Supply Chain Shortages

Supply Chain Shortages

Executive Summary

Supply chain disruptions continue to plague our industry.  This letter focuses on the critical worldwide shortage of plasticware, its causes, the current status and the forecast for when this will be resolved.

The item in shortest supply right now is 10ml serological pipette, sterile, IR.  These are nearly impossible to find.

A follow up discussion of the status of items in short supply mentioned in my letter of March 2021 is included.


Force Majeure Declared on Plastic Resins

Letter received from Corning on May 1, 2021:

“On February 16th, LyondellBasell declared Force Majeure on all polypropylene manufacturing due to ice storms that caused tremendous damage and an extended shutdown of all their Gulf Coast facilities. These events have severely disrupted the production and supply chain for base resins to all their customers. We do not expect the supply chain for these resins to be fully restored for quite some time. Both these events and a general rise in oil prices globally have caused us to absorb resin increases approaching 50% since the start of 2021. Corning has taken extraordinary steps to ensure the continuity of resin supply and has absorbed all 2021 resin increases due to increased demand for Covid related research consumables.

Effective June 15th, 2021, there will be an 8% price increase on all polypropylene based products manufactured and shipped from our Salt Lake City facility. This increase will be effective on all shipments starting on the 15th of June. Updated price files will be forwarded in the next week.”

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I was unaware of the Texas ice storm being the source of this problem.   This article by the Harvard Business Review spells out the whole situation:

https://hbr.org/2021/03/the-latest-supply-chain-disruption-plastics  I urge you to read this, at least the executive summary..

Like crude oil, this is a global shortage.  This has driven up prices in China as well:  https://www.argusmedia.com/en/news/2189152-chinas-pe-pp-futures-rise-on-texas-plant-shutdowns


The Supply Chain Game Hits Home

You know there is a problem when you get a call from one of the largest, most prestigious research institutions in the U.S. calls you and says:  “I will take as many 10ml sterile serological pipette as you can send.”  If THEY can’t get them, you know there is a problem!

Several years ago, I was invited to participate in an exercise put on by Siemens procurement department.  In this exercise, a huge plastic map was laid out on the floor and we were divided up into teams.  Each of us had one station on the supply chain:

  • Raw materials (e.g., crude oil, natural gas)

  • Processors (e.g.,  LyondellBasell who converts crude oil components into plastic resins)

  • Manufacturers (e.g., Corning who buys their plastic resins from LyondellBasell and does injection molding.)

  • Distributors (e.g., LPS, Fisher, VWR, Thomas who buy and stock Corning items on their shelves)

  • End users (e.g., you.)

This is a simplified version of supply chains in our industry.  Many of these have many more steps, especially when they are sourced from a foreign country like China.

In this exercise, we were given fake money to purchase at our station.  Then the moderator would throw a variable into the game:  “Your plant loses power for 3 days and you have to shut down production.”  Then the “fun” starts.  The supply chain dries up, people panic buy, the price increases.  At the end of the supply chain, the end users are in the dark until their orders stop arriving.  Their immediate reaction is to place blame on the next step back in the supply chain.

In no time at all, the entire supply chain is a complete mess!  It took round upon round of dice rolls to sort everything out once the moderator said “your plant is back in business.”

A variation of this game is now available online.  I suspect you won’t be interested in it right now since we are living through what amounts to a “worst case scenario.”


The Pressure on Injection Molders

With supplies of resins becoming hard to get and expensive.  People who own injection molding machines have some decisions to make:

  • What products are in the highest demand?

  • What products can I mold which require the least resin to make that are the most profitable?

  • What products MUST I make because of contractual or legal obligations?

  • What are the longest backorders and who is screaming for their product the loudest?

As in the supply chain game, injection molders started out with a plentiful supply of resin on hand but with the demand through the roof and their suppliers not shipping, you know you must nurse along the supply you have on hand as long as possible.


The Backlog at the Docks

The well document container ship that got stuck in the Suez canal is just one of the many issues in global shipping that have caused shortages in products shipping from China, India and Europe:

  • A shortage of containers.

  • A shortage of dock workers due to Covid to remove containers from ships.

  • A shortage of truck drivers to transport containers.

  • A huge price spike in shipping costs due to the above.

All this is assuming the product is available overseas.  Many people tend to forget that Covid-19 is a global pandemic.  While things are slowly becoming normal here, in India it is worse than ever!  Protocols are in place in most other countries as well.

Containers are arriving with badly needed products.  We ordered a shipment of sterile filter pipet tips from China in early March.  These were placed in a container by the end of March and are only now on a truck headed to Knoxville.  Most containers of product are sold before they are unloaded.


Is there any good news to report?

Yes!  With the vaccination of millions of Americans, the amount of Covid testing being done is greatly reduced.  This is relieving the pressure on many of the items we reported were in short supply in March:

  • There are a number of items that are in very short supply do to the Covid-19 pandemic

    • Nitrile and latex exam gloves (sterile and non-sterile)

    • Filter pipet tips of all sizes and types (Universal, LTS, Clip-Tip)

    • Pipet tips, non-filtered (especially non-standard WB, Extended, 5 & 10ml)

    • Centrifuge tubes of all types and sizes (PCR, Micro, 15ml and 50ml)

    • PCR Plates

    • Certain Media and Transport Tubes [IMPROVED!]

    • Transfer pipets (especially the 5.8ml and “blood bank” style)

    • Serological pipets (sterile, plastic)

    • Swabs [IMPROVED!]

    • Wipes (disinfecting, 70% isopropyl saturated)  [IMPROVED!]

    • Containers of many types (glass and plastic, media bottles, dispenser bottles)

    • Personal Protective Equipment (Shoe covers, sterile gowns, lab coats, sleeves, etc.) [IMPROVED!}

    • Many sterile items (due to lack of sterilization capacity)


Steps to Avoid Stock Outs

At LPS

  1. When a product in short supply is located, LPS proactively buys inventory to meet past customer demand.

  2. LPS doesn't have the capability or the space to buy enough to cover any potential demand - we “spot buy.”

    1. To ensure everyone has enough to meet their needs, customers must avoid panic buying

    2. Serological Pipets

    3. Filtered Pipet Tips (100, 200 and 1000ul)

    4. Nitrile Gloves

    5. Transfer Pipets

    6. 15 & 50ml Centrifuge Tubes 

    7. Luck plays a big role in whether or not we can even get items.  For example, we just happened to call our 15 & 50ml centrifuge vendor who has previously predicted lead times of 6 - 9 months on a day when a container had arrived.  We had 1 hour to issue a P.O.

  3. You may not get the brands you want.

    1. If you are in love with a particular brand, you probably won’t get it and may not even have a choice.

    2. We do our due diligence to ensure that the products we are getting are of good quality.

Suggestions for the Client

  1. The shortages are real. When you get a message regarding supply shortages from LPS on items that you buy, take immediate action, even if you have what seems like adequate inventory on hand now!  The days of JIT inventory are in the rear view mirror.

  2. You are very busy and probably don’t have time to worry about things like this.  (After all, that is what LPS is supposed to be doing FOR you!)  However, make time to have this discussion BEFORE things go off the rails.

  3. If LPS says there is a shortage, this probably means that Fisher and VWR ran out of these items long ago or placed them on allocation for larger customers.  Don’t count on being able to get products from them.  However, if you can find it there after LPS has issued the warning, don’t hesitate to buy it!

  4. Brands matter in normal times.  Available substitute items that may be functionally equivalent if not taken when they are available probably won’t be for long.  BE FLEXIBLE!


Summary

We are living through a truly exceptional time in so many ways.  People’s expectation of a return to “normalcy” in our personal lives is often superimposed on their expectation that normalcy will return to the “JIT” (Just In Time) mentality of pre-pandemic.  Those days are gone.  The supply chain is going to take many months to recover.  The prudent buyer (panic buying is NOT prudent!) will extend lead times, be flexible in considering alternative items and will work closely with their suppliers to avoid stock outs.  Consult with us for assistance in sourcing alternatives, and planning your ordering.