1 Modeling the Future of Health in Tanzania Sako Mayrick For Director General Medical Stores Department

Contents 1.Introduction 2.MSD Network and Distribution Systems 3.MSD Supply Chain & Impetus to Change 4.Private Sector Engagement 5.SCM Transformation 6.Challenges 7.Way Forward 2

3 1.0 Introduction Medical Stores Department (MSD) is an autonomous institution under the Ministry of Health & Social Welfare. It was established by an Act of Parliament No. 13 of 1993, and started operations in Vision The MSD vision is, "To provide quality medical services (medicines and medical supplies) closer to people." Mission statement To make available at all times essential drugs and medical supplies of acceptable quality at cost-effective prices to the population through government and approved non-government and private health facilities Objectives – Procurement – Storage – Distribution.

4 2.0 Distribution Network Central warehouse in Dar es Salaam & 9 zonal stores MSD uses 75% of its own trucks Under private sector participation: – 100% transportation from port to MSD – 25% distribution to zonal stores.

3.0 Impetus to Change Challenges call for review of supply chain design – complaints from customer – increased operational costs – staff and management readiness to adopt changes – Uncoordinated implementation of recommendations. Stakeholders’ commitment – government focusing on value-for-money and grassroots development (health is primary asset for livelihood) – development partners’ engagement (warehouse design, vehicles, and revised MTSP; and M&E) Gradual roll-over for change; completed 40%. 5

6 3.1 MSD Supply Chain Management New direction: Direct delivery to primary health facility Distribution systems: ILS (dispensaries and health clinics) and walk-in customers (referral hospitals, regional hospitals, and faith-based organization). 5,

3.1 Drivers for Change Focus on customer satisfaction (vision mandate) – stock availability – direct link with customers – restructuring of operations and CSS. Human capital requirement (competency) Capable computer system (ERP) for real time Supply Chain Modeling for Optimization (2020 project) – network – quantification – third party logistics providers. 7

4.0 Private Sector Engagement—Procurement & Storage  Procurement  80 – 90% of requirements come from overseas  private sector engagement locally and overseas  total value of procurement about $U.S.130 million, per annum  local capacity limited both in number of industries (5) and production capacity (items)  investment opportunity for local industries.  Storage  total capacity 42,000 sq m of required 60,000 sq m  50% rented from private sector. 8

4.1 Private Sector Engagement—Distribution MSD has one of the most complete logistical networks in Africa. From main warehouse in Dar es Salaam: medicines and medical supplies distributed to 500 points in-country. June 2013: 7,000 distribution points with direct delivery. Concerns: – Coca-Cola delivered to most remote villages in-country — why not medicines and medical supplies? Who should pay delivery costs and maintain quantity and quality of supplies? – Can private sector use the Coca-Cola model to help distribute medicines and medical supplies to remote areas? What about profit motive? Standards? – Why model the private sector (third party logistics)? 9

5.0 Supply Chain Management Transformations PastPresent and Future to 2020 MSD supplies reached customer through district medical office All supplies go directly to the customers Quantification based on historical data of facility orders National quantification determines national needs Multiple accountability on the supply chain MSD becomes fully accountable for entire supply chain MSD uses its trucks to distribute and uses private sector as needed Full integration with private sector (use third party) using the Coca- Cola model Late delivery of medicines and medical supplies On-time delivery of medicine and medical supplies Customer has complaints.Customer is satisfied. 10

5.1 Private Sector Engagement—Current & Future March 2011: MSD commissioned to deliver directly to health facilities – pilot in Tanga – exercise is efficient way to distribute but expensive and shifts scope of MSD activities; private sector engagement becomes necessary – nine regions under direct delivery, starting July 2012, moving to 18 regions. Private sector engagement – consultancy on using Coca-Cola model for last mile logistics to reduce stockout and operating costs, and invest in infrastructure – now includes nine more regions – today baseline cost averages $U.S.80 per trip to health facility – use of third party being considered risk and cost based on Supply Chain Model 2020 cost parameters. 11

6.0 Challenges Making model a reality (need finance, and human and material resources) Finding a credible, reliable third party provider – specialized vehicles for cold chain, experience with medicines Possible collusion and diversion of drugs before building lasting business relationship Infrastructure challenges (roads, facilities, and warehouses) Strict non-commercial procurement laws Logistics optimization challenges Coordination challenges (health sector, quantification, and network (see Supply Chain Model 2020). 12

6.0 Challenges MSD mini-truck going to Tamota dispensary in Korogwe Delivery truck going from Lushoto to Makanya dispensary 13

7.0 Way Forward Define and implement metrics for engaging private sector for direct delivery through Phase III of the Coca-Cola/Global Fund last mile interventions – eliminate stockout – improve forecasting – decrease operating costs – engage the private sector. However, DD project depends on stakeholders investing in warehouse and vehicles (Global Fund and USAID start possible for MSD). Modeling of Supply Chain 2020, with focus on network optimization and heath sector metrics. 14

Implement Supply Chain Model 2020 – MSD working on clear roadmap National quantification project started with SC 2020 exercise to support accurate forecast of demand. Phase III of last mile logistics under support development partners aims to optimize facility-to-warehouse assignment (from SCM 2020 model), saving significant distribution costs. Phase III of last mile logistics project aims to prepare and implement framework for third party, by phases. New strategic plan (2013) similar to 2020 framework; will support focused road map for effective, efficient supply chain systems. Stakeholder commitment to investing in the supply chain network ensures sustainability Way Forward

16 END Thank you for your attention