Supply assessment and outlook on non-specific COVID-19 supplies
An overview of the current and anticipated near-term impact of COVID-19 on UNICEF’s supply chains for country programmes.
Just three countries, the United States (US), Brazil, and India account for just under 50 per cent of all confirmed cases.
Air travel restrictions and airfreight market disruption remain and continue to interrupt and delay the supply of essential health products (vaccines, etc) to many countries. While there is still no indication as to when the situation is expected to return to pre-crisis levels, there has been a gradual increase since early April in number of scheduled flights available and therefore in the capacity to deliver supplies to countries.
Air freight transit times have increased and are about 3-6 days longer than previous standard transit times due to the reduced flight departures, as freighter flights are less frequent than passenger flights.
In anticipation of the development of a COVID vaccine and market considerations, most manufacturers have increased their production volumes in anticipation of meet increased demand and the vaccine roll out.
The effects of the COVID-19 pandemic on the status of women’s, children’s and adolescent health are affecting countries ‘s ability to make progress in reaching women’s, children’s and adolescents’ health and their ability to reach the targets under the SDG’s by 2030, as countries that were unprepared try to cope by diverting already limited resources away from essential services.
Currently the total number of confirmed COVID-19 cases globally has surpassed 18 million affecting over 200 countries, regions, and territories. Six countries, the United States (US), Brazil, and India account for just under 50 per cent of all confirmed cases. To date, just under 574,000 COVID-19-related deaths have been reported globally, according to the latest epidemiological updates issued by WHO1.
Other supply chain exposures, and impacts of COVID-19
UNICEF provides an overview of the current and anticipated near term impact of COVID-19 on UNICEF’s supply chains for country programmes. The focus is on supplies that make up the majority of UNICEF’s procurement ‘footprint’ (by procurement value and volume). Accordingly, it covers health related products, notably medicines, nutrition, cold chain equipment (CCE), safe injection equipment (SIE), long-lasting insecticidal nets (LLINs), education, as well as products related to water and sanitation.
UNICEF issues separate updates on COVID-19 specific supplies related to its response to the COVID-19 pandemic. Notably on:
• Diagnostics tests
• Personal protective equipment (PPE)
• Oxygen Access
A recent report issued by the WHO, on behalf of the Independent Accountability Panel (IAP) for Every Woman, Every Child, Every Adolescent, paints a very grim picture on the effects of the COVID-19 pandemic on the status of women’s, children’s and adolescent health. Progress in reaching women’s, children’s and adolescents’ health targets under the SDG’s by 2030 were already lagging before the COVID-19 pandemic. However, the pandemic has made it worse, as countries that were unprepared try to cope by diverting already limited resources away from essential services2.
Key shipping and logistics challenges
Air travel restrictions and airfreight market disruption remain and continue to interrupt and delay the supply of essential health products (vaccines, etc) to many countries. While there is still no indication as to when the situation is expected to return to pre-crisis levels, there has been a gradual increase since early April in number of flights available and therefore in the capacity to deliver supplies to countries.
All existing contract airfreight rates are suspended, with UNICEF registering rate increases by as much as 500 per cent but stabilizing at between 150 to 250 per cent, while at the same time many airlines seek financial support from governments.
The decline in widebody belly hold capacity from passenger fleets had levelled off with freight-only flights using passenger aircraft and a gradual resumption of select passenger flights from mid-June. However, airlines are now reducing their use of cargo-only passenger flights as regular passenger operations re-start and rate declines put pressure on the profitability of such services.
Meanwhile global freighter capacity (dedicated planes for cargo) has increased and is currently 20 per cent higher than 2019 levels. However, the overall air freight capacity globally continues to be critical and is at approximately 25 per cent below the levels registered for same period in 2019, but much less to African destinations.
Even though Africa is the region currently less affected by the pandemic, currently only having an estimated three per cent of the currently reported caseload, this situation may change. Africa has been heavily affected by the consequences of airline restrictions, especially inter-regional logistics travel inside Africa, in addition to the social and economic consequences as a result of mitigation measures.
Routes to the African continent have been particularly badly hit, although there are signs that some airlines are beginning to resume partial services, such as Air France and KLM, Ethiopian, Turkish, and Brussels Airlines are also operating cargo services to many destinations in Africa, and the resumption of limited passenger flights, government restrictions allowing.
Air freight transit times have increased and are about 3-6 days longer than previous standard transit times due to the reduced flight departures, as freighter flights are less frequent than passenger flights. In addition, the constrained market capacity difficulties in the securing of bookings which further expands air freight overall lead times for delivery of supplies.
Africa has a limited capacity to cope with the shock, and many African nations are currently facing increasing numbers of COVID-19 cases, with less than one intensive care bed and one ventilator per 100,000 people. WHO has warned that Africa, home to 1.3 billion people, could become the next epicentre of the pandemic, and face a severe shortage of tests, personnel, and oxygen supplies. Whereas Africa has responded rapidly to contain the pandemic, across the continent it has only carried out 685 tests per million people, compared to Europe, which has carried out nearly 23,000 tests per million people.
In terms of global sea freight, ocean freight rates appear to be staying relatively firm, despite falling demand, as lines exhibit a high degree of capacity management. Extensive “blank sailings” implemented globally has led to fully booked vessels, which is a situation that will continue over the next weeks. Imbalances in container availability are now impacting container capacity globally, as space remains tight on all trade routes due to high amount of “blank sailings”. A recent survey on seaports note that 40 per cent of seaport respondents experience a moderate (5 per cent to 25 per cent) decrease in port calls, and in some instances significant decreases in excess of a 25 per cent. More than half of the ports report no changes compared to normal conditions. An additional transit time of 1-2 weeks is expected.
UNICEF procures pharmaceutical products globally from various regions with 45 per cent (USD 44 million) being sourced from India, and 7.8 per cent (USD 7.8 million) from China. Both countries represent an exposure for UNICEF of just under 53 per cent. A large portion of the remainder are sourced from Europe. UNICEF is working with WHO and other partners to monitor and manage access to essential medicines.
Of the 16 manufacturers contracted by UNICEF to supply antimalarials, four are based in India and one is in China. Nine of UNICEF’s 11 contracted antiretroviral (ARV) suppliers are based in India, with none in China. Indian manufacturers supply generic ARV products, for which alternative originator manufacturers exist outside of India. As for other essential medicines, the majority (80 per cent) of the essential medicine suppliers are from India, with only four per cent (three) in China. Alternative suppliers are available in Europe for the injectable antibiotics sourced from China.
Although Indian pharmaceutical suppliers source almost 70 per cent of their active pharmaceutical ingredients (APIs) from China, they have indicated that they currently have enough API supplies from China to cover their operations for up to two to three months. In addition, the production of APIs and finished pharmaceutical products in China has resumed, and it seems so far, to have normalized.
The recent lockdown in India has resulted in some reduction in some supplier’s production capacity and increased lead times for medicines sourced from India because of in country logistical challenges. Price increases and supply disruptions due to logistics and shipping issues, therefore, remain a possible risk that UNICEF continues to monitor closely in real time with partners. However, where possible, UNICEF is using suppliers outside of India, including from Europe and China where medicine production has returned to full capacity to source the medicines.
As of the beginning of July 2020, WHO reports up to seventy-three countries report that they are at risk of ARV medicine stock outs due to the COVID-19 pandemic. Twenty-four countries report having either a critically low stocks of ARVs or supply disruptions, which could affect an estimated 8.3 million people benefiting from ARVs, representing about 33 per cent of all people taking HIV treatment globally. The risk to supplies is as a consequence of suppliers failing to deliver ARVs on time as well as the reduction in land and air shipment services, coupled with limited access to health services within countries due to the pandemic, where HIV prevention and testing services are not reaching the groups that need them most. Improved targeting of proven prevention and testing services will be critical to reinvigorate the global response to HIV.
Countries should mitigate the impact of any disruptions by working to maintain supply chains and engagement with communities to ensure access to health services and the delivery of critical medicines including ARVs and work to overcome any in-country logistical challenges.
Manufacturers of specialized nutrition products are geographically well spread across the globe. UNICEF has currently 21 LTAs for ready-to-use therapeutic food (RUTF) across most regions, including in India, the Americas, Europe, the Caribbean, and Africa. On the other hand, the supplier base for therapeutic milk is constrained with only one main LTA holder, located in France, and a second supplier recently reinstated in South Africa. To mitigate this risk, UNICEF is working with the supplier to pre-position therapeutic milk at supplier’s responsibility in East and southern Africa. UNICEF procures approximately 80 per cent of global production for both products and is monitoring closely the supply situation. The lockdowns in Haiti, India, and South Africa have stopped economic activity, but most RUTF manufacturers have been able to get an exemption as it is considered as essential (food) business and have either continued or resumed production. Manufacturers have increased their buffer stocks in anticipation of an increase in demand. UNICEF is also receiving RUTF as a contribution-in-kind (CIK), sourced from manufacturers in the United States (US), with so far, no problems reported. A sub-section of the same RUTF suppliers are also producing RUSF and other LNS products for UNICEF.
Other commodities used in nutrition programmes such as multiple micronutrient powders (MNPs) and anti-anaemias (iron folic acid and others) can be delivered from UNICEF’s warehouse stock in Copenhagen or directly from manufacturers. Replenishment of UNICEF’s warehouse inventory in Copenhagen is being increased and brought forward to ensure that there is enough buffer stock. The supplier base for MNPs is healthy with a large production capacity in Europe, Asia, and Africa. The same goes for the anti-anaemias with suppliers in Europe and Asia, although production is currently constrained with one of UNICEF’s suppliers responding to a negative quality audit. For Vitamin A capsules (Retinol), both UNICEF and the donor of the CIK are using the same supplier base in Canada, which has been able to produce as planned. The product is delivered to UNICEF programmes and partners from UNICEF’s warehouse in Copenhagen. The European manufacturers of High Energy Biscuits and supercereal products have confirmed that production is progressing as planned.
However, these products are primarily used in emergencies and represent a significant volume. UNICEF procured almost 50,000 MT of RUTF in 2019, representing more than 4,000 standard 20′ shipping containers, and are therefore vulnerable to disruptions in global freight. The extensive network of RUTF manufacturers UNICEF has now established, closer to where the products are being used, was intentional in order to reduce international transport volumes, shipping costs, and distances using sea and air freight, as well as to ensure that critical supplies are closer to communities, and their production also support local business development.
Logistics bottlenecks created by border closures, export bans, and reduced sea and air freight and trucking capacity, can also have an impact on the production of finished products as most of the manufacturers of the above products rely on the importation of raw materials, packaging, and active pharmaceutical ingredients, which cannot be sourced locally.
Cold chain equipment
The global supply of immunization of Cold Chain equipment (CCE) is diversified. The key suppliers of WHO prequalified CCE are spread across Europe, South Africa, India, USA, as well as China.
The production capacity of the Chinese supplier is back to normal with confirmed availability of raw materials and components. Some of the European suppliers’ production capacities have been restricted; one supplier had their factories closed while others noted difficulty in sourcing specific components and raw materials. The sourcing of components and raw materials is especially affecting the CCE suppliers based in India, where there has been delays experienced on several orders. However, in general there is minimal impact on CCE orders in the pipeline, especially with the largest CCE manufacturers.
As a result of border closure to incoming shipments in some countries, there has been delays in picking up some orders from the suppliers, as well as delays of shipments in-transit. This has resulted in additional storage costs in a few instances. There are still delays in shipments in terms of shipment by air freight due to availability of flights. Where possible air freight orders are being re-routed by sea. However, as most CCE orders are shipped by sea the impact overall for CCE supply is minimal.
In terms of CCE project implementation and installation services at the country level, lockdowns and restrictions on importation have resulted in full or partial suspension of in-country logistics and installation activities. In some cases, this resulted in increased operational costs.
UNICEF is monitoring the production, delivery and implementation status with the suppliers on a weekly basis and adjusting timelines and priorities in view of the changing situation.
UNICEF has a diversified supplier base of safe injection equipment (SIE). Indications from all LTA holders suggest that they can meet UNICEF’s current orders and they are confident that the situation will not affect their production capacity, and they have committed to inform UNICEF should the situation changes. With reference to the development of a COVID vaccine and market considerations, most manufacturers have increased their production capacity and have started to increase their production volumes in anticipation of being able to meet the increased demand, and to be ready when the vaccine is available for roll out.
Long-lasting insecticidal nets (LLINs)
UNICEF has forecast procurement of LLINs of up to 85 million LLINs over 2019-2020 period and has contracted 10 suppliers (including three from China and two from India) to fulfil these needs. While Chinese suppliers of LLINs have returned to their normal production capacity the Indian suppliers are starting to return but still with some lock-down restrictions. To avoid any delays, UNICEF have been reallocating the allocations it had forecasted for deliveries up to June and July from Indian suppliers still under lock-down to alternative suppliers from outside India. UNICEF is in the process of assessing the impact of COVID-19 on upstream supply chains for LLINs.
UNICEF continues to monitor the LLIN production status and is in dialogue with other global procurers (e.g. the US President's Malaria Initiative (PMI), the Global Fund) freight forwarders and inspecting agencies to collaborate on actions to mitigate further risks.
Most of UNICEF’s education supplies are procured from China and the COVID-19 pandemic initially had an impact on production and delivery delays. However, most education suppliers in China resumed production once lockdown was lifted and have been pro-active in taking measure to cover production backlog and since have been regularly accepting and delivering Education supplies on time. Warehouse replenishment orders have been placed and accepted by suppliers with staggered deliveries and are being delivered to Copenhagen Warehouse and kit packing is on-going attending to global emergency requests. UNICEF managed to expedite some critical items which have since arrived in Copenhagen.
UNICEF’s contingency plans in sourcing direct orders from alternative suppliers revealed that most manufacturers and traders also rely primarily on imports from China and do not hold high enough inventories of available stock. As they source most of their items from Chinese suppliers, they too equally face supply and production delays. UNICEF enquired with suppliers from other regions in Africa and Asia. Even though some suppliers had similar items, they had different product dimensions, longer-lead times for delivery, and limited or no provision of safety and conformity certification, which are essential for education products, and so none were found suitable as alternatives to China.
New warehouse replenishment orders to Copenhagen placed since March have been since been produced and dispatched by suppliers with regular shipments being continuously received in the Warehouse. The 3rd wave of replenishment orders have mostly been placed and regular production and shipment is being monitored. These orders are forecasted by warehouse to cover the surge in demand until the end of 2020.
Education unit had released new solicitations since February 2020, but the outcome indicates there are still challenges being faced with global suppliers in responding on time. As such to ensure continuous supplies of education commodity group Long Term Arrangement have been extended vs new solicitation given the challenges expressed by supplier to participate as well as submit samples which is appears to be the biggest challenge. Therefore, Education Unit has taken an informed decision to extend current long-term arrangements (LTAs) where possible and with supplier acceptance thereby delaying launching of new solicitation in hope global industry stabilization. In addition, for all new solicitation and procurement endeavours Education unit will further strategize for global supplier diversification in order to avoid similar challenges in future whereby majority of commodities are sourced from one country and/or territory. This may result, in some instances, with a higher price vs availability of products during emergency response.
The supply chain resilience of education products has scope for improvement based on the current experience. The market, and the wider industry, attempted to adopt alternative or contingency modalities. However, the industry has few and limited options outside of China, especially in sourcing raw materials, coupled with the fact some of the kit items are unique to UNICEF, and are made to order, such as all disability inclusive products (e.g. ruler with magnifying glass, Braille clock, Braille plasticized poster, and all branded items, amongst others). Overall, all education suppliers remain very responsive during the crisis, providing UNICEF with daily updates and maintaining regular communication.
Water, sanitation, and hygiene (WASH) supplies
Water, sanitation, and hygiene (WASH) products related to emergencies are mostly available in local markets (i.e. soap, buckets, jerrycans, handwashing stations, and others). For some key products, such as water purification tablets, UNICEF sources supplies from geographically diverse regions, mostly in Europe and South America, and they are generally shipped by sea freight (i.e. less exposed to air freight disruptions). UNICEF does retain an emergency buffer stock at its warehouse in Copenhagen and is in regular contact with key suppliers to monitor stock availability, which is changing rapidly. Even though UNICEF can still place all procurement orders, some suppliers are delaying the delivery of non-emergency orders for items such as handpumps. Those delays are then being exacerbated by longer delivery time due to the current challenging shipment context.
The procurement of hand sanitizer is facing some challenges, as it is a critical item used for IPC and to disrupt transmission in communities, at home, and for use by medical professionals, amongst others. As WHO recommends hand sanitizer to have at least a 60 per cent alcohol content, it is classified as dangerous goods, which limits any shipments using air freight. Suppliers have been communicating price increases to UNICEF ranging from 40 per cent to 90 per cent since the COVID-19 response. In light of this unstable market situation, the current hand sanitizer LTAs, expiring this year, have been extended for an initial period of 6 months, waiting for prices to come back to normal level.
UNICEF highly recommends country offices to procure those products locally or regionally if at all possible, in order to avoid and overcome any transport challenges, delays in delivery time, and higher landed costs. UNICEF has provided each country office a list with possible local or regional suppliers, and recent feedback from country offices confirms local and regional procurement is still possible.
UNICEF regional offices are also assisting country offices to secure hand sanitizer in their respective regions, which they might not be able to source locally. The World Health Organization has also issued guidance to national ministries of health (MoH) on how they can support local production of this product. In addition, UNICEF recommends country offices to engage in discussions with MoH's on options to produce hand sanitizers locally. For this, WHO published a guidance which includes two recipes and a guide for local production, which was re-released recently for the Covid-19 response. The recommendation is for these guides to be used by pharmacy professionals.
UNICEF’s regional offices, as well as country offices, started to secure local/regional stocks of hand sanitizer and to issue tenders for LTAs for this commodity. The stock which was initially secured by UNICEF in Europe (Spain, and the Netherlands) and Asia (Thailand), has been either delivered via its procurement service to different European UNICEF National Committees or taken by UNICEF’s East Asia and Pacific Regional Office (EAPRO) and Thailand country office.
In close collaboration with UNICEF’s Division of Private Fundraising and Partnerships (PFP), and Programme Division (PD), contributions-in-kind (CIK) requests are reviewed by UNICEF for WASH related products. The number of national CIKs for hygiene products increased in recent months and a large volume of global CIKs are under review for donations from Colgate-Palmolive, and Unilever, mainly for bar soap.
In addition, some World Bank, Global Fund and GAVI funding is channelled via UNICEF’s procurement service requests, including local procurement for WASH products such as hand sanitizer. This work requires close coordination with Country Offices as several items require local procurement. Additional funding from Regional Development Banks for WASH supplies is also likely.
To strengthen local procurement capacities in country offices and regional offices, UNICEF Supply Division and Programme Division are working on guidance materials, including a Fact Sheet for Handwashing Facilities and Supplies for the COVID-19 response.
1 - World Health Organization, Coronavirus Disease (COVID-19) Pandemic, WHO, Geneva, June 2020.
2 - The Independent Accountability Panel, Caught in the COVID-19 Storm, Women’s, Children’s, and Adolescents’ Health in the Context of UHC and the SDGs, IAPEC, Geneva, July 2020.