Restoring the supply chain has a long way to go, but we're seeing some encouraging news.
- By David Kopf
- Aug 01, 2022
Are there signs that the supply chain issues plaguing the HME industry
are improving? Well, I always risk getting labeled as a Pollyanna whenever I note points of
cautious optimism, but there have been three recent developments that at least represent some
good news when it comes to opening up the supply chain. Let’s review:
Chips and Science Act
After passing the Senate with bipartisan support (64-33) as well as the House in a slightly more
partisan vote (243-187), Pres. Biden signed the Chips and Science Act into law. The bill represents
$280 billion in funding for domestic semiconductor and chip research and manufacturing,
and also includes a 25 percent tax credit for investing in semiconductor manufacturing.
This is critical given that all sorts of HME device manufacturing — power mobility, sleep
and oxygen, to name a few — depend on access to chips. However, researchers at AutoForecast
Solutions estimated the world lost 11.3 million units of production in 2021 and would lose
7 million more units in 2022. So, it has been a key priority to get U.S. manufacturers access
to chips, and that means restarting domestic production after U.S. chip and semiconductor
output fell to 12 percent of the global supply in 2020, according to Brookings.
Is the Chips and Science Act going to automatically expand U.S. device manufacturers’
access to chips overnight? Of course not, but it’s a point for optimism.
Right before I wrote this column, Philips noted in an update to investors on its Second Quarter
performance that Philips Respironics “continued to make solid progress” with its repair and
replacement program for recalled CPAP and BiPAP devices. Specifically, Philips noted that
Philips Respironics had produced 3 million replacement devices and repair kits and that it
expects to increase capacity and complete approximately 90 percent of the production and
shipments to customers in 2022.
Does this mean the supply chain of sleep therapy devices is going to get better overnight?
Again, like the Chips and Science Act, no. However, it does represent progress in the right
direction, and I’ll take that.
Shipping Industry Metrics
We’re also seeing improvements in the shipping industry, at least in terms of a couple of key
metrics. The Ocean Timeliness Indicator measures the amount of time it takes for goods to
travel from their originating port to their destination port. In October 2021, the Indicator
reported it took more than 110 days for items to travel from Asia to the United States. That
declined to 95 days for the week ending July 10.
Similarly, the cost of shipping goods is falling, according to the Baltic Dry Index, which is
a composite of several indicators that track the shipping costs for transporting commodities.
That Index rocketed upward in the summer and fall of 2021 and stayed at pandemic highs
for some time. Now the Index has returned to April 2021 levels, which for a pre-pandemic
comparison is about on par with June 2019.
Again, is it time to bust out the champagne and party favors? Nope. But can we allow
ourselves to feel encouraged by these developments? I am going to cross my fingers and say yes.
This article originally appeared in the Jul/Aug 2022 issue of HME Business.
David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on Twitter at @postacutenews.