By Lisa Baertlein

LOS ANGELES (Reuters), – Just two days before Christmas, a ship carrying a machine to make masks left Mumbai, India. This equipment was headed for Illinois-based OSF HealthCare.

The hospital group isn’t making its first attempt at manufacturing. Following the closure of COVID-19’s border in 2020, which halted international shipments of medical masks and protective equipment from Asia (which produces about 80%), OSF and other hospital groups began investing in U.S. manufacturing of essential supplies, including gowns, critical pharmaceuticals, and masks.

Goal: To avoid a repetition of the earlier pandemic’s dangerous shortage of vital protective gear. This effort has been crucial as consumers, schools and employers are buying N95s and masks that protect against Omicron, a highly contagious variant.

Pinak Shah is the chief supply chain officer at OSF. He said that in eight months OSF had produced more than a million surgical faces for its patients and staff.

Once approved by Food and Drug Administration, the new equipment should arrive in February. It will be able to produce about 1 million N95s each year. Shah stated that OSF will be 100% self-reliant thanks to its two mask manufacturing programs.

OSF did not disclose the cost of the machinery. Salvatore Stile, President of Alba Wheels Up Logistics, stated that the machine will be fully paid off in 2 years. The surgical mask machine takes 18 months.

Shah stated that the investment was a way to hedge against uncertainty.

Manufacturing costs can be a bit higher than purchasing from lower-cost competitors. It allows for spot shortage/backorders and market risk control,” he stated.

Participants also claim that such projects support and stabilize domestic manufacturing as well downstream supply chains. Both are susceptible to fluctuations in demand and China’s threat of flooding the U.S. market with low-cost and sometimes low-quality alternatives.

LESSONS LEARNED

Premier’s chief executive Michael Alkire told Reuters that he had increased his efforts to support U.S. suppliers following January 2020 when China took Premier-bound N95 shipments out of Taiwan.

Premier and Vizient are rivals and have supported U.S. companies through strategic partnerships, expansion financing, and joint ventures for over 18 months. Vizient estimated that the investment total was more than $12 Million, while Premier refused to disclose the amount.

Prestige Ameritech has been a beneficiary from such deals. Premier, 15 members of the hospital’s staff and a minority stake in Texas-based Ameritech were among those who took the undisclosed minority share in May 2020. Prestige was also committed to purchasing a percentage of the hospitals’ surgical masks, N95s and other equipment for up to six-year periods. Vizient committed separately to purchase 9 million N95-masks within a 12-month span.

This is what a business needs. It requires steady revenue,” stated Prestige Ameritech CEO Dan Reese. He also said that his mask maker, Prestige Ameritech, prioritizes and supports healthcare providers.  

  Prestige now supplies 100% of surgical masks and up to 80% of N95s at Baptist Health South Florida, said George Godfrey, the Miami-based group’s vice president of supply chain.

Godfrey spoke highly of the Premier agreement, saying that it “certainly lowers the risk of obtaining such goods during times of everyone trying to source them.”

According to hospital executives, the projects will help build credibility in an industry that lacks the “big three” U.S. automakers or major retailers like Walmart (NASDAQ:), which have the ability to exert significant influence over suppliers.

Bruce Radcliff, Advocate Aurora Health’s vice president of supply chain and a participant on several Premier production projects said that “We’re more than customers.

Luis Arguello (President of DemeTECH), a Florida-based producer of medical masks and sutures as well as COVID test supplies, stated that “the healthcare sector is trying take control of their supply chain.” DemeTECH talks with “several hospital groups” who are interested in investing, he stated.

The American Mask Manufacturer’s Association (AMMA), which has a large production capability, believes that domestic hospital supplies will be safe during the Omicron surge.

Texas mask producer Armbrust American stated that the demand for masks from Texas consumers and schools districts has nearly cleared their 32,000-square foot distribution center. It was filled with unsold masks just a few days before.

Lloyd Armbrust of AMMA, the company’s president and chief executive officer said that it was great as it doesn’t mean I have to bankrupt. He is also increasing production.