Tag: Medical supplies

OM in the News: New York City’s Inventory Bust

Just last week we posted a blog by Howard Weiss that dealt with “stockpiling.” Now comes a surprising revelation on how New York City’s then mayor Bill de Blasio stockpiled over $225 million in pandemic-related supplies that are now almost worthless.

Since last summer, the city has systematically tried to auction off millions of dollars worth of Covid-related personal protective equipment (PPE)  and medical supplies — gowns, face shields, hand sanitizer, KN95 masks, N95 masks — that it decided are no longer needed. Many of these supplies remain in their original packaging and are brand-new. About 9.5 million items purchased by NYC for $224 million  have been auctioned so far, garnering about $1/2 million, reports THE CITY (a NY weekly on Feb.21, 2023) .

A top NYC official fretted in July 2022 that if the public learned about the auctions, it would prompt an inquiry “about the city’s over-buying during Covid,” an email reveals. So officials “crafted talking points to address why the city is auctioning off PPE while Covid cases continue to persist.”

Here are a few examples:

Taxpayers paid $12 million for 3,000 “bridge vent” breathing devices. The devices were unloaded, unused, in an auction described as “non-functioning medical equipment sold as scrap metal.” A junk dealer picked up the entire $12 million, 500,000-pound load — for only $24,600.  It took 28 truckloads to cart the stuff away.

In many cases, the city paid wildly inflated prices. One company sold the city 50,000 face shields at $6.70 per shield when the average open market price was $3.67. So taxpayers paid $335,000 for items that on average should have cost $183,500. This month, the city put up for auction a lot containing 701,100 face shields, with an opening bid of $1,000. That’s less than one penny per shield.

Huge discounts were also available for isolation gowns. NYC has been trying to sell off millions of these — still packed in their original boxes — for a tiny fraction of what taxpayers paid for them. Last month it offered a lot of 97,850 of their gowns for $1,000. It got zero bids and put the same lot up again last week, dropping the opening price to $280.

As of last week, taxpayers had shelled out $17.8 million for warehousing 13,500 pallets of these stacked medical goods. A city official recommended more aggressive marketing of auctions, lowering starting bids, breaking lots into smaller purchases, and giving some of the stuff away “in parks, subway stations.” And one other option: “destroying whatever can’t be auctioned.”

Classroom discussion questions:

  1. Evaluate this inventory situation.
  2. How would you resolve the problem?

 

OM in the News: Supply Chains Struggle to Maintain PPE Inventory

Supply chains are struggling to build personal protective equipment inventory, with 77% of respondents to a new survey saying they have no supply remaining for one of more types of PPE, according to Supply Chain Dive (Sept. 22, 2020). While large hospital systems are beginning to benefit from a recovering PPE supply chain, smaller, non-hospital facilities are still facing acute shortages. The three most requested items in August were N95 respirators, disinfecting wipes and surgical masks.

PPE manufacturers acknowledge the ongoing issue of availability and stock. “3M is making and distributing more respirators than ever before, though demand continues to far outpace what the entire industry can supply,” said 3M’s CEO. It is especially difficult to obtain PPE in rural parts of the country because of the geographic location, the cost of ordering PPE in small amounts and the inability of smaller organizations to meet minimum order quantity. Some organizations have turned to cleaning and sanitizing used PPE to help extend the life of its existing inventory. And they’re relying more on homemade alternatives.

Healthcare providers are also making changes to procurement practices to try to get the PPE they need. Some are moving to multi-source contracts instead of single-source contracts.  Others have turned to group purchasing, as we see in Chapter 11’s case study: Arnold Palmer Hospital’s Supply Chain on p. 468.

“The supply chain remains fragile and overtaxed by the worldwide demand for PPE,” says one hospital procurement manager. “The supply of N-95s continue to remain a concern, and while the supply of gloves and gowns has improved, given how often practitioners use a new pair or gown for each patient, their supply is always a concern.” As states mandate PPE stockpiling, N95 manufacturers are forced to chase ever-increasing demand which will further strain this scarce commodity.

Classroom discussion questions:

  1. Identify the OM issues involved in the PPE shortage.

  2.  In addition to Group Purchasing Associations some industries (such as electric utilities) loan spare parts and expensive equipment to others when there is an emergency.  How might this work in the hospital industry?