Industry response to terrorist attacks demonstrates survival instinct

A kind of paralysis gripped the nation after 9:03 a.m. Sept. 11. Tens of millions of television viewers tried to comprehend but could not fully grasp the surrealistic events that were unfolding. Among them were leading executives in the radiology industry.

In the days that followed, the imaging industry would be challenged in novel ways. Product launches would be skewed, (see “Philips ATL readies shipping of upgraded HDI 5000 scanner,” this issue), imaging supplies would be rerouted, key executives would be stranded. Donations to relief funds gained the attention of the public, but it was the operations response to this tragedy that characterized the industry.

Equipment vendors mounted efforts to support hospitals in the New York City area. Companies dispatched trucks with medical supplies and equipment. Service personnel camped out at hospitals to ensure that equipment remained operating, that victims pulled from the wreckage would receive the best possible care.

The industry’s humanitarian response was only the beginning of what would be a corporate struggle for survival. In the global economy, which has grown increasingly dependent on just-in-time parts, business was hemorrhaging. Supplies needed for the daily operation of equipment production lines were running out.

At GE Medical Systems, chief executive Joe Hogan and those around him had been mesmerized by events. Their trance was snapped by a realization that GE had only enough inventory at its manufacturing plants to keep production going for two or three days.

“We quickly understood, when airspace was shut down, that some of our logistic channels would be jammed,” Hogan said. “So we grabbed as much trucking capacity as we could to make sure we could keep our supply lines open. We also worked to make sure that when those airplanes took off again, they were completely full.”

GE reached out to commercial carriers, including van lines, which always have some residual capacity.

Cobbling together available trucking capacity, however, accomplished only so much. As a global company, GE Medical gets many parts from overseas. Transformers built in India, for example, couldn’t reach the U.S.

“We had to work with the logistics people within GE to make sure we had those transformers where they were needed most and then resupply the inventory when airspace came back up,” Hogan said. “We were fortunate that by the time we ate through our internal inventory, we had our logistic supply channels back up globally and nationally.”

Marconi Medical Systems shifted as many of its shipments as possible from air to ground transport.

“We encountered the same logistics interruptions that most companies did with parts getting shipped to us for manufacturing and our ability to get parts shipped to customers,” said Jerry C. Cirino, executive vice president, global sales and service. “But I do not think it will have a material effect on us.”

Siemens lost several days of production at plants in and outside the U.S. The worst may be over, said Dr. Erich R. Reinhardt, president and CEO of Siemens Medical Solutions.

“We are working under the assumption that there is a reasonable chance we are coming back to normal,” Reinhardt said.

Siemens is concerned, however, about long-term changes in transportation. Global companies are vulnerable to air travel interruptions, which necessary changes in security will impose.

“We are watching for impacts on travel and logistic costs because maybe it will take longer to fly materials and components around the world,” Reinhardt said.

Production is only one side of the coin. Maintaining the supply of parts to service engineers in the field is the other. Within hours, GE prioritized the parts needed to handle emergencies in New York City. In the end, no shortages occurred, Hogan said.

Other vendors reported similar successes. Cirino noted that Marconi’s service engineers are mostly local and strategically located in key markets with parts depots nearby. Parts, therefore, were within easy reach. Marconi service engineers are also cross-trained on multiple modalities.

“Our ability to service customers really hasn’t been impacted,” he said.

Vendors managed the challenges of the first week following the attacks under difficult circumstances. Global economies demand widespread and frequent travel by executives. Key personnel were stuck in offices not of their choosing in Asia, Europe, and around the U.S. Some did not return for a week or 10 days. Customer visits to luminary sites were canceled. And there was a psychological toll as well.

“It was really affecting our people from an emotional point of view,” Reinhardt said.

In the aftermath, the industry has taken stock of the near term and tried to get a handle on what lies further down the road. Vendors have seen no evidence of a lasting effect on sales, and executives remain bullish.

“I see nothing but a strong marketplace,” Hogan said. “So far, we haven’t seen any impact on demand.”

Whether or how macroeconomic conditions will factor in is a matter of speculation. The U.S. has been skirting the edge of recession for months. Some economists believe repercussions will push the U.S. and the world over the edge. Top imaging executives believe, however, that their industry will be only minimally affected.

The attacks do not change the complexion of healthcare, Reinhardt said, which remains upbeat for diagnostic imaging. Populations in the U.S. and other developed nations are still aging; they are still becoming increasingly health conscious.

“I think there are a lot of indicators that sophisticated imaging technologies will continue to be in demand,” Reinhardt said. “I do not expect a slowdown.”

While inherent demand might not be affected by general economics, the ability or willingness to make large capital equipment investments may. Entrepreneurs, particularly those providing outpatient services, might be at risk, said Paul Smit, vice president for strategy and business development at Philips Medical Systems.

“People may find it a bit harder to attract risk-bearing capital,” he said. “But I think in healthcare that is much less the case than in industries that are driven by expectations of high sales growth.”

The wild card in this deck is attendance at professional meetings. The RSNA meeting has served as a launching pad for new radiological products, as well as a chance for vendors to hobnob with prospective customers. Strong attendance at the upcoming meeting had been expected.

“The big question is, How comfortable will people feel about traveling?” Cirino said. “And what will happen between now and then?”

Editor’s note: This is the first of two articles that examine how the radiology industry responded to the events of Sept. 11. The second will appear in the next issue of SCAN.