The Supply Chain Is Not Immortal

When looking for an adequate digital camera for use of the Current, I was discouraged to find that the store did not have any stock of a Sony that that appeared to meet my needs perfectly.  After I finished playing with the floor model, the clerk told me that no store in its region had any.

So as to be thorough, I went to several other shops of varying size and brand within about a 20 mile radius and confirmed that it wasn’t just the one chain that was short on supplies.  The Best Buy in Seekonk, MA, presented a nearly frightening image:  several rows of empty display stands.  The manager had either sold the display models or put them away, having no product to offer.

Of course, lacking a digital camera is not likely to be a life-or-death circumstance, much less lacking a particular digital camera.  But empty store racks for items that seem so ubiquitous stand as a reminder that products don’t magically appear.  They must be developed and manufactured, following laws of economics and constrained by public policy and regulations.

In the case of the cameras, the immediate culprit appears to have been flooding in Thailand that has disrupted the supply chain for high-tech goods.  A longer-term contributor lies in the personal, social, economic, and government incentives that have led the industry to be so reliant on a small Asian peninsula.

A story out of northern New Jersey proves that a product’s being life-and-death does not mean that its availability is guaranteed:

The only factory that made the [cancer drug Doxil], Ben Venue Laboratories, had been experiencing a series of production problems for months and had received numerous citations by the Food and Drug Administration for quality and sterility issues. The Ohio factory, which had been supplying the drug to J&J, would soon shut down.

Doxil is a drug that is complicated to make but brings in little in the way of profit, like many of the drugs that are in short supply. That means there is little incentive for factories to renovate to prevent manufacturing problems or for others to jump in and take over production if a factory falters.

A public debate about this specific instance would be complex and far-reaching.  On one hand, consensus is broad across the political spectrum that government has a legitimate role in regulating production at least to the degree of maintaining some health and safety standards.  On the other hand, it is a fair question whether the “quality and sterility issues” at Ben Venue were more problematic than desperate patients’ buying Doxil through extortionate doctors’ back doors.

One also must acknowledge the various checks on panic that might lead to calls for immediate government action if the full story is not pursued.  There are similar, albeit inferior, drugs available to Doxil patients.  A “typical full course of treatment” is seven doses spaced out over six weeks each — less than a year’s worth — but some patients, including the face that Bergen Record reporter Barbara Williams gives to the story, have been using Doxil essentially as a treatment for chronic disease.  A generic alternative is making its way through trial and regulatory approval.

The key point, here, especially while national policy on healthcare is in the public consciousness, is that the status quo cannot be taken for granted.  If the demand cannot be generated for research investments and manufacturing maintenance, let alone the “redundant” production capacity that might have helped with the digital cameras if other regions were competing more fully in the same market, then consumers won’t be able to find the goods that they want and need.

Along with stories that rightly tug on our heartstrings, we have to consider the nuts, bolts, and incentives that collect resources in sufficient amount to bring products into existence, as well as the other purposes toward which those resources might otherwise go.



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