Countries are scrambling to secure protective equipment and medical supplies to aid against the pandemic, and have turned to China to meet their needs. But the rush of demand exposes buyers to compliance and quality risks. Rosie Hawes offers advice on how to avoid procurement pitfalls
While mainland China has long been one of the world’s leading manufacturers of healthcare products, demand for medical equipment amid the global pandemic has skyrocketed. This increased competition and commercial pressure has transformed the market, and even experienced organizations may struggle with supply lines due to significant changes to the business and regulatory environment.
Obtaining COVID-19-related medical equipment is requiring an intensive effort during a time of crisis when resource supply faces unprecedented stress, and the ability to navigate a constantly shifting and unfamiliar landscape is often determining whether an organization is successful.
Recent reports of unsuccessful efforts to obtain medical supplies have included incidents of faulty, low-quality or counterfeit goods, as well as delayed, partial or ultimately failed deliveries of contracted supplies. Gaining an effective understanding of the integrity and backgrounds of potential supply partners is challenging and complex, and can often reveal undisclosed beneficiaries, dishonest behaviour, and even fraud or a failure to pay.
A review of more than 140 suppliers since April in mainland China – in relation to COVID-19-related medical procurement efforts for business as well as compliance teams – shows that 42% lacked the required qualifications or licences, 37% showed no evidence they could meet expected production capacity, or had limited or no related experience, and 27% had regulatory or legal issues.
To add to the challenges, the surge in demand and competition for crucial medical supplies combines two combustible elements. The first is inexperienced buyers, as many organizations from around the world are now trying for the first time to source COVID-19-related medical equipment directly from mainland China. The second is opportunistic sellers, taking advantage of the situation by overpricing goods, speculating, and making dubious claims about their stock and capabilities.
Rosie Hawes is a partner at Control Risks’ compliance, forensics and intelligence practice in Greater China and North Asia.