Political unrest erupts in a volatile region, threatening by some estimates more than half the world's production of medical and dental hand instruments. A typhoon strikes in Southeast Asia, and suddenly the world cannot get the latex gloves essential for surgery. A pandemic causes demand to spike for health care products, and there is a global shortage of essential medical goods.
At the World Economic Forum in Davos this year, a group of business, academic and government leaders discussed potential scenarios like these and what we can do to prepare for them in a session titled "Global Supply Chain Resilience." As chairman and CEO of the world's largest provider of health care products and services to the office-based medical, dental and animal health practitioner, I was fortunate to serve on the panel, which was moderated by Dr. Shirley Ann Jackson, the president of Rensselaer Polytechnic Institute, alongside fellow panelists Marcelo Claure, chairman, CEO and president, Brightstar Corp.; Koji Sekimizu, secretary-general, International Maritime Organization; and Tarek Sultan, chairman and managing director, Agility.
The world's supply chain forms the backbone of our global economy, security and health, and the risks it faces are many. The five "P's" of powerful weather, pandemic, political instability, port closures, and primary sourcing can easily cause disruption, potentially triggering a cascading effect for millions. Take Hurricane Sandy, which devastated coastal New York and New Jersey a few months ago. Sandy's effects were far greater than society was prepared for, with hospitals shut down because of power outages and gas lines miles in length as tankers couldn't deliver fuel because of port damage.
And the risks are increasing. With global warming and population growth, the National Oceanic and Atmospheric Association reports that weather-related disasters have increased sharply over the past three decades.
Narrow regional sourcing dependence also puts us at risk. For example, more than half of the world's production of medical and dental hand instruments is dependent on processing in the South Asia, and more than 90 percent of exam and surgical gloves are produced in Southeast Asia.
Demand shocks present another risk. With influenza vaccine production limited to a few large multinational companies, the World Health Organization predicts that there would be an insufficient global vaccine supply during a pandemic. And global interconnectedness and the threat of antibiotic resistance make pandemics more likely in the future.
What to do? We cannot plan for precisely how or when, but we can plan for the fact that disruptions will strike. We must create supply chain resilience to enable us to respond. Sound business practices, such as increased investment in areas of potential disruption, maintaining a robust global network to ensure flexibility, analysis of past disruptions to bolster contingency planning, and detailed disaster preparedness and relief planning are essential. We must utilize available tools and develop new ones to enhance information flow, facilitate partnerships and build strong networks based on trust.
Like most global challenges we face, no single sector can effectively address supply chain issues alone. The only effective solution is public-private partnerships. At the height of the SARS epidemic, Henry Schein received an urgent call from the government of Hong Kong with requesting two million masks. Our ability to deliver on this dramatic spike in demand within four days depended on our close relationships with our transportation partners, government officials and our supplier partners. When a major producer of the flu vaccine shut down manufacturing operations a few years ago, our ability to get essential vaccines to health practitioners at the height of flu season depended on our tightly knit partnerships with suppliers and public sector actors.
The same holds true when preparing for disasters. Through our global corporate social responsibility program, Henry Schein Cares, we have developed a model of collaborative public-private partnership with our supplier partners, NGOs, governments and others. We do not start from scratch once a disaster strikes. Instead, we have pre-positioned pallets of emergency medical supplies in the warehouses of our NGO partners to facilitate their immediate response.
The international community's current ability to respond to the global supply chain risks we face is inadequate, but thanks to the World Economic Forum's ability to bring together the world's leading experts and key stakeholders, critical discussions are taking place. But we must continue to do better. No one actor or sector can go it alone. Collaborative partnership, proactive planning, open communication and effective coordination are the only solution. The next crisis we face is not a matter of if. It is not even so much a matter of when. If we don't do something more, and soon, it will be a matter of how bad.
As a society, we need to move fast to make sure the answer to this question is: Not nearly as bad as it could have been.
Stanley M. Bergman is chairman and CEO of Henry Schein, Inc., a Fortune 500 company and the world's largest provider of health care products and services to office-based dental, medical and animal health practitioners, with more than 15,000 employees and operations or affiliates in 25 countries. Visit his website: www.henryschein.com.