COVID, Products, Prices

So COVID-19 came and stayed. While certain parts of the world are seeing a relief, others have been badly hit. The virus is still circling around the world and may be back for the next cold season. We don’t know yet.

Despite quarantine and a troubled economy, some businesses stayed operational. We see examples in the food industry, cargo transportation and Biotech in general. This is great as jobs weren’t lost and - largely - things continued moving forward.

Yet there is a less obvious but serious impact of the COVID crisis also on the “winning businesses”.
Lately, product shortages and price increases have become a serious problem. This requires a special understanding for the new situation and adaptation of our supply chain strategy regarding certain biological products and raw materials.

  1. Product shortages
    Many biological raw materials are generated as a by-product of the food industry. Since the food industry continued being operational, one may assume that there would be an uninterrupted supply. Yet the situation is more complex. In order to reduce infection risks and secure safety of operation, many producers have moved to working in shifts, with reduced staff, and have concentrated on food manufacturing only. Any side processes like blood collection or other non-food processing have been suspended for the period of emergency. We saw how meat manufacturers in the US, UK, Germany struggle with a high number of COVID infections; meanwhile many plants have been shut down. So while food manufacturing continues being operational, the generation of biological starting materials has been reduced or even stopped.
    The situation with Human Plasma / blood collection is not much different. Donors are reluctant to go to donation centers, stay indoors and put themselves at risk due to contact with other people. Many plasma centers are reporting a decrease of almost 45% of the human plasma donation volumes.
    In the same time the demand for some biological raw materials has increased significantly. Animal or human blood proteins are an essential component for the manufacturing of sample transportation media or diagnostic reagents. While existing reserves are being globally depleted, there is less supply of new production ingredients.
     
  2. Price increases
    They are the logical consequence of product shortages. Not only are the existing raw materials scarce and being sold for more money, there is more to it.
    We saw COVID’s huge impact on transportation. Personal travel decreased by 90% and it probably won’t recover for quite a while. A less known fact is that most of the passenger aircrafts used to take significant quantities of non-dangerous cargo on board. With the massive reduction of passenger flights, shippers have been forced to switch over to regular cargo options. The immediate lack of shipping capacity doubled, tripled air freight prices. Reportedly, air freight rates for some flights out of China have been communicated to the shipper only upon confirmed booking. Additionally, airports and ports have started working shorter hours with reduced staff which leads to currently much longer clearance time. The extended stay at the port / airport is of course being billed to the importer.
     
  3. Lessons learned
    As always, there is something to learn. This time it is Reserves, Reserves, Reserves!
    Just-in-time supply doesn’t work well in COVID times. A company may need to spend immediately more in order to get their raw material supplies. Also, the raw materials may not arrive as fast as they used to. This is the current trend which will last for a while.
    Our recommendations for a worries-free supply chain:
    - keep a larger stock if possible
    - work with a local partner who can keep a  secure stock for you and ship short term
    - build a backup supply solution wherever possible
    - check the market and talk to experts more often
    - apply common sense
    - Finally - don’t forget your face mask!

If you need more information on available solutions – contact us.

12.07.2020 15:04