This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.
A month ago, Azim Maknojiya was in the business of fun, producing promotional wristbands, glow sticks, and lanyards for big events. Now his company, Ionized, is dealing with life and death. Leveraging a decade’s worth of connections with Chinese manufacturers and international shippers, Ionized is working to bring badly needed protective medical equipment, including gowns, face shields, and N95 respirator masks to the U.S. amid the coronavirus epidemic.
“It’s a little scary,” admits Maknojiya, who didn’t have any previous experience with medical equipment. “It’s a learning curve on a daily basis, but we see there’s a demand for these products, and we’re trying our best to fulfill it.”
That demand is unprecedented. Shortages of vital equipment are already common across the U.S., well before the predicted peak of the coronavirus pandemic. In New York City, doctors and nurses have been forced to improvise, including using trash bags to replace medical scrubs and protective gowns. In California, nurses have protested limited access to personal protective equipment, often abbreviated as PPE.
Existing producers of protective equipment are seemingly doing as much as they can. Conglomerate 3M said Sunday that it had ramped up to “maximum production” of PPE, including N95 respirators, and has said those masks are all being diverted from retail outlets to medical personnel. Honeywell says it has already more than doubled its production of the masks.
But it’s still not enough, and as the pandemic spreads in the U.S., the shortages could get even worse. So manufacturers and importers are retooling factories, reshaping supply chains, and navigating red tape in a bid to save lives—and, in some cases, soften huge blows to their usual lines of business.
Gap Inc., parent company of Banana Republic and Old Navy, said this week that it would shift its factories to making cloth masks, gowns, and scrubs. Meanwhile, Fanatics, the online seller of Major League Baseball gear, said it would also produce masks and gowns.
PPE pivot
Brian Hahn, chief operating officer of electronics accessory producer Nomad, is working closely with Nomad’s factories in China to shift production from accessories like Apple AirPod cases to surgical face masks. That has included installing new machines, but Hahn says the transition has been a relatively light lift. “They’re the same kind of machines. Things are amazingly modular,” he says.
(That contrasts with the complex and slow process of starting new production of ventilators, also in high demand for treating critically ill COVID-19 patients.)
Getting products where they’re needed most is a separate challenge. A new effort called Project N95, launched on March 20, has swiftly become a major clearinghouse for equipment requests and offers. Cofounder Andrew Stroup says that as of March 26, Project N95 has fielded requests from 1,958 hospitals and health care facilities, in need of 90 million pieces of protective equipment, and is in touch with over 940 producers.
But while Project N95 is a nonprofit, the manufacturers turning to medical supplies are not.
“Absolutely, we’re doing it for business reasons,” says Hahn. “We’re not trying to profit, but keeping people employed is the No. 2 priority, after stopping a literal pandemic. It’s a close No. 2.” Nomad staff have been reassigned from roles such as corporate sales and forecasting to the new protective equipment effort.
Both Hahn and Maknojiya say their usual business lines have been hit hard by the coronavirus pandemic. Among other products, Ionized produces custom lanyards for conferences, virtually all of which have been canceled worldwide. Maknojiya says his business is down 80% since late February.
And while it may keep more people employed in the short term, medical supplies won’t replace business lost in the sudden downturn. “Not even close,” says Maknojiya. “We’ll be lucky if we make 20% [of usual revenue] out of this.”
Red tape
While Maknojiya has been working with established PPE producers, Hahn says Nomad aims to add new production capacity for face shields, surgical gowns, and N95 respirator masks. He’ll have to deal with considerable regulation to do that. N95 masks in particular are regulated by several different U.S. agencies, and some groups hoping to expand domestic production face 45- to 90-day waits for regulatory approval.
But some types of red tape may be even more important in the current crisis. For instance, desperate health workers may turn to AliExpress, an online marketplace that currently shows thousands of listings for N95 or similar masks. But Maknojiya says he has seen evidence of factories misrepresenting their certification to produce N95 masks. Shopify, another marketplace platform, was recently found to be home to thousands of new storefronts selling PPE, at least some of it ultimately sourced from AliExpress.
Maknojiya says Ionized has been able to use its existing quality control team to assess its partner factories in China. Short of that, he encourages cities and hospitals considering a new supplier to guard against fraud by asking for lists of previous customers, then independently confirming that the products being sold are as advertised.
The China cure
Many factories producing medical supplies are located abroad, particularly in China. But while there may be broader reasons to be anxious about that shift, the current crisis also shows clear benefits, because Chinese manufacturers have rebounded since their country’s recent bout with the coronavirus.
“The beauty of it is China is fully functional right now,” says Maknojiya. “They’re at 100% capacity.”
Similarly, Nomad is shipping its surgical masks from mainland China through a fully operational warehouse in Hong Kong. Hahn says the focus is on “putting out fires” by shipping small batches of 1,000 masks or less, using FedEx’s international air freight services for delivery in as little as two days.
“This is not the ‘China disease,’” Hahn emphasizes, contradicting President Trump’s use of the term “China virus.” “This is China potentially saving us all.”
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