By Roger Landman, Product Operations Manager at SYSPRO
As the pandemic continues, there is no doubt that it has expanded the shortage of essential supplies – first was the personal protection equipment, then the hand sanitizer and now the most critical of all, the medical grade oxygen required to treat those who are ill with COVID 19. While running out of oxygen is unthinkable, the resource has been at risk of being in short supply in almost every country.
The short supply is compounded by the fact that medical grade oxygen has a very specific constitution. According to Mckinsey, medical oxygen accounts for approximately 3 percent of global oxygen production. Industrial grade oxygen makes up the rest, and the two are distinctly different. Medical grade oxygen is specifically developed for the human body and can be described as ‘high purity oxygen’. Suppliers of medical oxygen have to comply to a number of regulatory requirements and need to ensure that no other gases contaminate medical oxygen cylinders. In contrast, industrial oxygen is used by sectors such as metal fabrication and automotive manufacturers for combustion, oxidation, cutting and chemical reactions. This type of oxygen is not purified for human use.
Due to the huge shortage for medical oxygen, some suppliers have started to repurpose their industrial grade manufacturing facility to produce medical oxygen to supply oxygen for the healthcare industry. One company in Africa has converted 8000 industrial oxygen cylinders to medical oxygen cylinders in the past few months. This sudden shift within the supply chain does however, require a number of planned considerations.
Shifting Gear in an End-to-End Oxygen Supply Chain
Traditionally, oxygen suppliers have managed supply and demand by taking a seasonal approach to product demand i.e. in the months of low demand, suppliers have accumulated stock. The pandemic has caused a spike in demand for oxygen suppliers and as a result, forecasting within planning systems has been significantly inadequate.
In order to meet the unseasonal spike in demand, oxygen suppliers have needed to continually review and re-adjust their forecasting plans. Depending upon criticality of supply, these reviews may even take place on a daily basis as forecasting accuracy will be vitally important to determine manufacturing capacity, storage capacity (number of bottles in circulation vs. available to use), warehousing and delivery processes.
There are a number of critical scheduling areas the oxygen suppliers need to consider when reviewing or adjusting their forecasting plans
- Maintenance schedules need to be carefully considered, as losing time to breakdowns could place further pressure on the supply chain
- Oxygen suppliers need to think about a management system for the returned empties. Suppliers need a scheduling system due to the fact that high pressure cylinders have to comply with a number of regulatory requirements which require regular inspections and checks. Suppliers also need up-to-date visibility into how many cylinders are available for use, and how many are out-of-use and require repairs or certification.
- With unprecedented demand, every move of a cylinder needs to be deliberate. Delivery trucks are delivering to multiple destinations, and therefore routing optimization and turnaround times are critical.
Technologies to forecast demand and balance capacity
It is of course not only up to oxygen suppliers to reconsider planning and scheduling to meet demand. Manufacturers both upstream and downstream of the oxygen suppliers also need to make provision to meet the needs of their own customers. For example, the metal fabrication industry requires oxygen to manufacture components and will require deliveries on a schedule. These schedules may alter and affect delivery schedules of the fabricated metals business to its customers.
While connected services allows customers to keep in touch with oxygen suppliers, platforms such as Enterprise Resource Planning (ERP) allows the industry to consolidate forecasted demand, identify stock availability, factor in supplier lead times, cost, material requirements, contingency stock requirements, and warehouse capacity constraints, and integrate this all into their unique business model.
The key is to identify an ERP provider with industry specialization and integrated technologies such as MRP to help meet the forecasted demand, balance capacity in the factory and plan labor and resources requirements. MOM can then be used to streamline the deployment of resources, provide analytics and reduce waste. The organization can also see the number of incoming customer orders, and gain insights into potential future orders. They can also see the customers’ financial standing and decide whether to allocate any stock to that customer, prior to accepting any new orders.
By having such a system in place, manufacturers have a clear view of critical jobs that should be prioritized and where oxygen supply should be rationalized. At the same time, they can also have end-to-end supply chain visibility and identify whether alternative suppliers are required.
As a result, customer service is improved, costs are reduced, and manufacturers can mitigate interruptions that will affect their inventory levels and ultimately product delivery. While the oxygen shortfall is a brutal reality, platforms such as ERP can help suppliers and manufacturers to meet the demand, plan for the future and ultimately save lives.