1

GLOBAL HEALTH SUPPLY CHAINS

SCTL: San Jose, Costa RicaJuly 21st, 2009

Central Medical Store (CMS)

Health Centre /ICTC

Central/National

Provincial/District

Site

• Product Registration• Forecasting / Quantification• Procurement

• Forecasting / Quantification• Procurement• Storage• Inventory Management• Transportation

• Storage• Transportation• Inventory Management

• Storage• Transportation• Inventory Management• Dispensing

• Storage• Inventory Management• Dispensing

Product Flow

TYPICALLY MOH SCM INVOLVES ACTIVITIES AT 3 DIFFERENT LEVELS

• Central Co-ordination• Guidance / Direction

• Target Setting• Procure / Store & Distribute

SC Activities at each level Focus at each level

• M&E consolidation• Provincial Budget Mgmt

• Liaison between Sites & Central• Storage & Distribution

• Patient Test, Care & Treatment• Report Completion

• Request & receive Commodities• Storage

Data Flow

Ministry Of Health

Provincial/ Regional WH

Hospital/ Hospital Lab

Health Centre/ ICTC

GLOBAL SUPPLY CHAINS

Holistic Approach to SCM

Outsourcing of non-core competencies

Dynamic & Regular forecasting

Strategic relationships with Suppliers

Pooled Procurement/ Draw down qtys

VMI/ DSI

Supplier Hubs

Direct Shipments/Cross Docking/ Merge

Route optimization

SW Integration

Metrics used to identify weakness/set priorities. CI efforts

Data turned into Information

High Level of Awareness of SCM- w/in organization- in country eg: education- SCM strategies

Silo’d view of SCM

In-source everything CMS, Procurement etc

Annual forecast/incorrect assumptions

No supplier relationships or perf mgmt

Annual Tendering w/single deliveries/no consolidation of procurement across system

High buffer stocks at all levels held at various stocking location

Manual processes/tools, typically using excel/access database with no integration

Some metrics identified but not always appropriate or tracked, no CI

Limited data availability and integrity

Funding provided by multiple sources/with different priorities

Low level awareness of SCM

Vertical Supply Chains

Decentralizing of SCM

Where I have come from …. To where I am now ….

THE GAP CONTINUES TO WIDENED BETWEEN DELVEOPED WORLD AND DEVELOPING WORLD SUPPLY CHAINS

Private Sector/High Income

Focus on supply chain as competitive advantage / increase profits

Outsourcing allows focus on core competencies and specialization

• Massive cost savings

• Reduction in inventory at all points in chain (cashflow benefits)

Concurrent with

• Enhanced customer service

- Shorter lead times

- Increased customization

- Improved quality

Health Systems Developing World

• Lack of HR/specialized SCM knowledge

• Poor communications/data integrity

• Absence of metrics for performance/progress

• Lack of strategic approach/ business framework

• Funding provided by multiple stakeholders whose priorities are not always aligned

Exacerbated by

• Investment in vertical supply chains

• Push to decentralize

ResultPatients • Go without• Or have to purchase meds privately

MOH/Donors• Wasted investments/inefficiencies throughout system• Lost opportunity to make more effective use of funds

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CHARACTERISTICS OF GLOBAL HEALTH SUPPLY CHAIN

New Product

Introduction:

NPI = Forecasting & Procurement, limited focus on lifecycle planning Timing = 12-18 months for actual implementation Uptake not very successful ending up with a lot of expired stocks

Quantification: Annual Forecast process using a 12-18 month planning window Limited consumption data available, unconstrained demand not included Assumptions not always appropriate (eg: Malaria AMC, Ess Meds distribution

history) Forecast Accuracy is not tracked

Procurement: Tender 1/Year w/single deliveries & supplier selection driven by cost Procurement processes are long cumbersome process driven by perceived

transaction efforts Payments are made up front, even for donor commodities Funding from National Budget can be unpredictable and insufficient Supplier Performance Management does not exist Govt Procurement Guidelines can be restrictive and favour local organizations Many hospitas/labs do their own procurement but do not utilize Pooled

procurement to leverage economies of scale

6

CHARACTERISTICS OF GLOBAL HEALTH SUPPLY CHAIN

Storage: Utlize CMS concept - central distribution to provincial warehouses & sites Require sufficient space to store upto 12 months of inventory Poor storage facilities and in many cases insufficient storage Storage & Distribution costs are based on % of commodity prices not activity based costs CMS are typically parastatal and can be very bureaucratic with no revenue recovery models

Inbound/Outbound Logistics

Distribution:

Customs Clearance can be cumbersome /Product waivers required for some commodities Different trucks used for different commodities, no optimization of transportation /routes Cold Chain challenges in rural areas Reverse Logistics doesn’t occur very effectively

Inventory Mgmt: High buffer stock levels - typically 2-3 months at site, 2-3 months at provincial level and 6 months= at central Inventory Balancing /Redistribution doesn’t happen very well and is usually through an informal process Little or no proactive management or tracking of Excess, Expired & Stockouts Ongoing Shortages of commodities such as gloves, due to inaccurate ess meds lists Stock outs monitored at National Level not so much as site level ARVs tend to have excess/expired as opposed to shortages Many times stock turns up in Private Sector Clinics

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CHARACTERISTICS OF GLOBAL HEALTH SUPPLY CHAIN

Technology Fragmented systems and usually utilizing NGO developed tools Technology solutions focus on point solutions for Forecasting, Inventory Management, Data collection and are usually excel/access data base Focus on central level not site level

Resources: Little awareness of SCM as a profession Typically Pharmacists are in charge of SCM activities w/little or no training Very little synergies between partners/disease specific programs & primary health care systems Task shifting needs to occur especially in resource constrained settings Many personnel have multiple jobs Salary inequities amongst MoH programs due to donors Poor communications across the supply chain People who gain from not fixing the issues

Data: Data collection is in place for disease specific programs, but little information is available Accuracy & completeness of data is questionable Little or no data analysis is done except for reporting to the donors Reports used for order fulfillment, however order qtys are typically determined based on patient data

Policy: Treatment Guidelines/ Essential Meds list not updated on a regular basis Payment processes Procurement tendering - favor local suppliers

Sources

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Ré publique du Burundi

Minist è re de la Sant é Publique

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PATIENT

VERTICAL SUPPLY CHAINS LIKE THIS EXIST IN MOST DELVELOPING WORLD COUNTRIES

RESULT OF POOR INFRACSTRUCUTRE, TRAINING AND LACK OF RESOURCES

BIGGEST IMPACT OF ALL: APPROX 2/3 OF SELECTED MEDS ARE UNAVAILABLE IN PUBLIC HEALTH FACILITIES ON AVERAGE AT ANY

TIME*

Average availability = 34.9% in the public sector and 63.2% in the private sector

*across developing world excluding LAC/Caribbean

Source: WHO, Health Action International, United Nations MDG8 Report

CHAI’s Supply Chain Strategy is to empower governments to build cost-efficient, effective and

sustainable national health care supply chains

1. Ensure sustainability through increased awareness and continuous source of SCM skills/knowledge in country. E.g. SCM Curriculum/Accredition, SCM Mentoring

2. Leverage resources from developed world, private sector. E.g. Partnerships, Applying lessons learned

3. Turn data into information E.g. Develop technology roadmaps

4. Secure funding for SCM specific programs, to help demonstrate effective solutions

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EXAMPLES OF SCM ISSUES IN COUNTRY

India redistributes on a monthly basis as oppose to having the supplier ammend their delivery qtys each quarter India - Cold Chain for HIV Kits compromised because fridge isnt working Many countries, testing doesn’t occur because they run out of reagents or machines are broken Swaziland distributes ARVs monthly, but ess meds only every 2-3months if the trucks are in working order Botswana/Cambodia forecast Malaria using average monthly consumption GF encourages procurement of high volume, single deliveries to achieve lowest cost GF encourages up front payment to suppliers PEPFAR training objectives are based on # of personnel trained not the effectiveness of the training Per diem culture exists in training/workshops Unconstrained demand is not captured especially for essential meds in Mozambique if you are sick, it is best to have HIV, because you know you will get treated Liberia is constantly running out of gloves Communications between site & central are broken down and a lack of trust exists 10-30% of drug costs are allocated to storage and distribution of drugs for GF Decisions are driven by budet & project not by commodity requirements Public Health SC has been weakened by disease specific programs

Major institutional donors providing funding for health systems

PARTNERS AND DONORS INVOLVED IN SUPPLY CHAIN MANAGEMENT ACTIVITIES

Key implementing agencies engaged in health system strengthening

• GFATM

• PEPFAR

• USAID

• AUSAID

• DFID

• World Bank

• SCMS: Typically focused on Forecasting & Procurement at the national level

• JSI/JSI DELIVER: Logistics focused, conducts assessments and develops tools (eg: Qantamed, Pipeline)

• MSH: MIS focused, usually on Inventory management tools, also an implementer of GMS Technical Assistance

• WHO: Technical Assistant for PSM Plans

• UNICEF: Acts as Procurement Agent

R8 procurement/SCM = $172m or 8.7% of total phase one

$185m in 2007 to PFSCM (runs SCMS)

Funds DELIVER, with JSI in 38 countries (focus on contraceptives) $100m 6 years

No distinct SCM budget but incorporated into many activities