine that can produce the melt‑blown polypropylene used in N95 respirators was about 14 months” . The technology for the machines was developed in the United States, but more recently, Pourdeyhimi says, “aside from a small manufacturer in Florida and a sprinkling of others in Europe and China, German companies enjoy a near-monopoly, simply because their machines are so good. The machines used to “convert” melt‑blown into wearable PPE are somewhat easier to come by, he says, but 90% of them—both for N95s and for pleated surgical masks—are made in China” 
Many new U.S. factories are temporarily sidestepping production and certification challenges by acquiring Emergency Use Authorizations (EUA’s) issued by the U.S. government for non-medical designed masks. While the FDA and NIOSH requirements take time to process, EUA products with the same performance are fortunately able to take on the job of combating the virus right now.
As stated on the PQM website, “Everyone wants an N95, but the supply of FDA cleared product is so far below the market demand that customers are looking at alternative solutions including civilian grade and other government Emergency Use Authorizations approved masks to purchase” . PQM has already created 205+ new jobs, and production at their new 25,000 square foot manufacturing facility has a capacity of around 5.5 million masks per month .
HoPPE Alliance is currently negotiating with PQM to become one of our trusted suppliers. HoPPE’s proprietary platform offers streamlined deal management, supply and demand matchmaking, deal discovery, and contract/document automation. HoPPE offers suppliers a network of trusted and qualified buyers in both the private and public sector who are ready to accelerate the global recovery. HoPPE Alliance founder and CEO, Caen Contee says, “I am very excited to showcase on our online deal matching and management platform new suppliers that our buyers may not know about. New companies like PQM are really needed to address current inefficiencies in the PPE supply chain.”
Companies like PQM show a path to bringing back some of nearly 5 million manufacturing jobs the U.S. outsourced overseas from 2000 to 2016, when one out of every five manufacturing establishments in the country shut its doors . When these businesses closed, the U.S. lost what Willy Shih, a professor of management practice at Harvard Business School, calls the “industrial commons”—”the combination of expertise, infrastructure, and networks of mutually dependent businesses that help foster efficiency and innovation” . An article from the MIT Technology review published in April suggests that “Because the American manufacturing sector is more consolidated and narrower in scope than it once was, it’s also less diverse, less resilient, and less able to respond to a crisis” .
More secure PPE transactions and reimagined supply chains is the clearest path to ending this pandemic and saving the most lives. As Biden gets ready to take office with his slogan of “build back better”, companies like PQM and HoPPE Alliance are leading the way.