On April 7, an Airbus A330 landed at Dublin airport from China. The private plane, owned by air freight leasing company Avolon Aero, contained pallets of medical supplies destined for the Health Care Executive (HSE), the Irish health service. The sought-after equipment was the result of a collaboration between the public and private sector – government officials both in Ireland and diplomats in China had worked with prominent private individuals who were able to bring their connections and influence to bear, including the rock star Bono, who donated €10 million to the project.
One of the people Bono approached to bring the project together was Liam Casey, the founder of logistics firm PCH International. Having spent the past 24 years working in China, the 54-year-old Irish entrepreneur has developed deep expertise in an area now critical to sourcing the equipment needed in the fight against coronavirus – an intricate knowledge of global supply chains.
PCH doesn’t reveal the identities of its clients, but they are widely reported to include many of the world’s biggest brands and consumer goods companies, including Apple, L’Oreal, Salesforce, Square and Beats. The company, which is headquartered in Cork, but has offices in San Francisco and Shenzhen works with brands to develop, manufacture and handle logistics for products that are either in your pocket or on your desk. “It’s end-to-end supply chain orchestration,” Casey says. “We take products from concept all the way through to a consumer.”
PCH works at every level from design concepts to packaging, sourcing of raw materials and vetting of factories, it manages manufacturing and data services for brands to match clients with suppliers and to track orders – and spot trends – in real-time. It oversees e-commerce, fulfilment and distribution, often shipping directly to stores all over the world. It ships products as close to demand as possible in the way that, say, cloud computing scales services. The easiest way to understand PCH is to think of it as the Amazon Web Services of hardware.
As the UK government struggles to provide NHS workers and care givers with PPE equipment, it’s become clear that the current global demand for some medical supplies is insatiable and the marketplace treacherous. Unscrupulous middle-men act as brokers, supplying products of questionable provenance at vastly inflated prices – Casey says that he has received numerous approaches from dubious sources every day claiming to access to large volumes of PPE – and governments are outbidding each other for supplies and, allegedly, conducting piracy in order to access the crucial equipment. China is manufacturing around 200 million face masks per day with demand vastly outstripping supply.
The European Centre for Disease Prevention and Control, an EU agency, estimates that for each confirmed coronavirus case a health service would need 14 to 24 separate sets of personal protective equipment every day. According to Johns Hopkins University there are currently two million people who have tested positive for the virus. If even less than five per cent of these people are hospitalised, tens of millions of sets would be required per month, without even considering the demand from other organisations that need PPE, such as care homes.
“So many people are chasing PPE, countries are chasing it, different states in the US are chasing it, hospitals are chasing it, so it’s hard to actually get solid supply,” Casey says. “Our focus is making sure that we’re comfortable with anything we get – if you’re putting a mask in the hands of a frontline worker it has to work.”
Casey says that the only way to do this is to send teams to “walk the line”: to inspect every stage of the manufacturing process from raw materials to the finished product. “You identify factories that have the licenses, you identify the factories that have access to materials, you identify the guys that have the automation and the capacity in their buildings, you want to make sure they can handle the volume.”
Typically, PCH aims to move products from the production line to retailers in the US within 36 hours: products are trucked from factories to Hong Kong airport, pass through Chinese customs, loaded onto air freight for a 12-hour journey to the west coast and then through customs in the US and onwards to their destination. PCH works with partners on this final leg of the journey, which Casey describes as “the last mile”.
While PCH hasn’t previously manufactured PPE, it has produced FDA-approved products since 2004. Regulation of this is determined by the International Organization for Standards, a Geneva-based group that oversees various commercial and industrial standards via representatives from across the world. The specific standard for medical devices is known as ISO 13485. Individual countries manufacture masks with physical properties and performance characteristics that adhere to this and can be expected to function at a similar level: the Chinese version of this is known as KN95, in Europe it’s FFP2 and the US N95.
These medical grade masks are different from the type that PCH is also working to source as part of an initiative by, among others, Y Combinator founder Sam Altman, who is hoping to crowdsource one billion masks for US workers within the next 180 days. These single-use, textile-based masks will have a Bacterial Filtration Efficiency (BFE) of around 95 per cent. While not FDA approved, they are suitable for use in hospitals for non-frontline staff. Casey says that the biggest orders thus far have come from service companies, such as food delivery.
In order to keep freight costs down, this PPE will be shipped across the Pacific to Long Beach in California. Typically, this takes thirty days, but faster boats have been sourced which will take two weeks. Casey argues that this is the optimal way to ensure consistent supply as quickly as possible – as long as PCH has visibility of the supply chain and it functions as it should do, then it can control what happens on either end of the time the equipment spends on the ocean. “Transit time is real, that exists, but what’s not real is all of the warehousing and all of the storage and all of the hoarding, and all of the gouging that’s happening outside of the clean supply chain,” he says. “For us, it’s all about the quality of the factories and the data from the factories. We want to know the output on an hourly basis. Once we have that we can match it with wherever it needs to be… We use data and AI to know where this stuff needs to go. It’s the ultimate matching of demand and product, and technology can be used to do that.”
Whether shipping consumer electronics or surgical masks, PCH’s aim is to use data in order to shorten the supply chain – if goods are in the hands of the consumer more quickly, the supply chain has a higher level of liquidity and capital requirements are lessened.
“You have to pay up front because the factories are paying for the raw materials up front, paying for the equipment up front. We want factories that will build 5 million masks a day, so they have to make big investments,” Casey says. “Any transactions that are happening at the moment in China, they’re all cash up front.”
China was able to ramp up production quickly as factories that had previously been producing other types, of products, such as consumer electronics, switched to producing masks. “There are companies in China that, in January had never made a mask, and today they have a run rate of 30 million per day,” Casey says. It also helps if you can mobilise the world’s largest oil, gas and petrochemical conglomerate company: the Chinese government instructed Sinopec to produce the raw materials in February.
“At these kind of volumes you have to know where the raw material is. Where’s it coming from? When is that arriving? Is it on trucks? How fast is it going to get there?” Casey says. “If you’ve got a factory producing five million masks per day, it doesn’t take long for those masks to fill up a lot of space, so you’ve got to create continuous flow as fast as possible.”
The covid-19 crisis may lead to shifts in global supply chains, with some commentators arguing that western governments will not want to be reliant on east Asian manufacturing hubs again. But, for the foreseeable future, China will maintain its place as the world’s leading manufacturer. And, whether you’re producing £900 smartphones or masks at 30 pence per unit, Casey maintains the golden rule: “you’ve got to walk the line.”
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This article was originally published by WIRED UK
