Coronavirus… how it exposes the weakness of a Single Source Procurement Policy.
The World Health Organisation declaring a global health emergency over the spread of the Coronavirus brings a new clarity to the seriousness of such events. Global and national authorities are now in full-fledged preventative mode with demand for surgical and respirator masks far outweighing available supply, partly due to the scale of the threat but also due to the over reliance of the industry on one geographical supply source – China.
With the shutdown of production in China as a result of the Coronavirus, the disposable mask market (and indeed global manufacturing in general) is facing up to a real and present challenge, the consequences of a single source procurement model. Many of the very large mask Brands, including OEM clients Irema manufacture for, deliberately shy away from a single source procurement model to avoid the scenario the market now finds itself in.
Irema Ireland has been manufacturing surgical and respirator masks since 1985 in Ireland as an OEM manufacturing partner. Irema has managed to maintain its strong reputation in the market for over 35 years, by having a product that reaches the required global quality certifications coupled with a smooth reliable supply chain for its customers.
Single source procurement has grown as a model over the last 20 years with a switch towards far eastern manufacturing for a number of Brands due in the main, to perceived cost savings. The reason Irema Ireland has managed to buck this trend and indeed grow significantly, is due to its location and the desire for the very big players in the market to have a dependable source of supply within an important geographical region.
And why is this the case? They simply cannot afford a complete sudden stop to their supply chain when an event of this nature takes place. The three biggest potential impacts to the supply chain are metrological events, a pandemic and regional instability caused by war or the threat of war. This is why global brands choose to have OEM partners on multiple continents to ensure that when one cog of the wheel stops turning that rest of their supply chain keeps operating.
So why does Ireland remain an attractive location for OEM partners, who can’t take the risk of a single source procurement model. Unlike other regions it does not suffer from extreme weather events that can effect power and transport, its relative wealth and modern health service means it is better prepared to deal with a potential pandemic and its membership of the European Union offers political and economic stability.
As it stands, the demand for disposable masks and respirators is at the levels experienced during SARS and Swine Flu pandemics. The fact that the sector is so reliant on Chinese manufacturing could have knock on affects for the next 12 months at least, with the Chinese domestic market demand meaning international supply could easily be restricted. For the brands with a single source reliance on this China this could be hugely damaging. There is also the question about whether European and Western markets will have confidence in Chinese made products going forward.
When the dust settles on the Coronavirus, there will be a lot of questions asked of the procurement policies in place throughout the market. It will make brands think about diversifying their supply chain and creates an opportunity for Irish manufactures to position themselves as a safe pair of hands to those making the key OEM partnership decisions.