0. CLICK TO ADD TITLE The 5th Global Health Supply Chain Summit
November , 2012 Kigali, Rwanda  
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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]

1. 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

2. 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

3. 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

4. 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

5. 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

6. …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

7. 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

8. 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

9. 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

10. 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

11. Senegal case-study results : massive supply chain improvements
PIKINE DISTRICT 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

12. 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

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