Imagine going to the store to buy your usual dozen regular eggs. When you get to the dairy section, all of the eggs are gone. The first time this happens, you decide to purchase the brown eggs instead. The next time you go shopping, the regular eggs and the brown eggs are gone. This time you buy the range-free organic eggs. The following week, you return to the store and find they are out of the regular eggs, brown eggs, and free-range organic eggs. You must now purchase an egg substitute product to come as close as you can to getting eggs. The replacement eggs you bought were not what you originally wanted, they didn’t taste the same, and they ended up costing more than what you usually paid. Finally, you return to the store again only to find that they are out of everything egg-related. You are unable to purchase any form of eggs and have to stop eating eggs. You ask the store to order more eggs, and they tell you everything is on back-order. Unfortunately, no one knows when the orders will arrive and which kind of egg products will end up coming. On top of the egg shortage, you learn that the chickens are unable to produce the same amount of eggs they previously did. Will you ever get your eggs?
This hypothetical egg situation is very similar to what is happening in the human hair systems (cranial prosthetics) industry. Let’s unpack this situation, starting with the people who provide the human hair to the manufacturers. The majority of human hair comes out of China and Indonesia. Due to strict COVID-19 lockdown rules, fewer people can provide hair to the manufacturers. As a result, manufacturers are sourcing human hair from other countries such as North and South Korea.
Manufacturers at the factories are facing many obstacles. Not only are they dealing with the COVID-19 lockdowns and restrictions, they only have a third of their labor base. The manufacturers must hire new ventilators who manually apply hair to the cranial prosthetic bases. Ventilators have a very specialized skill, and proficiency takes time and practice. Additionally, there has been a second spike of COVID-19 in China, further depleting the workers. Not only is it harder to obtain human hair, but the production in the factories has decreased significantly. Manufacturers are scrambling to make cranial prosthetics and not able to keep up with the demand. Vendors did not know that the manufacturers were out of bases/molds, resulting in orders from November 2019 to January 2020 remaining on backorder. Strangely enough, more recent purchase orders have arrived faster than the pre-COVID-19 orders.
Most vendors of cranial prosthetics use the same factories. Due to recent concern about the lack of transparency concerning COVID-19, many vendors have lost confidence in China. With the factories in China severely impacted by COVID-19, the vendors turned to factories in Indonesia. The Indonesian factories did not expect the sudden influx of demand, which caused an overload on their ability to produce products promptly. In other words, the demand was significantly higher than the supply.
Before COVID-19, vendors were doing business as usual. No one could have predicted the pandemic and its consequences. Standard stock orders, with a minimum of 25 or more cranial prosthetics, took approximately three months to fill. Custom orders generally took eight to ten weeks to be delivered.
As of January 2020, the majority of vendors had sufficient inventory based on the typical volume of orders received by the hair restoration clinics (previously referred to as salons before receiving essential business status by most states). As February 2020 began, orders from the manufacturers stopped arriving, and the vendor’s inventory became limited, and in some cases, depleted. Vendors have to offer substitute products to supply something to the clinics. Unfortunately, many of these substitutions are not the same as the desired and intended products. As a result, they are now running out of the substitute products as well. The vendors are having to place back-orders to refill stock, which is creating considerable demand for everything.
There is so much uncertainty because of the pandemic. Many are concerned about another spike as we approach the colder months. Vendors are unable to make promises to the clinics and, frankly, don’t know what to tell them about the situation, which can cause a strain in perceived customer relations. Vendors are doing the best that they can as they are in a challenging and unchartered circumstance.
Clinics are facing many of the same issues that the vendors are dealing with where supply and demand are concerned. They typically keep a month or two worth of inventory and re-order monthly. With a lack of inventory, clinics are trying to find new sources for cranial prosthetics. Unfortunately, there aren’t many options for quality products. The majority of clients, approximately 85-90%, use stock cranial prosthetics. This category of products is on back-order at this time. Only 10-15% of clients require customized products. Fortunately, some of those orders are starting to arrive.
As with any scenario of increased demand and decreased supply, the cost of goods has gone up. Generally, clinics create program pricing for a year. With the cost of goods increasing, the clinics are losing money because of the set program prices already in place. Also, if a temporary or substitute solution is required, the clinics are absorbing the additional cost incurred to provide excellent customer service.
Transportation of goods is another potential stop-gap in the supply chain. Depending on the country of origin, there are stringent customs rules imposed. Recently, US Customs held a massive shipment of human hair from foreign prisoners obtained in an inhumane manner. Although not usual, it is just one example of the kind of issue a delivery may encounter. Also, due to COVID-19, shipments are already taking longer to reach their destinations than before January 2020.
The clients have faced many unexpected disappointments throughout this situation. Not only are they dealing with the uncertainty of a world amid a pandemic, but their hair loss program has come to a standstill. During the lockdowns, clients were unable to return to the clinic for their scheduled treatment. They had to attempt unskilled, do-it-yourself, “at home” remedies to maintain cranial prosthetics that needed replacing. Clients’ appearances changed, causing many to deal with low self-esteem, possibly feeding into existing mental health issues.
What happens now? As of today
, manufacturers, vendors, and clinics have implemented the required safety precautions. Many have gone above and beyond to provide as much comfort and safety as possible. The hope is a safer environment will help factories return to a more productive and cost-efficient way of doing business. The situation may not look good at the moment, but we believe there is light at the end of the tunnel. It may take some time, but with the promise of a vaccine in the works, our industry will rebound and come back even stronger!
TMG Ventures, Inc.
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