Editor's Note

Cautious Optimism

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.

Philips

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.