Improving Medicine Supply Chains to

Debottleneck RBF Programs

Prashant Yadav

Brittany Johnson

1

World Bank RBF Workshop

Argentina, March 25, 2014

Session Plan

• Part 1 Panel Discussion

• What factors prohibit medicine availability in your program?

• Panelists from

• Nigeria

• Liberia

• Sierra Leone

• Part 2 Presentation of common supply chain challenges and a

diagnostic framework

• Part 3 Presentation of options for improvement

• Part 4 Q &A

2

Average availability was only 34.9% in the public sector and 63.2% in the private sector

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

Clinic level availability of medicines remains abysmally low

Session Plan

• Part 1 Panel Discussion

• What factors prohibit medicine availability in your program?

• Panelists from

• Nigeria

• Liberia

• Sierra Leone

• Part 2 Presentation of common supply chain challenges and a

diagnostic framework

• Part 3 Presentation of options for improvement

• Part 4 Q &A

4

Suppliers Ministry of Health

Distribution

MoF or other financing

source

Clinics

Uncertainties in timing of funds disbursement from MoF or external source

•Delays in procurement due to archaic procurement processes • Poor quantification and planning • Long supply lead times

• State monopoly on distribution • Weak incentives for performance improvement • Last mile distribution challenges • Poor information flows

Typical structure. May not hold for all countries and programs. Corruption and infrastructure issues are additional structural barriers

•Weak staff capacity to manage inventory •Poor or no consumption tracking

Lack of incentives, information and accountability throughout the system

Factors that led to poor availability

Drug Selection

Procurement

Quantification

Warehousing

Primary Distribution

Dispensing

Diagnosing and characterizing bottlenecks in the medicine supply chain

Financing

Secondary Distribution

Functional Area Nature of challenge

Information Flow

Financial Flow

Physical Flow

Root causes

Root causes of the challenges

7

Stock-outs

Financial flow uncertainty

Demand uncertainty

(intrinsic or due to demand info

asymmetry)

Physical flow uncertainty

The “corrupting” influence of variability in Supply Chains

Intrinsic variability may be hard to remove but extrinsic variability and information

asymmetries can be fixed

Complex multi tier distribution structure

Central Medical Store

Provincial Stores

District Stores

Health Facilities

Village Health Posts

Community Health Workers

10

Ord

er

Siz

e

Time

Customer

Demand

Retailer Orders

Distributor Orders

Manufacturer’s Orders

Number of babies is constant!

How come there is such a variability in the demand for Pampers?

The corrupting influence of distribution structure complexity

11

End

patient Health

Facility District CMS Procurement Manufacturer

Bull-whip effect: Amplification in demand variability as it goes upstream in a multi

tiered distribution system

Fewer layers in the distribution system help remain in sync with actual demand

The corrupting influence of distribution structure complexity

12

Low frequency of replenishment and the curse of the forecasting

trumpet

-10

-5

0

5

10

Fo

reca

st I

na

ccu

racy

Time horizon to forecast for

Higher frequency of shipments i.e. shorter resupply intervals between

each stage in the system decrease forecast inaccuracy

Session Plan

• Part 1 Panel Discussion

• What factors prohibit medicine availability in your program?

• Panelists from

• Nigeria

• Liberia

• Sierra Leone

• Part 2 Presentation of common supply chain challenges and a

diagnostic framework

• Part 3 Presentation of options for improvement

• Part 4 Q &A

13

14

Central Medical Store

Regional Medical

Store

Health Facilities

Patients

Importers/

Distributors

Wholesalers

Private Dispensing

Points

Private Sector

Procurement Purchasing

Current supply chain structure in most LICs and LMICs

15

Public Health Facilities

Patients

Importers/

Distributors

Wholesalers

Private Dispensing

Points

Private Sector

Purchasing

Supply chain structure in all OECD countries

Public (or payer)

negotiation of prices

Evolving and Changing Role of the Central Medical Store

Drug Selection

Procurement

Quality Assurance

Warehousing

Distribution

Dispensing and Care

Provision

Intrinsically a Public Role

Private or Para-Statal (as these roles requires high

agility and responsiveness)

Often a Public Monopoly on Procurement and

Distribution leads to poor performance

Public or publicly financed (complex discussion

beyond the realms of this session)

Public vs. Private roles in the medicine supply chain

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1. Better Global Demand Forecasting

• Global Fund’s focus on global forecasts

• Better country level forecasts (USAID funded teams provide TA)

• Global ACT Forecasting Consortium

2. Risk sharing with manufacturers

• Coordinated ordering across buying agencies

• Long term forecast based orders

3. Stock buffers closer to demand nodes

• PEPFAR/SCMS RDCs

• Global Fund’s Rapid Supply Response Mechanism

4. Supplier selection metrics to include delivery lead time and the observed

variability in historical delivery lead times

Reducing Lead Times

Forecast Driven

Drug Substance

Manufacturing

Demand and financing uncertainty leads to longer lead-times

Co-formulating and

Packaging

Pre-delivery

Inspection

Shipping and

Transport

Drug Substance

Inventory

Final Product

Inventory

Order Driven

Inventory /Order Interface

Source : Yadav, Sekhri and Curtis (2006)

Particularly long lead-times for selected TB medicines

Source: Adapted from Dalberg analysis

Minimum Volume Guarantee

Country Manufacturers Financier

1

Financiers and countries estimate

annual purchasing volume for specified

products

2

MVG decides on volume of

product and amount of

risk to assume

Establishes master contracts

with manufacturer based on

volume / risk tolerance

3 Countries place individual orders

under master contract

4

Manufacturer ships

products directly to

countries

5

Manufacturer

informs MVG of

unused volume

Secondary Markets? 6

Sale or storage of

any unused

product;

Risk sharing with manufacturers reduces lead-times

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Source : Yadav, Sekhri and Curtis (2006)

Source: Partnership for Supply Chain Management

Holding Buffer Stock in Regional Hubs

•Shorter lead time to national buyers

•Reduced inbound logistics costs Vargas and Yadav (2008) did a rigorous evaluation of

the benefits from the Regional Hubs and found

significant savings in inventory holding, transport and

stock-out related costs

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1. Para-statal and better managed Central Medical Stores (CMS)

2. Outsourced, private sector run transport and distribution services

• KEMSA

• Malawi- Imperial Logistics+ CML

• The Gambia- Rider for Health

• CHAI+Coca Cola Mozambique pilot

3. Fewer distribution tiers and Supply Chain Network Redesign

• Zambia

• Tanzania-MSD Direct Delivery

• South Africa direct delivery pilot

• Mozambique direct

• Llamasoft and HERMES (U Pitt/JHU)

4. Performance Incentives for the Central or Regional Medical Stores

• Mozambique (USAID + World Bank)

Improving Distribution Structure

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1. Village Reach + Partners: Open LMIS

2. USAID and JSI : multiple projects

3. Logistimo-mobile logistics system

4. Dimagi- Commtrack

5. SMS for Life

6. Zambia e-ZICS

Better Information Flows

District or Provincial

Store Clinics

Coupling last mile delivery with information flow and requisitioning

1. Zimbabwe- DTTU- USAID/Deliver

2. Village Reach- DLS in

Mozambique

3. Senegal- moving warehouse

4. Nigeria- pilot project

5. Others

• In systems with weak clinic level

capacity for

ordering/requisitioning and stock

management functions, it may be

best to shift the loci of that

decision making

• In systems with challenging last

mile delivery, it is effective and

efficient to combine information

collection and physical

distribution

• Redesign distribution network

• Fewer tiers (level of stock holding) in the system

• Higher frequency of shipments between each stage in the system

• Private third party transport

• Objectively evaluate public vs. private roles

• Competition for medicines distribution function

• Framework contracts with private wholesalers where applicable

• Align incentives for higher performance

• Change incentives of all supply chain staff

• Create strong supply chain leadership

• Transform information collection

• Leverage new LMIS tools

• Leverage “informed push” models

• Better end-to-end visibility

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Some ideas for changing from “business as usual”

Session Plan

• Part 1 Panel Discussion

• What factors prohibit medicine availability in your program?

• Panelists from

• Nigeria

• Liberia

• Sierra Leone

• Part 2 Presentation of common supply chain challenges and a

diagnostic framework

• Part 3 Presentation of options for improvement

• Part 4 Q &A

26