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Uncertainty in blood supply chains creating challenges for industry

Donors give blood in Rutland, Vermont, Dec. 20, 2011. AP Photo/Toby Talbot

When we talk about supply chains, we may conjure up images of manufacturing plants, warehouses, trucks and shipping docks. There is another, truly unique supply chain for a product vitally important to health care and life, and it is very volatile at the moment: the blood supply chain.

Human blood, unlike computers, smartphones and cars, cannot be manufactured, and no substitute for it has yet been invented. At the same time, blood, like fresh produce, is a perishable product, with platelets lasting five days and red blood cells 42.

This blood industry is now at a crossroads, due to fluctuating demand over the past decade. Hospitals are now requiring less blood as compared to a few years ago because of changes in medical practices, leading, at times, to a surplus in overall supply. In 2011, a total of 1.2 million fewer units of blood were used in hospitals as compared to 2009, bringing them a US$274 million savings in terms of costs. This has resulted in a relatively strong supply and a weak demand for blood at the blood banks, which gives hospitals the upper hand while negotiating with the suppliers.

In fact, hospitals are now demanding lower prices from the suppliers, and many are even considering switching to alternative blood banks. An example of this was at the Indiana Blood Center in 2014, where three of their major under-contract hospitals opted for a cheaper price offered by the Red Cross. This led to a one-third shrinkage in Indiana Blood Center’s revenue, forcing the company to revise its business model by cutting the costs as much as possible.

The excess supply, along with increased competition, force the blood suppliers to lower their prices. The hospital cost of a unit of red blood cells in the U.S suffered an almost 10 percent drop from 2011 to 2014.

A simultaneous drop in the demand and the price of blood products has tremendously affected the players involved in the blood supply chain, with the blood banking industry revenue dropping to US$1.5 billion per year in 2014, down from US$5 billion in 2008. Being hit by such a severe revenue loss over a short period, one of the first actions taken by blood providers was to lower their costs by cutting jobs. It is expected that, over the next few years, the blood banking industry in the U.S. will lose 12,000 jobs, roughly a quarter of its workforce, due to the financial stress.

My area of research in business supply chains holds some clues as to how the blood industry can address some of its supply chain challenges.

A lifesaving commodity that can’t be manufactured

We probably can all understand that a blood shortage can have devastating consequences in the face of disaster. What may be less recognized is that a continued budget deficit for blood services leads to a reduced budget for research on blood banking and related fields. Such an impact may not only threaten the effectiveness and safety of various activities in the blood supply chain but may also negatively affect the responsiveness at times of crises and disasters.

Blood is a hard commodity to manage for many reasons. First, regular replenishment of the blood supply is necessary. Also, supply is completely dependent on donations by individuals to the blood banks and blood service organizations collecting blood, which, for the most part, are nonprofits.

Joan Malchow and husband Doug Malchow hold up their arms after giving blood for the Red Cross, Friday, Dec. 21, 2007, in Princeton, New Jersey.
AP Photos/Mel Evans

Still, a multi-billion dollar industry has evolved out of the demand for and supply of blood, with the global market for blood products projected to reach $41.9 billion by 2020. The United States constitutes the largest market for blood products in the world. Donors in the U.S. and some others countries are typically not paid.

In the U.S., the American Red Cross supplies about 40 percent of the blood, with America’s Blood Centers, with 600 blood donor centers, providing about 50 percent (and about one-quarter of the blood in Canada). The remainder is collected by hospitals and medical centers themselves or, lately, by profit-maximizing blood suppliers.

A drop in demand brings uncertainty

Prior to 2008, hospitals and other surgical centers consistently reported blood shortages every year. This resulted in the cancellation and postponement of elective surgeries.

Things changed. In part because of medical advances, some procedures do not require as many pints for transfusion. This decrease in demand for blood is posing great challenges for the industry, resulting in consolidations and mergers of testing labs and processing facilities.

A partially empty tray of units of AB-type red blood cells is seen in a refrigerated shortage unit in the American Red Cross Blood Services building in Philadelphia Oct. 28, 2003. The Red Cross has had officials traveling the country since May trying to step up donations to overcome a worse-than-usual blood shortage.
AP Photo/Jacqueline Larma

In response to the drop in demand, suppliers formed partnerships. Mergers have taken place to counteract rising costs of blood banking operations and even to work for enhanced safety, availability and affordability of blood for hospital partners and patients. At times, the reconfigurations have included the closing of testing facilities as done by the Red Cross.

According to the America’s Blood Centers, the largest network of nonprofit community blood centers in North America, 19 partnerships and mergers were formed in the five years from 2010-2015 among their member blood banks, reducing the size of the network from 87 to 68 members. That represents a doubling from the 1990s, when 19 mergers took place during 10 years rather than five.

Blood bank transfusion bags.
Wellcome Images via Flickr, CC BY-NC-ND

Supply chain analytics tools can assist

My colleagues and I have been researching blood supply chains, from enhancing their operations with collection, testing and distribution to hospitals and medical centers. The goal is to minimize costs as well as risk and waste and to optimize the supply chain network design.

More recently, our research has turned to the assessment of mergers and acquisitions, since some of its evolving features have taken on the characteristics of corporate supply chains, which we can learn from and take advantage of.

Identifying potential synergies prior to a merger or acquisition (M&A) can provide quantitative measures; indeed, real numbers, as to whether or not such an M&A should take place. In addition, there may be synergies associated with cooperation, rather than a complete merger or acquisition. For example, different blood service organizations may benefit from utilizing shared testing facilities, common facilities for procurement and even vehicles for the delivery of their blood products to hospitals and medical centers.

In addition, donors must be nurtured. Donors, who are the raw material suppliers of blood products, typically can donate no more than three times per year. An estimated 38 percent of the U.S. population is eligible to donate blood at any given time, but less than 10 percent of that eligible population actually donates blood each year.

A demand surge could prove challenging

The future for blood supply chains is fraught with uncertainty.

There could be another rise in demand in coming years due to population increases. Second, changing demographics, such as baby boomers’ aging, will be a new influence. The unpredictability of natural and man-made disasters mandates that all blood banks stay alert and be responsive to fluctuating demand and supply.

It is imperative to apply supply chain analytics tools derived from industry to assist in both supply side and demand management to make for the best utilization of a lifesaving product that cannot be manufactured – that of human blood.

The Conversation

Anna Nagurney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

Source: The Conversation

Winning over Congress’ key members would spell legislative victory for President Trump

Will a Republican Congress grant President Donald Trump a path to easily confirming his nominees and turning his campaign promises into law? Not necessarily.

The history of congressional-presidential relations suggests that Trump may have difficulty enacting his ambitious agenda into law.

Unified government does not always mean smooth sailing for presidents. And during divided governments, Congress and the president have often worked together to pass major legislation.

In 2009, Democrats enjoyed larger majorities in both the House and the Senate than Republicans do now. As a result, President Barack Obama was one of the most successful legislative presidents in modern history. Yet, only one of the president’s top three legislative priorities became law – health care reform. The other two – immigration reform and cap-and-trade carbon control – failed.

The success or failure of the president’s legislative agenda greatly depends on “critical” members of Congress. In the 115th Congress, these critical members are the Republicans who are most likely to vote against President Trump’s proposals, and the Democrats who are most likely to cross the aisle and support them.

After studying congressional voting behavior from 1981 to 2015, I found that three factors predict who these members will be during unified government: the president’s popularity among their constituents, whether their own seat in office is safe or vulnerable and whether they are ideologically moderate.

To win over these critical members, Trump will have to pursue different strategies in each chamber. His main task in the House is to minimize Republican defections. In the Senate, he must attract at least eight Democratic votes in order to invoke cloture, which stops filibusters by ending debate and forcing the Senate to vote.

Here are a number of ways that Trump could build legislative coalitions.

Building coalitions in the House

There are three likely scenarios in the House.

First, Trump could build big majorities by keeping House Republicans united in support of his proposals and attracting the votes of moderate Democrats, and Democrats who represent constituencies where he is strong. This is somewhat unlikely since only 12 House Democrats represent districts where Trump defeated Hillary Clinton.

The second scenario is that Trump passes bills by simply retaining the support of all Republicans who represent districts he won in 2016. Only 21 House Republicans represent “blue” districts where Clinton prevailed in 2016. Even if all House Democrats and all House Republicans in “blue” districts vote against Trump’s proposals, the final tally will still be in Trump’s favor, 220–215.

The third House scenario would require at least 24 House Republicans to vote against Trump’s proposals, assuming all House Democrats vote against them as well. This would mean the proposals would fail. Conservative Republicans with ideological concerns about Trump’s agenda, such as Dave Brat of Virginia and his 30-something colleagues in the House Freedom Caucus, might join with Republicans from districts where Trump is weak to defeat his proposals.

Trump’s agenda in the House

Which House scenarios prevail will depend on the scope of Trump’s proposals on various issues. The current Republican plan to build more fence or wall on the Mexican border would likely pass along party lines. Repealing the Affordable Care Act and reforming the tax code will likely have the support of nearly all House Republicans, and might win votes from some vulnerable House Democrats like Collin Peterson of Minnesota who represent districts where Trump is strong.

An infrastructure bill could pass in a similar fashion if it consists mostly of tax cuts for private business. If it contains large amounts of federal spending, a number of conservative Republicans will likely vote against it. Such defections could be offset if House Democrats vote with Trump on this issue, as Minority Leader Nancy Pelosi recently signaled she is open to.

Any effort to renegotiate trade deals may play out much the same way. House Speaker Paul Ryan’s willingness to break the “Hastert Rule,” which requires a majority of the majority to support a bill before it can come to the floor, may come into play if enough House Republicans oppose Trump’s proposals.

But even if all five of Trump’s major agenda items pass in the House, they must still clear the Senate.

Where bills go to die

Former Sen. Alan Simpson put it succinctly: “the House [is] usually pissed off at the Senate. That’s the way it works.”

At the end of Obama’s historically successful, but still frustrating, work with a Democratic Congress in 2009, Pelosi promised the vulnerable members of her caucus that they would not have to take any more hard votes in 2010 unless the Senate acted. It didn’t.

The Senate is notoriously difficult for presidents to work with, and Trump’s prospects in the Senate are better for nominations than they are for bills. In 2013, Senate Democrats triggered the “nuclear option” on all non-Supreme Court nominations. That means that Trump’s cabinet nominees will need only a simple majority, 50 votes, to be confirmed. While some nominees may fail due to personal scandals or a handful of reticent Republican senators, the vast majority will likely be confirmed.

Supreme Court nominations and major bills are another story. Thanks to the filibuster, Trump will need 60 votes to confirm a Supreme Court nominee and pass major bills into law. Gutting the Affordable Care Act, however, will be relatively easy for the Senate. Republican senators plan to use the budget reconciliation process to repeal it, much like Democrats used the budget reconciliation process to pass it.

On other matters, President Trump and Senate Republicans will need at least eight Democratic votes in order to overcome filibusters on controversial bills such as building a wall on the Mexican border or reforming the tax code. The president will be in a relatively good position to win these votes. Ten Senate Democrats who are up for reelection in 2018 represent states that Trump won in 2016 and may be more likely to back proposals that are popular with the public.

The fate of Trump’s legislative agenda and Supreme Court nominations depends upon his ability to win these senators’ support.

The Conversation

Patrick T. Hickey does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

Source: The Conversation

How speeding up payments to small businesses creates jobs

Operating a small business, the backbone of the U.S. economy, has always been tough.

But they’ve also been disproportionately hurt by the Great Recession, losing 40 percent more jobs than the rest of the private sector combined.

Interestingly, as my research with Harvard’s Ramana Nanda shows¹, there’s a fairly straightforward way to support small businesses, make them more profitable and hire more: pay them faster.

A major source of financing

When a business is not paid for weeks after a sale, it is effectively providing short-term financing to their customers, something called “trade credit.” This is recorded in the balance sheet as accounts receivable.

Despite its economic importance, trade credit has received little attention in the academic literature so far, relative to other sources of financing, yet it is a major source of funding for the U.S. economy. The use of trade credit is recorded on companies’ accounting statements as “trade payables” in the liability section of the balance sheet. According to the Federal Fund Flows, trade payables amounted to US$2.1 trillion on non-financial companies’ balance sheets at the end of the third quarter of 2006, two times more than bank loans and three times as much as a short-term debt instrument known as commercial paper.

Recent news reports have highlighted the problem of slow payments to suppliers as large companies extend their payment periods, often with crushing results for small businesses.

Other countries have tried to reform the trade credit market, especially in Europe, where a directive was adopted in 2011 limiting inter-company payment periods for all sectors to 60 days (with a few exceptions).

In an earlier paper², I showed that requiring payments to be made within shorter time periods had a large effect on small businesses’ survival when it was adopted in France. Receiving their money earlier led them to default less often on their own suppliers and their financiers. Their probability to go bankrupt dropped by a quarter.

Accelerating payments

To learn more about the impact of such reforms in the U.S., we studied the effects of speeding up payments to federal contractors.

The QuickPay reform, announced in September 2011, accelerated payments from the federal government to a subset of small business contractors in the U.S., shrinking the payment period from 30 days to 15 days days – thus accelerating $64 billion in annual federal contract value.

Federal government procurement amounts to four percent of U.S. gross domestic product and includes $100 billion in goods and services purchased directly from small businesses, spanning virtually every county and industry in the U.S. In the past, government contracts required payment one to two months following the approval of an invoice, with the result that these small businesses were effectively lending to the government – and often while doing so, they had to simultaneously borrow from banks to finance their payroll and working capital.

Our research shows that even small improvements in cash collection can have large direct effects on hiring due to the multiplier effect of working capital. On average, each accelerated dollar of payment led to an almost 10-cent increase in payroll, with two-thirds of the increase coming from new hires and the balance from increased earnings per worker. Collectively, the new policy – which accelerated $64 billion in payments – increased annual payroll by $6 billion and created just over 75,000 jobs in the three years following the reform.

To give a example, take a business selling $1 million throughout the year to its customers and being paid 30 days after delivering its product. It therefore has to finance 30 days worth of sales at any given time (or eight percent of its annual sales). As a result, it constantly has about $80,000 in cash tied up in accounts receivable.

A shift in the payment regime from 30 days to 15 days means that the firm only has to finance 15 days of sales, or $40,000. And that would in turn help it eventually sustain $2 million in annual sales and double in size.

Holding back growth

These findings confirm the widely shared belief among policymakers and business owners that long payment terms hold back small business growth.

They also raise the question as to why the economy relies so much on trade credit if it costs so much in terms of jobs, and whether other policies might be undertaken to reduce it. An interesting follow-up policy to QuickPay was SupplierPay. In that program, over 40 companies including Apple, AT&T, CVS, Johnson & Johnson or Toyota pledged to pay their small suppliers faster or enable a financing solution that helps them access working capital at a lower cost.

It is likely that more information on customers’ quality and speed of payments would allow suppliers to choose whether to work with businesses that pay more slowly. So following a “name and shame” logic, companies might feel they have to accelerate payments not to be perceived as bad customers.

The broader impact

Would it make sense to sustain and extend this policy?

An interesting aspect of our analysis is that the effect of QuickPay depends on local labor market conditions. It was most pronounced in areas with high unemployment rates when it was introduced. Elsewhere job creation was limited.

The reason for this is that helping small businesses grow gives them an advantage over other companies operating locally. By hiring more, these small business contractors make it harder for others to do so. Unless there is unemployment, this crowding out effect offsets the employment gains of the policy.

As such, such a policy will only be effective in stimulating total employment in areas or times of high unemployment.

The Conversation

Jean-Noel Barrot receives funding from Kauffman Foundation.

Source: The Conversation

Inside the coal industry’s rhetorical playbook

A political sign in West Virginia reflects the claim that the Obama administration, by developing policies to reduce carbon emission, was waging a campaign against the industry. Vicki Smith/AP Photo

If citizens have heard anything about the upheaval in the U.S. coal industry, it is probably the insistence that President Obama and the EPA have waged a “war on coal.” This phrase is written into President-elect Donald Trump’s energy platform, which promises to “end the war on coal.” Continue reading Inside the coal industry’s rhetorical playbook

(2017/01/06) Trump and our National Security State (Civil Rights)

Edition #1069
Today we take a look at the mechanics of our national security state that has been mostly installed or maintained over the past two presidencies and what Trump may do with that entrenched power
Be part of the show! Leave a message at 202-999-3991

​Show Notes

Ch. 1: Opening Theme: A Fond Farewell – From a Basement On the Hill

Ch. 2: Act 1: Chris Hedges: Trump Will Crush Dissent With Even Greater Violence and Savagery – @TheRealNews – Air Date 11-10-16

Ch. 3: Song 1: Murky Water – The Autumn Isles


Ch. 4: Act 2: Do NOT Abandon the Constitution, Even for Terrorism – @DavidPakmanShow – Air Date: 09-27-16 Continue reading (2017/01/06) Trump and our National Security State (Civil Rights)

Does nonpartisan journalism have a future?

'Shredded papers' via www.shutterstock.com

The nonpartisan model of journalism is built around the norm of covering politics as though both parties are equally guilty of all offenses. The 2016 campaign stressed that model to the breaking point with one candidate – Donald Trump – who lied at an astonishing level. PolitiFact rates 51 percent of his statements as “false” or “pants on fire,” with another 18 percent rated as “mostly false.” His presidency will continue to make nonpartisan journalistic norms difficult to follow.

As a political scientist focused on game theory, I approach the media from the perspective of strategic choice. Media outlets make decisions about how to position themselves within a market and how to signal to news consumers what kinds outlets they are in ideological terms. But they also interact strategically with politicians, who use journalists’ ideological leanings and accusations of leanings to undermine the credibility of even the most valid criticisms.

While Republican politicians have decried liberal media bias for decades, none has done so as vehemently as Trump, who polarizes the media in a way that may not leave an escape.

The development of a nonpartisan press

In the 20th and 21st centuries, news outlets have made their money through subscriptions, sales and advertisements. However, before these economic models developed, newspapers had a tough time turning a profit.

In the 19th century, many newspapers were produced and distributed by institutions that weren’t in it for the money. Political parties, therefore, were a primary source of news. Horace Greeley’s Jeffersonian – an outlet for the Whig Party – had a decidedly partisan point of view. Others, like The Bay State Democrat, had names that told you exactly what they were doing. When Henry Raymond founded The New York Times in 1851 as a somewhat more independent outlet despite his Whig and Republican affiliations, it was an anomaly. Nonetheless, partisan newspapers, for economic and political reasons, were common throughout the 19th century, particularly during the early 19th century.

The information in partisan newspapers was hardly unbiased. But nobody expected anything else because the concept of a neutral press didn’t really exist. The development of a neutral press on a large scale required both a different economic production and distribution model and the recognition that there was a market for it.

The muckraking era that began in the early 20th century brought such journalism into the forefront. Muckraking, the forebear of investigative journalism, traces back to Upton Sinclair and fellow writers who uncovered corruption and scandal. Its success demonstrated demand for papers that weren’t partisan, and production and distribution models developed that allowed more nonpartisan papers to turn a profit by filling a gap within the market.

The economic principles at work are always the same. There is a balancing act between the costs of entry and the size of the audience that can be reached which determines when new media outlets can form, just as in any other market. The trick is that costs and benefits change over time.

Neutrality norms in a complex media environment

Just as market incentives supported the development of a neutral press, market incentives, combined with technology, have allowed institutions like Fox News and MSNBC to provide news coverage from decidedly conservative and liberal perspectives, with internet sources further fragmenting the media environment into narrow ideological niches.

These media outlets, though, muddy the signals: A nonpartisan journalist strives to levy valid criticism, but a partisan journalist will always criticize the opposing party. Thus a weakly informed voter will have a difficult time distinguishing between, say, a valid accusation from a nonpartisan journalist that a Republican is lying and partisan bias from a left-wing journalist who fails to acknowledge that bias.

The current media landscape is a hybrid, combining opinion-based outlets that resemble the party-affiliated newspapers of the 19th century and journalistic outlets that attempt to follow the muckraking model that developed in the 20th century. The way the latter attempt to distinguish themselves from the former is by following norms of neutrality and asserting that both parties are equally guilty of all political sins. This model breaks down when the parties are no longer equally guilty.

Consider the first presidential debate of 2016. Hillary Clinton mentioned Trump’s 2012 claim that global warming was a Chinese hoax. Trump interrupted to deny having made the claim. Not only had Trump engaged in an outlandish conspiracy theory, but he also lied during a debate about having done so.

“Both sides do it” is not a valid response to this level of dishonesty because both sides do not always engage in this level of dishonesty. Yet it was relatively normal behavior for Trump, who rose to the top of the Republican Party by gradually taking leadership of the “birther” movement and eventually even tried to switch the blame for that to Clinton.

The strategic problem in this type of situation is more complex than it appears, and it is what I call “the journalist’s dilemma.” The nonpartisan press can let the lie go unremarked. But to do so is to enable Trump’s lies. On the other hand, if they point out how much he lies, Trump can respond with accusations of liberal media bias. Trump, in fact, goes further than past Republicans, even directing crowd hostility toward specific journalists at rallies.

The media landscape, though, is populated by outlets with liberal leanings, like MSNBC, so uninformed news consumers who lack the time to do thorough investigations of every Trump and Clinton claim must decide: If a media outlet says that Trump lies more than Clinton, does that mean he is more dishonest or that the media outlet is a liberal one? The rational inference, given the media landscape, is actually the latter, making it self-defeating for the nonpartisan press to attempt to call out Trump’s lies. This might explain why a plurality of voters thought that Trump was more honest than Clinton, despite a record of more dishonesty from Trump at fact-checking sites like PolitiFact.

Nonpartisan journalism in a Trump presidency?

Is there a way for the neutral press to point out when Trump lies and not have that information get discounted as partisan bias?

The basic problem is that the norms that have guided the nonpartisan press are built around the assumption that the parties are mirror images of each other. They may disagree on policy, but they abide by the same rules. The nonpartisan press as we know it, then, cannot function when one party systematically stops abiding those norms.

The 2016 campaign was an example of what happens when the parties are out of balance. Trump simply lied far more than Clinton, but the nonpartisan press was unable to convey that information to the public because even trying to point that out violates the “both sides do it” journalistic norm, thereby signaling bias to a weakly informed but rational audience, which invalidates the criticism.

Unfortunately, then, the nonpartisan press is essentially stuck, at least until Donald Trump is out of office. While there is no longer a “he said, she said” campaign, the fact that Trump is not only the president but the head of the Republican Party makes his statements informal positions of the Republican Party. For the press to attack those statements as lies is to place themselves in opposition to the Republican Party, making them de facto Democratic partisans.

Because Trump is an entertainer rather than a policymaker, it is difficult for the press to even interview him as a normal political figure since he does not respond to facts in conventional ways. Each time he lies, any media outlet that aspires to objectivity must decide whether to point it out – which would make it indistinguishable from the Democratic-aligned press – or to allow the lie to go unremarked, thereby remaining complicit in the lie, tacitly aiding the Republican Party. Neither is likely to inform anyone in any meaningful way, which renders the model of the neutral press nearly inoperable.

The Conversation

Justin Buchler does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

Source: The Conversation