ALLOCATING CRITICAL SCARCE CORONAVIRUS MEDICAL SUPPLIES
By Terry Harris, Managing Partner, Chicago Consulting
Allocating scarce critical Coronavirus medical supplies should depend on several factors including
- Who is doing the allocation—a national government as guidelines or mandates, an agency such as FEME or an individual Supplier company such as Abbot, Medline, Mackeson or Cardinal
- The efficacy of the material being allocated─more efficacy means the allocation method is more important
- How effective the recipient is in applying the medical material, their skill at saving lives
- The scarcity of the material at the Customer (Hospital, Clinic, Provider)
- What is known—if the inventory at the Customer is known–a particular allocation method might work over another
We envision a situation in which an effective Coronavirus medical material is in scarce supply at a Supplier’s origin or warehouse and is being sought at multiple Customers. The problem confronting the Supplier is to determine how to allocate their supply as it currently exists, the current on-hand inventory, and then whatever it next acquires from the upstream supply chain.
The Supplier wishes to perform this allocation for multiple reasons
- Save lives
- Be as effective as possible in combating the virus
- Be fair
- Avoid criticism and potential litigation
- Follow the law and government authorities
Framing it symbolically, the Supplier has an On-hand inventory of X and n orders from Customers of the material in quantities of Y1, Y2, Y3, … Yn, and the sum of these amounts exceeds X. What should the Supplier send each Customer? What should the Supplier tell Customers it will be able to send when it is next resupplied?
A rational basis of allocation is the effectiveness in saving lives at the Customer expressed in Times’ Worth (Days’ Worth, Months’ Worth). Basing allocation on Times’ Worth places Customers on an equally efficacious lifesaving footing and allows for the allocation to be made repeatedly based on the then contemporaneous situation.
Assuming each Customer’s application of the material were equally effective, more would be allocated to a Customer that
- Had less currently On-hand
- Would use the material more rapidly
This would be an allocation amount of ZI to Customer i where the quantities ( OI + ZI ) / FI are equal for each i and where OI is the On-hand and FI the Usage. Finding such equal quantities, ZI , is simple for an computer program.
PRACTICALITIES AND APPLICATION
Allocations of temporarily scarce material have been rare in our abundant society heretofore. They have usually been applied by the Suppliers’ Customer Service or Sales representatives normally in conversation with Customers placing orders. This approach will not work for critical Coronavirus material. Needed is an authoritative and rational way to send specific quantities of a Suppliers’ valuable lifesaving On-hand material.
The Times Worth-based approach outlined above relies on two key parameters, the Customers’ On-hand and its Usage. It is likely that an individual Supplier would have difficulty maintaining these data on their Customers or those who have placed orders. Perhaps a national organization should provide these data. Perhaps FEMA should maintain and provide them to Suppliers.
Usage amounts might be able to be estimated by one or more of the following
- The capacity of the Customer to serve Coronavirus patients
- The population served
- The density of the population served
- The number of previous nearby Coronavirus deaths
- Past Usage
Past Usage will be a poor surrogate for future Usage in the early stages of a new material, just when allocation is most needed.
In the case in which the Customers’ On-hand quantities are essentially zero, such as the early stages, the allocation becomes simpler. Then the quantities should be in proportion to the Usage. Namely pick the ZI ’s in proportion to the FI ’s.
Applied well, forecasting will account for usage trends and recognize shifts as regions and cities accelerate and decelerate.
Here’s a suggested implementation timing:
- Obtain Coronavirus death statistics by geography, Zip Code, 3-Digit Zip Code, County, MSA.
- Construct a Usage estimate of all Customers based on these statistics in their representative geographies
- Apply the simple allocation process above: ship quantities in proportion to Usage estimates of all Customers that have placed orders
- As material gets distributed FEMA should maintain On-hand data of each Customer. Perhaps they should mandate that Customers provide such data
- Then allocate with the approach above accounting for On-hand and Usage
Smart simple allocation approaches are needed now as effective material first moves through our medical supply chain. We cannot wait for perfect methods with difficult to obtain data.
It’s better to be approximately right than precisely wrong