Why American Mask Makers Are Going Out of Business
The plight of these small mask companies, however, suggests that reviving American manufacturing — even when the underlying rationale is national security — won’t be easy.
How the Supply Chain Crisis Unfolded
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The pandemic sparked the problem. The highly intricate and interconnected global supply chain is in upheaval. Much of the crisis can be traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:
A reduction in shipping. With fewer goods being made and fewer people with paychecks to spend at the start of the pandemic, manufacturers and shipping companies assumed that demand would drop sharply. But that proved to be a mistake, as demand for some items would surge.
Demand for protective gear spiked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo vessels began delivering gear around the globe.
Then, a shipping container shortage. Shipping containers piled up in many parts of the world after they were emptied. The result was a shortage of containers in the one country that needed them the most: China, where factories would begin pumping out goods in record volumes
Demand for durable goods increased. The pandemic shifted Americans’ spending from eating out and attending events to office furniture, electronics and kitchen appliances – mostly purchased online. The spending was also encouraged by government stimulus programs.
Strained supply chains. Factory goods swiftly overwhelmed U.S. ports. Swelling orders further outstripped the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.
“Resilience is the byword of the day,” said Marc Schessel, a hospital supply chain expert who is working to develop alternative supply chains for personal protective equipment. And resilience — that is, creating extra manufacturing capacity that can get the country through an emergency — is what the small mask makers say is their value to the country. Sure, they argue, a globalized, just-in-time supply chain for low-cost protective equipment is fine in ordinary times. But we’ve learned these past two years that the country needs domestic manufacturers if we hope to avoid terrible shortages during the next pandemic, and the one after that.
But how do you create that resilience? The federal government spent $682 billion buying goods and services from contractors in 2020, according to Bloomberg Government. That’s the sum the Biden administration wants to use to buy American products. And while it’s hardly chump change, it’s only about 3 percent of America’s $21.5 trillion economy.
The mask manufacturers I interviewed for this article said the Biden administration had expressed interest in buying their masks, but it has yet to happen. Even if it did, it would be unlikely to put much of a dent into Chinese dominance. As Mr. Bowen put it in a recent email to the White House, “Hospitals drive the mask market.” Since their incentives are to reduce costs, he wrote, “Any plan that allows imported masks to cost less than U.S. made masks will result in a foreign government controlled U.S. mask supply — as currently exists.”
To put it another way, the modern imperative of maximizing shareholder value will always put efficiency and cost over resilience.
The mask manufacturers are a microcosm of a larger problem. Today, there are shortages that go well beyond personal protective equipment. Things as diverse as semiconductors and garage doors are in short supply — all products whose manufacturing was offshored during the past decades as American companies embraced just-in-time supply chains and inexpensive foreign labor. Economists and corporate executives ignored resilience, and now the country doesn’t have a clear idea how to create it, even as its necessity has become obvious.
Mr. Bowen told me that the problem for small U.S. mask manufacturers could be solved by either banning imported masks or putting hospitals on notice that they would be legally liable if their purchases of imported masks meant they could not protect their staff or patients in a future emergency. He also acknowledged that neither situation was realistic.
Article source: https://www.nytimes.com/2022/03/05/business/dealbook/american-mask-makers.html