Building Resilience into the Nation's Medical Product Supply Chains (2022) / Chapter Skim
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Appendix C: Determining Risk Values When Evaluating Medical Product Supply Chain Resilience
Appendix C: Determining Risk Values When Evaluating Medical Product Supply Chain Resilience
Pages 277-284
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From page 277... ...
Adding protections should be avoided for one product that provides little added benefit when the resources could have yielded more benefit if spent protecting another product. This appendix describes the procedures for estimating expected risks and setting protection targets for medical products.
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From page 278... ...
Similarly, analytic estimates of Si could be made by evaluating shortages caused by various trigger events. Analytics techniques, such as machine learning, might be helpful in leveraging past data to estimate event probabilities and shortage levels.
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From page 279... ...
That is, a supply of Xi units will cover a shortage event that cuts off 100 percent of production for Ti weeks. It is standard practice in inventory and supply chain management to refer to inventory levels in units of time because it highlights the level of protection much more clearly than does referring to inventory in units of items.
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From page 280... ...
Setting an appropriate protection volume target of Xi or a protection time target of Ti requires consideration of the profile of possible shortages. For example, if a detailed scenario analysis was performed to compute the expected shortage amount Si, one could use the data shortage probabilities and magnitudes to generate a cumulative probability distribution like those shown in Figure C-2.
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From page 281... ...
Since holding large amounts of rarely used inventory is expensive, there is strong incentive to consider alternative resilience interventions. The medical product supply chain resiliency framework in Chapter 5 provides a tool for identifying options.
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From page 282... ...
Nevertheless, this technical dive into the analytics of setting protection targets highlights the need for alignment of risks and rewards. For example, if the Strategic National Stockpile holds inventory for two products with similar Hi values but holds an amount equivalent to the 99.9th percentile of the shortage distribution for one product and inventory equivalent to the 50th percentile of the shortage distribution for the other, then there is probably an opportunity to make better use of resources.
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From page 283... ...
For example, a trigger event should not be considered a shortage until it exceeds readily available capacity, which includes that from working overtime or scheduling extra shifts. Intermediate lead time capacity must also be accounted for, such as that achieved by hiring and training new workers or repurposing existing facilities to expand capacity, when estimating shortage magnitudes in the risk assessment process.
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From page 284... ...
284 NATION'S MEDICAL PRODUCT SUPPLY CHAINS the protection time target must also be accounted for. The framework in Chapter 5 provides a structure for thinking through options for generating capacity that will limit the need to store excessive amounts of inventory as protection against a rare but extreme emergency.
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