The future of supply chain: Oxygen, vaccination, stress testing – Economic Times

After leaving a trail of death and disaster the second wave of Covid-19 is finally showing signs of abating. This is a golden opportunity for all stakeholders in India’s manufacturing supply chain to act now to delay the third wave.

Immediate Focus: Drum Up Buffer Rope Models for Oxygen Supply Chain

Our daily

production capacity stands at 7,287 MT and our average consumption last year stood at 3,842 MT. Daily consumption peaked at 5,000 MT during the second wave. Our buffer stock of 50,000 MT can sustain 10 days during peak load consumption. Almost 70% of our oxygen production capacity is heavily skewed towards the eastern states of India. Whereas the states that were affected by the oxygen drought were in the north and the west. The shipment of medical-grade oxygen requires cryogenic tankers and containers in alignment with the size and capacity of multimodal logistics such as trucks, cargo aircrafts, and container wagon-carrying BLC rakes; each of which can ferry anywhere between 40 to 58 wagons. Furthermore, 67% of the trucking logistics companies in India belong to the category of small fleet operators (SFOs) thereby posing a challenge from the standpoint of logistics scalability. An oxygen supply chain solution should focus on these things:

  • It should have a hub and spoke network of buffer storage depots of cylinders and concentrators.
  • It needs a group sharing distribution model for optimum use of resources.
  • A digital inventory track and trace system.

Essential goods manufacturers, digital supply chain solution providers, and hospitals can collaborate on mapping oxygen buffer storage locations against locations that are at risk to assess costs, lead time, and turnaround time. These buffer storage hubs can feed the spokes through distribution to user groups like resident welfare associations, NGOs, and hospitals through group sharing. Supply chain solution providers can analyze inventory consumption-reconciliation and replenishment patterns to deploy sanitization SOPs and safety checks. Each oxygen concentrator and cylinder can provide protection for 100 users. Doing so will increase the impact of oxygen cylinders by 100X.

Intermediate Focus: Scaling Up The Manufacturing of the COVID-19 Vaccine

The only long-term solution t fight Covid is vaccination. Central consolidation of vaccine procurement to the tune of 75%, with a 25% window for private hospitals will resolve several vaccine supply chain challenges. As seen in the case of Operation Warp Speed in the United States, a centrally administered vaccine procurement model will alleviate the bad Nash equilibrium emanating competition among state governments to procure vaccines on their own and foster greater collaboration. It will also allow the central government to lock in both the quantity and price of vaccines in contracts and create a fiscal elbow room for the central government to consider underwriting the financial risks of vaccine makers. Policy makers may consider creating a single-window green corridor for faster regulatory approvals and compliance checks for FDI proposals with transfer of technology agreements and local manufacturing of raw materials and process equipment. This will ensure seamless access to credit and supply lines for vaccine makers and foster collaboration with MSMEs and OEMs in India.

Long-Term Focus: A National Supply Chain Stress Test for Critical Resources
A national supply chain stress test for critical resources may be conducted every financial quarter.

It should consist of three layers of descending priority levels:

  • To encompass items covered under the Essential Commodities Act.
  • To include the raw materials required by vaccine manufacturers deployed in the COVID19 vaccine.
  • To cover materials required in the infrastructure vertical.

Doing so will insulate mega projects like the National Infrastructure Pipeline from inflation and supply shortages and enable us to control rising unemployment rates. The infra sector in India has a 2X investment to multiplier effect. A 1% increase in investment has the potential to create 1,360,000 jobs. It will also provide us with grass roots level insights on manufacturing supply chain alternatives to make in India for the rest of the world.

(The writer is Founder, Moglix)

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