What does the COVID-19 pandemic teach us about global value chains? The case of medical supplies

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After the outbreak, PPE shortages became global as many countries restricted exports and tried to increase domestic production.

“After the COVID-19 outbreak, global shortages of PPE products emerged as many affected countries imposed export controls and sought ways to boost domestic output.”

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By early May 2020, 3M's U.S. output of N95 masks reached 95 million per month, and its worldwide respirator production had doubled since January 2020 to 1.1 billion annually, with 400 million of that in the United States.

“By early May, 3M brought its U.S. production of N95 masks to 95 million units per month,14 and doubled its global output of respirators since January, 2020 to 1.1 billion per year (400 million in the U.S.).”

• cites Whooley, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

• cites Newmarker, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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For many products, the main foreign supplier to the US is not China; the EU is the primary source of CT systems, hand sanitizers, patient monitors, X-ray equipment, and breathing masks, while other leading exporters include Mexico, Malaysia, Singapore, South Korea, and Canada for specific products.

“However, depending on the product, the main foreign supplier for the American market is often not China. The European Union is the primary source of CT (computed tomography) systems, hand sanitizers, patient monitors, X-ray equipment, and breathing masks. Other leading exporters for specific products include: Mexico (medical protective clothing, catheters); Malaysia (sterile gloves); Singapore (”

• cites Bown, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Although China increased mask production tenfold in just two months from January to March 2020, global demand for surgical masks was estimated to be possibly ten times higher than world production capacity before the crisis.

“Although China increased its mask production tenfold in just 2 months (January–March, 2020), it was estimated that global demand for surgical masks might be ten times higher than world production capacity prior to the COVID-19 crisis (OECD, 2020a).”

• cites OECD, 2020aNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The US imported about $5 billion, or 26%, of these products from China, the leading supplier of many items including PPE, protective goggles, thermometers, and medical headwear.

“The U.S. imported about $5 billion (26%) of these products from China, which is the leading supplier of numerous items, including PPE, protective goggles, thermometers, and medical headwear.”

• cites Bown, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Because China was the initial COVID-19 epicenter, its production could not meet its own pandemic-related demand, and China imported up to 2 billion masks during the crisis.

“Because China was the epicenter of the initial COVID-19 outbreak, however, its production was insufficient to meet its own demand related to the pandemic, and China imported a huge quantity of up to 2 billion masks during the crisis.”

• cites OECD, 2020aNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Exports of medical goods from advanced industrial economies rose 45% since 2008, while non-traditional exporters grew twice as fast at 100%.

“While exports of medical goods from the advanced industrial economies increased by 45% since 2008, the “non-traditional” exporters grew twice as fast (100%) (see Figures 2 and 3).”

• cites Bamber, Fernandez-Stark, & Taglioni, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Columbia University disease modelers estimated that if the US had begun social distancing one week earlier than mid-March, about 36,000 fewer people would have died, and if stay-at-home measures had been in place on March 1, two weeks earlier than most people started staying home, 83% of US deaths could have been avoided.

“According to disease modelers at Columbia University, if the U.S. had begun imposing social distancing measures just one week earlier than it did in mid-March, about 36,000 fewer people would have died in the coronavirus outbreak, and had stay-at-home measures been in place on March 1, 2020, 2 weeks earlier than most people started staying home, 83% of U.S. deaths could have been avoided (Glanz &”

• cites Glanz & Robertson, 2020; Pei, Kandula, & Shaman, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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In March 2020, U.S. government estimates indicated that 290 million N95 respirators would be needed monthly to protect U.S. healthcare workers, while projected monthly supply from leading U.S. producers and smaller suppliers was only 80 million.

“The results indicated that 290 million N95 masks would be required each month, whereas projected supply by the two leading U.S. producers of the masks, 3M and Honeywell, together with smaller suppliers like Moldex-Metrix and Prestige Ameritech, would generate only 80 million masks on a monthly basis, far below the target amount (see Figure 4).”

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The top five global exporters of COVID-19 products account for 50% of trade: Germany 15%, the US 11%, Switzerland 9%, China 8%, and Ireland 7%; the US represents 18% of global imports, followed by Germany at just under 9%.

“A look at the overall trade structure of COVID-19 products reveals that the top five global exporters, which together account for 50% of trade, are Germany (15%), the U.S. (11%), Switzerland (9%), China (8%), and Ireland (7%). The U.S. represents 18% of global imports for COVID-19 products, followed by Germany at just under 9% of the total.”

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By May 2020, 3M had increased its U.S. N95 output more than fourfold in six months to 95 million monthly, and its worldwide capacity was expected to grow from 1.1 billion to 2 billion masks by year-end.

“3M, the biggest American producer, more than quadrupled its U.S. output of N95 masks in the first half of 2020 to 95 million per month by May, and its global capacity was projected to double from 1.1 billion to 2 billion masks by the end of 2020.”

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Before the COVID-19 crisis, medical supply trade and production were interdependent: advanced economies like the US and Germany focused on higher-tech medical devices, while lower-cost hubs such as China and Malaysia led in less sophisticated PPE (face masks, surgical gloves, medical gowns).

“While the U.S. and Germany tended to specialize in the production of medical devices, China and Malaysia are the most specialized in PPE goods (OECD, 2020b).”

• cites OECD, 2020bNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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A fivefold governance typology includes hierarchies and competitive markets as endpoints, plus captive, relational, and modular production networks with differing levels of explicit coordination between lead firms and suppliers.

“Subsequently, a more elaborate fivefold governance typology was introduced that included hierarchies (vertically integrated firms whose affiliates are bound by equity ties) and competitive markets as endpoints, along with three types of recurrent production networks – captive, relational, and modular – with varied levels of explicit coordination between lead firms and their suppliers (Gereffi, Hum”

• cites Gereffi, Humphrey, & Sturgeon, 2005; Sturgeon, 2009Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The GVC framework treats different MNEs as lead firms that coordinate complex, multi-tiered global supply chains.

“a distinguishing feature of these studies is that they offer a network-centered perspective on the global economy that views different types of MNEs as “lead firms” that orchestrate complex, multi-tiered global supply chains.”

• cites Gereffi & Kaplinsky, 2001; Gereffi, 2018, 2019Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The GVC framework points to strategic choices that might yield more resilient supply chains and more diversified sourcing.

“The global value chain framework highlights strategic options that could lead to more resilient supply chains and diversified sourcing patterns.”

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In global industries, governance structures exist: lead firm strategies set performance requirements such as price, quality, standards, and delivery schedules for supplier tiers worldwide.

“Global industries have governance structures The strategies of GVC lead firms set the performance requirements (e.g., price, quality, standards, delivery schedule) for globally dispersed tiers of suppliers.”

• cites Gereffi, 1994Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing).

GVCs connect international trade, investment, and finance at the macro level with national and regional economies at the meso level and local suppliers, communities, and workers at the micro level.

“In effect, GVCs link the macro-level of international trade, investment, and finance with the meso-level of national and regional economies, and the micro-level of local suppliers, communities, and workers.”

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Supply chain policy drivers differ across importing and exporting economies, advanced and developing nations, and the home and host countries of leading MNEs.

“In addition, the policy drivers of supply chains are different in importing versus exporting economies, advanced industrial versus developing nations, and the home and host countries of the large multinational enterprises (MNEs) that typically lead and orchestrate global industries (Taglioni & Winkler, 2016; Stolzenburg, Taglioni, & Winkler, 2019; Horner & Alford, 2019).”

• cites Taglioni & Winkler, 2016; Stolzenburg, Taglioni, & Winkler, 2019; Horner & Alford, 2019Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Early GVC research contrasted producer-driven chains, led by manufacturers in technology- and capital-intensive sectors, with buyer-driven chains, led by retailers, branded merchandisers, and supermarkets.

“A core insight of the early GVC literature was the contrast between “producer-driven” chains, whose lead firms were multinational manufacturers in relatively technology- and capital-intensive industries, such as automobiles, computers, and pharmaceuticals, and “buyer-driven” chains, whose lead firms were retailers (such as JC Penney, Walmart, and Carrefour), branded merchandisers (e.g., Nike, Adid”

• cites Gereffi, 1994Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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That growth was driven by rising demand from aging populations in rich and middle-income countries, higher healthcare spending in developing countries, and low tariffs that ensured plentiful low-priced, high-quality goods.

“The driver was a large increase in demand, resulting from a rapidly aging population in both rich and middle-income countries, increased expenditure on healthcare in the developing world, and low tariffs that resulted in a plentiful supply of low-priced and high-quality goods.”

• cites Bamber, Fernandez-Stark, & Taglioni, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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In its 2019 Annual Report, 3M reported that reduced inventory under its new global operating model expanded cash flow by 10%, increased operating margins by 22%, and reduced inventory levels by $370 million.

“In its 2019 Annual Report, 3M heralded its reduced inventory in order to more fully implement its “new global operating model” that expanded cash flow by 10% compared to the preceding year, increased operating margins by 22%, and reduced inventory levels by $370 million (3M, 2019: 2).”

• cites 3M, 2019Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

Medical supplies are typically producer-driven value chains involving business-to-business transactions between lead firms or top suppliers and institutional clients such as hospitals, distributors, and government agencies.

“Typically, medical supplies are producer-driven value chains involved in business-to-business transactions between their lead firms or top suppliers and institutional clients, such as hospitals, healthcare distributors, and government agencies.”

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Early in 2020, 3M increased N95 output at its plants in South Dakota, Nebraska, and China, and ran its worldwide respirator factories around the clock because it expected COVID-19 to raise demand.

“In early 2020, 3M scaled up N95 supply in its factories in South Dakota and Nebraska, as well as its respirator production site in China, to run all of its global respirator plants 24 hours per day, seven days per week, in anticipation of higher demand from the COVID-19 virus.”

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The U.S. imposed restrictions on some flights from China on January 30, 2020, to try to slow the virus's spread.

“the following day, restrictions were imposed on some flights to the U.S. from China in an effort to quell the spread of the virus.”

• cites Frontline, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The shortfall of nearly three-quarters of required N95 masks would have to be met by existing firms, new entrants, or imports, which were very hard to source due to export restrictions from almost every PPE-producing country.

“This shortfall of nearly three-quarters of the required total would have to come from the output of existing firms or new entrants into this sector, as well as imports that were exceptionally difficult to find because of export controls imposed by virtually all PPE-producing nations (WTO, 2020).”

• cites WTO, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

Supply chain geography can change over time due to country conditions, firm strategies, technology shifts, or government policies, and regional and global sourcing patterns coexist and are often complementary.

“The geography of supply chains can vary over time This is based on multiple factors (e.g., country conditions, company strategies, technology shifts, or government policies), but regional and global sourcing patterns coexist and are often complimentary in many industries (Gereffi, 1999; Dicken, 2015; Whittaker, Sturgeon, Okita, & Zhu, 2020; Gereffi & Wu, 2020).”

• cites Gereffi, 1999; Dicken, 2015; Whittaker, Sturgeon, Okita, & Zhu, 2020; Gereffi & Wu, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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President Trump's first COVID-19 briefing by HHS Secretary Alex Azar occurred on January 18, 2020, several weeks after initial signals from China.

“President Trump’s first briefing on COVID-19 by Alex Azar, Secretary of the Department of Health and Human Services (HHS), occurred on January 18, several weeks after troubling initial signals about the pandemic emerged from China.”

• cites Frontline, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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It has been difficult to rapidly increase face mask supply during the COVID-19 crisis or to find companies able to switch to this production process within a reasonable time and without substantial new investment.

“For this reason, it has been difficult to quickly increase the supply of face masks during the COVID-19 crisis or to find companies that can switch to this production process within a reasonable time and without substantial new investment.”

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In medical devices, global trade is led by large vertically integrated MNEs based in advanced economies with worldwide production; main suppliers in newly industrialized and specialized locations are usually subsidiaries of MNE lead firms from innovative centers such as the US, Germany, Switzerland, the Netherlands, and the UK.

“In the medical devices segment, global trade is led by large vertically integrated MNEs headquartered in advanced industrial economies with worldwide production facilities. Although a number of major medical-device export industries are situated in relatively large, newly industrialized, global manufacturing hubs (such as Mexico, China, and the Republic of Korea), as well as smaller, more”

• cites OECD, 2020bNot matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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In less technologically sophisticated PPE, there is more external contracting by third-party suppliers, despite regulatory oversight and certification for factories selling medical devices to major markets; this expands the role of external contractors and large developing-economy suppliers for items like face masks, medical gowns, and surgical gloves.

“In the less technologically sophisticated PPE segment of medical supplies, by contrast, there is more external contracting by third-party suppliers, even though regulatory oversight and certification are required for all factories that sell medical devices to major markets6 (Bamber, Fernandez-Stark, & Taglioni, 2020). Thus, there is more scope in PPE than medical devices for supplier-centered (rat”

• cites Bamber, Fernandez-Stark, & Taglioni, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Booming international demand has driven globalization of medical supplies and devices in recent decades.

“In general, booming international demand has driven the globalization of medical supplies and devices in recent decades.”

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Global supply chains have specialized divisions of labor: different locations make specific components and final products, raising efficiency, but disruptions or substandard products at one location can threaten the whole chain if sourcing is not diversified.

“Global supply chains have specialized divisions of labor Different locations make specific components and final products, which increases the efficiency of the chain. However, disruptions or substandard products at one location can jeopardize the entire chain if sourcing options are not diversified (Sturgeon, Van Biesebroeck, & Gereffi, 2008; Buckley & Strange, 2015; Sun & Grimes, 2018).”

• cites Sturgeon, Van Biesebroeck, & Gereffi, 2008; Buckley & Strange, 2015; Sun & Grimes, 2018Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The U.S. government said 3M had to give the American market priority, and it empowered FEMA to get as many N95 masks from the company as it wanted.

“The U.S. government asserted that, due to the coronavirus pandemic, 3M must give priority to the American market, and the Federal Emergency Management Agency (FEMA) was authorized to obtain as many N95 masks as it needed from the company.”

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The JIT model in healthcare and industry requests for liability waivers when converting industrial N95 masks to medical use were two other major factors that limited 3M's ability to raise its U.S. N95 supply.

“there are two other significant factors that slowed 3M’s ability to substantially increase its supply of N95 masks to the U.S. market: the JIT business model that prevails in the healthcare market and prioritizes lean production and low inventories across the supply chain; and industry demands for liability waivers in shifting from industrial to medical N95 masks to combat the COVID-19 pandemic.”

Probably not a substantial claim: may not pass S4 (based).

Globalization's expansionary phase in the late twentieth and early twenty-first centuries has run its course.

“Globalization in its expansionary phase in the latter decades of the twentieth century and first decade of the current century has run its course.”

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So-called black swan events are becoming more probable, though we cannot know their particular characteristics.

““Black swan” events are increasingly likely, but their specific features remain unknown (Avishai, 2020).”

• cites Avishai, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

Probably not a substantial claim: may not pass S4 (based). May combine two claims.

In recent decades, supply chains grew more global and relied more on major exporting countries such as China, and on a JIT model designed to keep costs and inventories low.

“Supply chains not only became more global in recent decades but they also became increasingly dependent on key exporting economies like China, along with the JIT business model that was optimized to maintain low costs and reduced inventories.”

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U.S. policy failures contributed to a record daily count of 68,241 new COVID-19 cases on July 10, 2020, over three times the 20,114 cases reported on June 15.

“The result of these and other U.S. policy shortcomings in confronting the epochal challenge of the coronavirus pandemic is that the U.S. had a record number of new COVID-19 cases in a single day on July 10, 2020 with 68,241 diagnoses reported, a startling spike that more than tripled the total in mid-June (20,114 new cases on June 15) (New York Times, 2020).”

• cites New York Times, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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China is a key strategic player in PPE supply, both as a low-cost exporter and, more importantly, because its healthcare market was the world's second largest, valued at over $1 trillion in 2020.

“China in particular remains a critical strategic actor within the PPE supply chain, not merely as a source of relatively low-cost exports but even more importantly because China’s healthcare market is the second largest in the world, estimated at over $1 trillion in 2020 (Huang, 2019).”

• cites Huang, 2019Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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3M and Honeywell, the largest U.S. suppliers, each received contracts exceeding $170 million for protective equipment, while other big orders went to inexperienced third-party companies at prices far above those paid to established producers.

“The biggest U.S. suppliers, 3M and Honeywell, were each awarded contracts for over $170 million for protective gear, and other large orders went to untested third-party firms willing to enter the mask market at prices many times higher than the contracts for established producers.”

• cites Davis, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The Trump administration tried to cancel 3M's export agreements with buyers in Canada and Latin America, which deepened sovereignty worries among U.S. trading partners.

“To further complicate its supply-side policy agenda, the Trump administration sought to nullify 3M’s export contracts with overseas customers in Canada and Latin America, raising deeper sovereignty concerns with U.S. trading partners.”

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Research on GVCs indicates that rules for identical products may differ in strictness or enforcement in big developing countries like China, potentially helping or blocking supplier upgrading.

“However, GVC studies highlight that regulations for the same products can vary in their stringency or levels of enforcement in large developing economies such as China, which could promote or hinder upgrading among GVC suppliers (Kaplinsky, Terheggen & Tijaja, 2010).”

• cites Kaplinsky, Terheggen & Tijaja, 2010 sourceNot checked — no full text of the source

Probably not a substantial claim: may not pass S2 (checkable). May combine two claims.

Although substantial reglobalization may be the most useful and lasting post-crisis path, deglobalization cannot work as a long-term future vision.

“While significant forms of reglobalization are likely to be the most constructive and sustainable responses in the post-crisis era, de-globalization is not a viable long-term vision for the future.”

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Congress included the liability waiver in President Trump's emergency law, which launched the $2 trillion stimulus package and funded production of more than 1 million N95 medical masks over 18 months.

“The liability waiver was included in President Trump’s emergency legislation that opened the floodgates to the $2 trillion stimulus package that included funding to produce over 1 million N95 medical masks over the next 18 months (Whalen, Helderman & Hamburger, 2020).”

• cites Whalen, Helderman & Hamburger, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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The administration failed to grasp the pandemic's scale and inevitability when U.S. cases first appeared in January 2020, and further delays over testing, bureaucratic fights, and reluctance to face health risks wasted precious time.

“They did not appreciate the scale and the inevitability of the pandemic problem when the first U.S. cases were reported in January, 2020,16 and additional policy delays, related to lack of testing, bureaucratic in-fighting, and unwillingness to confront the health risks posed by the looming pandemic, wasted valuable time.”

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Rules and regulations matter greatly for every healthcare supply chain, at home (e.g., N95 liability) and in the transparency of global supply chains, where informal subcontracting has often hurt quality and trust.

“First, regulatory policies are crucial for all healthcare supply chains, both in the home market (such as the legal liability concern over N95 masks) and also in the transparency of international supply chains, where informal subcontracting has often compromised quality and lowered confidence in these arrangements.”

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Converting industrial N95 masks to medical use is not straightforward because medical masks require an extra splash-proof material, which raises long-standing industry concerns about liability lawsuits.

“Thus, the conversion from industrial use to medical masks is not straightforward, as some retooling is required because medical masks contain an extra material that makes them splash-proof, raising long-standing industry concerns about liability lawsuits (Whalen, Helderman & Hamburger, 2020).”

• cites Whalen, Helderman & Hamburger, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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In sum, the pandemic exposed how poorly current policies and global supply chains handled the public health and economic shocks it caused.

“Overall, COVID-19 has revealed a great deal about the inadequacy of current policies and global supply chains to respond to the public health and economic crises unleashed by the pandemic.”

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Industrial and medical N95 masks are made to different specifications, vary in design and fit, and are subject to different regulations.

“Because industrial and medical N95 masks are made according to different specifications, they vary in design and fit, and they are subject to different regulations.”

• cites Whalen, Helderman & Hamburger, 2020Not matched

  Couldn’t be matched to a paper in Crossref, so it can’t be checked.

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Although low inventories can be efficient with stable orders, they render supply chains brittle and fragile during crises.

“While lower inventories may be viewed as an efficient business practice when orders are steady, they make supply chains fragile and brittle in times of crisis.”

• AssumptionRests on an assumption: Globalization's growth in recent decades led firms to adopt lean production and just-in-time supply chains that cut inventories to reduce operating costs and tied-up cash.