Published on August 11th, 2020 By Jack Bonacci
Lets first establish some vocabulary.
Landed Inventory: Products that have cleared customs and have been issued an SGS* report.
Production Inventory: Products that have not yet been made and/or issued an SGS* report.
*Multinational corporation that provides inspection, testing, certification, and verification for international commerce.
PPE Exchange is the first PPE marketplace to make the important distinction between these two ideas. Taking this into consideration, we have made customer expectations when purchasing PPE more accurate and agreeable such that customers are always very clear on what, when, and how they are getting their PPE.
Distinguishing between landed and production inventory is not only relevant to the medical industry, but necessary to countless other industries in need of PPE as well. Hospitals, airlines, restaurants, factories, and any other entity in need of protecting employees and customers are often paralyzed in the procurement process because of this seemingly simple piece of information.
Simply put, manufacturers either sell products directly to end-users or sell to brokers who then sell to end-users. Demand for PPE is exploding, and it isn’t going to dissipate anytime soon. Industry connections (manufacturer-to-buyer or manufacturer-to-broker-to-buyer) that existed before this pandemic, remain, if but by a thread. However, those entities that didn’t previously need PPE regularly are stuck floundering in a patchy network propped up by rumors about products that may or may not be currently landed. Even if goods are landed, customers can be assured that they are not the only potential buyer for that very set of products.
An order is placed for nitrile gloves, and the customer needs the goods in 10 days. The timeline is feasible if the products are landed, but highly improbable if they still need to be produced. Landed PPE products, especially in the midst of a crippling pandemic, are valued at a premium. If multiple buyers need gloves of a certain standard in the near future (which necessitates that those gloves be cleared by customs and available to ship immediately), there becomes a supply shortage given the time parameters.
As it stands, the availability of landed products is communicated in urgent phone calls or emails, and the quickest-acting buyers are rewarded – often at a steep price. Meanwhile others are left on the back-burner in hopes of being next-in-line if the first buyer’s purchase falters, and they get no commitment from sellers until a hasty communication urging immediate action.
There are few ways the landed vs. production problem gets remedied:
- Increased supply of landed products.
- Increased transparency from sellers.
- Buyer adoption of procurement planning via production orders.
On increasing supply of landed products
The industry would need a combination of relaxed customs regulations and increased warehousing capacity on part of both manufacturers and domestic brokers. Relaxing trade rules in an on-going pandemic world is unlikely. If it were to happen, the bureaucratic process of achieving relaxed regulations would take years. Moreover, the longer brokers have to house products, the higher their rent and security costs become.
This route can also be achieved by more domestic producers entering the market. There was a stimulus aimed at domestic industry with the first COVID-19 relief package passed by Congress in March, but that focused heavily on ventilators and not on other forms of PPE.
On increasing seller transparency
This is possible, but not a complete solution. Overseas manufacturers don’t have robust warehousing capabilities in the U.S., and brokers are grappling with unprecedented industry flexibility regarding the pace at which the products they import are moved. They place production orders, and when the products clear customs, they sell almost instantly. Even if manufacturers and brokers have real-time inventory updates on a centralized platform, the issue of getting customers the PPE they need when they need it is not solved: all that is solved is the issue unrealistic expectations from buyers.
On buyer adoption of procurement planning via production orders
The aforementioned transparency coupled with procurement planning via production orders creates a sustainable solution. If buyers only target landed inventory, they may secure occasional orders from trustworthy vendors, but those cases will certainly be rarities among an array of orders lost to other buyers and orders of faux products. By thinking one month down the road, buyers can lock in goods from manufacturers directly, and those orders can become recurring deals with established manufacturing partners.
For example, if instead of vying for landed goods, a customer focused in late August on needs for October, they can guarantee better pricing, quality, and timing of delivery by ordering goods that aren’t yet produced. This demand planning from end-users makes production planning easier for manufacturers; a process that perpetuates trust between the parties and lends itself to a long term procurement solution through which front-line workers can be consistently supplied with PPE.
PPE Exchange seeks to help those in need of PPE by helping to provide clarity in a market that has been riddled with uncertainty. By thinking about the needs of your organization weeks before that need becomes real, you can avoid the stress of competing for landed materials. Instead, we recommend setting up a supply chain of consistently produced goods using trusted vendors. Through this process, we can once again establish trust and validity in a market seriously lacking order and stability.
If you have not already, please request to become a part of PPE Exchange. Once a member of the platform, you will have the ability to view hundreds of PPE listings from verified and vetted PPE vendors. These listings include all the details you will need from: landed vs. production quantities, prices per unit purchased, lead time to delivery, as well as relevant certificates of verification. Please feel free to email us at email@example.com if you have any questions.