U.S. Pandemic Could Severely Strain Face Mask, Other PPE Supply Pipeline

Hong Ray Enterprises notified Medline Industries, Inc. and other U.S. customers that they are facing “force majeure conditions” and that they will be unable to meet their normal agreements to customers; Hong Ray is Medline’s largest exam glove supplier. “This disruption to supply will have a cost impact on the entire industry,” said Tripp Amdur, president of Medline’s glove division, in a press release issued July 3. “We are moving quickly to secure adequate supply for our customers through alternative factories, at ultimately a much higher cost. It is crucial that we act fast for exam gloves, however, because it’s a high-demand item that can spike in times of crisis situations such as SARS and the pandemic flu.”

In its letter to its U.S. customers, Hong Ray Enterprises cited a number of events and government actions that have led to its inability to fulfill its contracts, including a fire at a major raw material manufacturer, dramatic changes in government policy impacting labor, taxes and credit and pollution-control measures associated with the Beijing Olympics. According to Amdur, Hong Ray’s situation is by no means unique: “All of our suppliers are facing enormous and unexpected obstacles in fulfilling their contract obligations. While Hong Ray is the first factory to formally declare ‘force majeure,’ other factories, including those that manufacture latex gloves, face similar circumstances. In Malaysia, for example, the government recently declared a change in pricing for natural gas, almost tripling the price overnight.”

In mid-August, Kimberly-Clark Health Care also issued a press release addressing Hong Ray’s production shortfalls, shipping delays and price increases. “With the market changing over the past several months, we ramped up our production of Sterling Nitrile Exam Gloves in October 2007 as one of many safeguards to ensure we could supply a superior alternative to vinyl and latex gloves should predictions of production shortfalls hold true,” said John Dodd, vice president of global healthcare product supply. “We will continue to invest in our nitrile glove processes to make certain that we can support our customers in what has become a very volatile global market.” Kimberly-Clark Health Care reaffirmed that its current supply of nitrile gloves are stocked and available, as they are manufactured at two Kimberly-Clark-owned facilities in Thailand and are not subject to the shortages or quality concerns of the heavily outsourced vinyl glove market.

While a “perfect storm” of market conditions and labor costs had a hand in the manufacturing migration overseas, Bowen points to the chokehold group purchasing organizations (GPOs) have on companies’ access to the marketplace. “Selling individual products to individual hospitals became impossible over a decade ago,” Bowen says. “In order to gain price-sensitive GPO contracts, America’s medical companies utilize cheap offshore labor. The GPO focus on price tends to turn products into commodities and give foreign suppliers the advantage.”