Unit 8 Supply Chain

Objectives 1.Describe the special nature of health care commodities due to the need for provider advice and counseling 2.Describe incentives along the supply chain 3.Describe information flows in the supply chain and opportunities for breakdown

Part 1: Special Nature of Health Supplies

Health Supplies Drugs, Syringes, Suture, Contraceptives etc. Perishable Some need health providers to be used for maximum benefit –Need to be prescribed based on diagnosis

Perishability Drug’s –Expiration date must be tracked to avoid loss of potency Vaccines –Must be kept refrigerated or frozen Condoms –Degraded by heat and light

Adulteration Informal drug vendors profit from relabeling products Adulteration can happen anywhere in the supply chain

Production Research costs need to be paid for –The most recently discovered drugs remain under patent protection They cost more Their sales pay for the research for new drugs Patented drugs are prohibitively expensive Generics produced in country

Part 2: Incentives along the supply chain

Supply Chain Model Selection Distribution UseProcurement

Larger orders cost less than small Generics cost less than patent Good forecasts can lower costs by preventing overstocks and shortages Prioritizing needs and bargaining accordingly

Distribution Proper storage Inventory Control System, transport working

Use Clinical guidelines Treatment protocols Training and supervision

The Logistics Cycle

The Supply Chain

Health Logistics in Kenya

Part 3: Information flows in the supply chain

Pull-Push Systems Pull (requisition) system = ordering –Quantities to be issued are determined by personnel who receive the supplies Responsive to changing local need Must train SDP personnel Push (allocation) system –Quantities to be issued are determined by personnel who issue the supplies Best if need “rationing” Pull-push (combined) system –May vary by items

Invest in logistics management systems, not just products themselves It’s never too early in product development or program planning or health system reform to consider logistics Collect and use information to drive supply chain decisions, supply transactions and coordination efforts Do what it takes to achieve visibility up and down the supply chain What We Know Works

Institute a customer focus Train, train, train: people and technology are both important Focus on fundamentals of logistics management: –Forecasting and demand planning –Procurement –Warehousing and inventory management –Logistics management information systems –Freight forwarding –Distribution management –Quality assurance Measure everything What We Know Works

Adopt/adapt private sector practices, e.g.: –Long- and short-term forecasting and quantification –Pooled procurement under long-term contracts –Regional distribution centers –Consolidated, best-value freight shipments –End-to-end supply chain visibility Outsource functions intelligently Centralize and decentralize with care Always promote supply chain integration What We Know Works

Risks of Decentralization Decentralization: –leads to multiple different procurements which leads to high prices –leads to decreased supervision and training which leads to inequity among districts –insufficient funds may lead to stockouts Need to monitor changes via a few key pharmaceutical indicators Decentralization  Integration  compromised logistics management information system

Supply system diseases Disease 1) Drug Adulteration Disease 2) Drug Leakage –Drugs being taken out of supply chain They still reach patients but with potential adulteration and lack of supervision Disease 3) Information failing to flow –Information never collected –Information not distributed Small people think that information is power and if they give it away they give away power

Summary Medical supplies have properties unlike other commodities. –They often work best with expert advice on their use Selection-Procurement-Distribution-Use –Information at every step The more information flows the better