MARKET ALERT: Hospital Supply Chain & War in Ukraine
The current war in Ukraine has captured the attention of the world. It is already having a material global impact and devastating communities in Ukraine. We feel for those being impacted, especially after 2 very long years of the pandemic. For US hospitals, these conditions will greatly increase uncertainty around availability of certain products – both equipment and supplies – particularly those produced or assembled in Eastern Europe.
Manufacturers are already forecasting further production delays due to raw materials shortages, surging energy prices, and shipping issues. See below for more information to help you plan for continued uncertainty and minimize the impact on hospital operations.
- Raw Materials Shortages will Reduce Product Availability – Production of certain medical products will be limited by the availability of materials, including aluminum and steel, that were already in short supply. It may become difficult to get products built with these materials and, in the near term, expect costs to keep increasing. Russia and Ukraine are also both large producers of neon, platinum and palladium, which are key ingredients for chip production. Given existing chip shortages, expect longer order lead times and increased backorders for certain medical equipment.
- Energy Constraints and Surging Prices Will Increase Product Costs – With Russia as a dominant provider of energy to many European countries, the immediate disruption of oil and natural gas supplied by Russia will further complicate supply chain issues and production challenges for manufacturers. Global gas reserves are already strained; further limits on supply will drive prices higher with costs being passed on to buyers. For hospitals – expect prices for many products that were already inflated due to the pandemic to increase further and impact budgets through 2022, potentially longer.
- Shipping Costs and Transit Time Will Both Increase – As the industry has experienced over the past two years, shipping costs for imports have risen dramatically due to global demand, limited space and availability of shipping containers, and labor shortages that still persist. While US ports are recovering from the extensive log-jams that delayed shipments over the past months, the war in Ukraine is already creating new shipping and logistics issues. Port restrictions and closures, disruption of shipments into and out of Russia, Ukraine and other critical European ports, will increase the uncertainty and transit time for all types of products for the foreseeable future.
Hospitals are understandably fatigued with the supply chain issues that started back in 2020. For now, they will need to continue being flexible to adapt to volatile market conditions that will get worse. Plan for the product shortages, price hikes and shipping delays outlined above to ensure your hospital has the products needed to continue delivering patient care.
Have questions about market conditions or product availability? Please reach out. We’ll be glad to share the current updates we are receiving daily from industry suppliers and manufacturers.
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