CLICK TO ADD TITLE The 5th Global Health Supply Chain Summit November 14 -16, 2012 Kigali, Rwanda   CLICK TO ADD TITLE What can we learn from Consumer Goods on supply chain? How can we smartly apply that to Health? Hassan Belkhayat & Doan Hackley McKinsey & Company [SPEAKERS NAMES] [DATE]

In Africa, CPG has much lower stock-out rates than EHP EHP1 stock-out rate CPG1 stock-out rate: prepaid mobile phone credit cards % of time, annual average % of time, annual average Kenya Kenya Amoxicillin 25 Uganda Nigeria Pills 50 Tanzania Senegal Depo 46 Nigeria DRC Nigeria POS: ~55,000 Nigeria POS: ~710,000 1 EHP : Essential Health Products; CPG : Consumer Packaged Goods Source: DHS 2006, BMGF Contraceptive supply chain diagnostic in Senegal and Nigeria 2011

Performance management Learning from CPG, despite differences, given similar challenges seem in EHP Similar challenges Breadth of distribution Ensuring high quality of delivered product Managing “compliance” Increasing efficiency Financing Structure Performance management Forecasting Operators Differences Product economics Management model Complexity of delivery Regulatory considerations Product demand dynamics

SCM is the end to end integration of key business processes Information flow Procurement planning Production planning Logistics planning Order and demand management Materials management Manufac-turing Distribution Customer service management Physical flow Distribution – network configuration, transportation management, operations of distribution centers, 3PL, and retailers Objective – deliver high-quality products, on time, in the demanded volumes Source: McKinsey

A distinctive approach to supply chain improvement End to end Holistic perspective on performance From customer to supplier Quantitative (metrics) and qualitative (maturity of processes) Correlation between structural set up and performance Fast and focused Fast and effective approach with relevant key insights Focus on understanding key performance drivers No extensive data mining Top-down quantification and prioritization Linked to action Prioritized action plan is key outcome Rapid estimation of impact potential Prioritize measures by impact and implementation effort Best-practice repository and deep-dive analysis tools Source: McKinsey SCM Practice

McKinsey 360º SC diagnostic… Quantitative – KPI benchmarks 30 KPIs across three dimensions – service, cost, capital Comparison with average and top quartile Qualitative – maturity of practices 20 practices across four dimensions – strategy, operating system, management infrastructure, mindsets and capabilities Calibrated with proven maturity model Source: McKinsey SCM Practice

…then assess impact potential and prioritize actions Impact assessment tailored to supply chain strategy – e.g., service level vs. cost In health – stock-outs & quality, but also on overall coverage (consumption) Move to action – prioritize measures Description of measures across all performance dimensions Best-practice SC repository including case studies and detailed approaches Source: McKinsey SCM Practice

6 lessons on what drives performance Explicitly linking supply chain strategy to corporate strategy; setting clear, well-understood aspirations 1 Using segmentation to embrace the complexity that matters 2 Designing and building forward-looking networks that meet service, cost, and risk aspirations 3 Creating lean, end-to-end value chains by optimizing across functions 4 Executing world-class integrated demand and production planning processes with discipline 5 Getting the right talent on board and holding them accountable 6 Source: McKinsey SCM Practice

Methodology applied to Senegal contraceptive supply chain Quantitative Qualitative Room for action Average # days of stock out per year at SDP level Central level stock-outs Inappropriate forecasting Lack of performance management – procurement and stock levels Non standardized order management Revive RHSC to review central stock levels monthly Change forecasting tool and methodology (target driven) Implement informed push system for distribution (private logistician) >300 >150 Implants Injectables Source of stock outs Distribution issues Complex network design Malfunctioning order management Low staff capabilities; medical staff as logisticians Target < 2% stock-out at facility level Supply chain key component of the FP strategy to move from 12% CPR to 27% 60% 40% Central level Distribution issues Source: BMGF Contraceptive supply chain diagnostic in Senegal and Nigeria 2011

Potential concrete solutions: best practice CPG ideas Inventory management: right stock level? Financing: how to pay for inventory Streamlining the design: how many steps? Performance management: how to get /use data to improve performance? Outsourcing: who and how to optimize? Source: Team analysis

Solutions for public health inspired by CPG best practices Inventory management: right stock level? Financing: how to pay for inventory? Revive a RHSC with all donors to follow on a monthly basis stock Trigger procurement when stock levels hit a minimum level Initial endowment from MoH of base stock to facilities as a working capital Facilities only reimburse for products sold Streamlining the design: how many steps? Performance management: how to get /use data to improve performance? Products flow straight from regional warehouse to facilities Products are delivered using a standard and optimized route Central unit following impact on stock-outs and consumption (merged potentially with RHSC) Data of stock-outs and consumption collected monthly by operator Outsourcing: who should operate? Outsource logistic duties (order management, transportation, stock monitoring) to a private operator Contract includes penalties if stock-outs are >2% and data flow not on time Medical workers focus only on medical tasks

Senegal case-study results : massive supply chain improvements PIKINE DISTRICT- 2012 fugures Stock-outs Share of SDPs experiencing at least one stock-outs during a month (%) DIU Implants Injectable Pills Baseline Feb March April May June July August Sept Oct Source: ISSU, operator : baseline average last quarter 2011

Senegal case-study results : supply chain and performance management increases health impact PIKINE DISTRICT Consumption Number of units per month dispensed DIU +52% Implants +940% Injectable +61% Pills +73% Baseline Feb March April May June July August Sept Oct Source: ISSU, operator. Baseline : average consumption per month during last quartner

Ongoing performance management is critical to satisfy customers ... without firefighting!