A variety of supply chain functions are part of the pipeline (see table 1.)

It’s clear that each supply chain function ultimately serves the customer’s six rights. Remember that any one of the functions listed in table 1 could be divided into many additional functions. This document, however, focuses on a subset of supply chain functions. Figure 2 displays elements of the supply chain grouped into a logical logistics cycle.

Figure 2. Logistics Cycle

The circular shape is the first thing you notice about the cycle; this shows the interdependence of the various elements in the cycle. Each activity—serving customers, product selection, forecasting and procurement, and inventory management—depends on the other activities.

Major Activities of the Logistics Cycle

Serving Customers

Everyone working in logistics must remember that their job is to select, procure, store, or distribute products to meet customer needs. For example, storekeepers do not store drugs or other health products simply for the purpose of storing; they store products to make them available for use when needed—contraceptives for family planning or drugs to treat illnesses. Each activity in the logistics cycle contributes to providing excellent customer service by ensuring the six rights. Clients in a health facility setting should expect to be served by well-trained, caring professionals who follow supportive policies and have the resources to deliver the necessary care and treatment. Because serving a customer is not a logistics activity (it could be a medical activity), this document describes all the logistics activities that ultimately serve the customer.

Product selection

Any logistics system that procures and distributes goods must select individual products. In a health logistics system, a national formulary and therapeutics committee, pharmaceutical board, board of physicians, or other government-appointed group make select those products. In a decentralized setting, health service delivery points may have a list of products based on the services they offer, but these selections are guided by national and professional standards.

Quantification and procurement

After products are selected, managers must determine the quantity needed for each product, for a specific time period—this is called quantification. This process ensures that product selections are made using standard guidelines and regulatory requirements that consider the cost and timing of procurements. Quantification depends on accurate forecasting. You may base your forecasts on the previous quantities of products dispensed or on services provided. You can also use population, service, or sales targets. To refine and improve forecasting over time, enter the data and assumptions you used to prepare a forecast and compare them to actual performance. Procurement regulations are often written in great detail; but there must be trained personnel and a system of documenting, maintaining, and auditing procurement records at every level of the procurement function. See section 4 for more detail about quantification and procurement.

Inventory management

After an item is ordered and received, it must be stored until the customer needs it. A program’s inventory control strategy specifies how much stock to store and where to store it. Enough stock should be available to meet customer needs until a new order is received; but not so much that stocks expire or are wasted or that you exceed storage capacity. Storage has two purposes for products: (1) to ensure the quality or condition, and (2) to make them available for distribution. A transportation strategy is critical to managing inventory. For example, a transportation strategy may suggest larger loads less often, or smaller loads more often.

Quality monitoring

Quality monitoring appears between each activity of the logistics cycle. For example, you should ensure that you carefully monitor the quality of—

• Product decisions (Serving Customers à Product Selection)
• Procurement proficiency (Product Selection à Procurement)
• Forecast accuracy (Forecasting à Serving Customers)
• Products while they are being stored and distributed (Inventory Management à Serving Customers)
• Product aging (Forecasting à Serving Customers)
• Customer’s experience (Inventory Management à Serving Customers)

Internal Influences

For different supply chains, the logistics cycle may look the same, but how different groups and processes interact varies, depending on the supply chains requirements.

Ordering

In logistics, placing orders is a routine activity. In some logistics systems, the person placing the order determines the quantity to be ordered—this is a pull or requisition system. In other systems, the person who fulfills the order determines the quantity to be issued—this is a push or allocation system.

You can use both push and pull approaches in one system. However, you should not combine two systems at the same distribution level, because the same personnel would need to rule on parallel sets of logistics decisions. You should use only one system within any given level. Imagine the confusion at the regional warehouse if some clinics are pulling supplies while other clinics need supplies pushed to them. However, between levels, you can use a pull system effectively: for example, between the central level and the regional level. At the same time, you can use a push system from the regional level to service delivery points. Select a system that is defined within your inventory control strategy; it must be supported by policies, personnel, and resources.

Vertical versus integrated supply chains

Many countries have several logistics systems for selecting, procuring, and distributing health supplies to clients. Often, programs such as family planning, maternal and child health, malaria control, tuberculosis control, and nutrition, all manage and distribute supplies for their programs. Called vertical programs, they have historically been managed by separate management units, often from the central level.

Many countries, however, have been moving away from several vertical logistics systems toward one integrated system that distributes supplies for all programs. For example, a system that manages contraceptives for the family planning program might also manage oral rehydration salts (ORS), vitamin A, and other products for the maternal and child health program.

Vertical and integrated systems each have advantages and disadvantages. Valid technical reasons, often reflecting changes in the environment, make integrating a logistics system more advantageous or feasible, including the following:

• improved transportation infrastructure
• improved data management
• improved communications system coverage
• new customer service requirements
• increased storage and transportation efficiency.

When moving toward an integrated logistics system, to ensure that all products are managed efficiently, you must consider the specific needs of the various products and programs. The system may need to be segmented by product category to protect products with a short shelf life from expiry and to ensure appropriate storage and transport for products that require cold or cool chain.

For more information on logistics systems, download a PDF of The Logistics Handbook: A Practical Guide for Supply Chain Managers in Family Planning and Health Programs.

External Influences

The logistics cycle, a valuable diagram, highlights the relationships and dependencies between the partners and processes in a standard supply chain. However, the logistics cycle does not exist apart from the real world, which is rarely simple, static, or free of external motivations and influences.

Government policies

Government regulations and procedures affect all elements of the logistics system. Many governments have established policies on the selection of medical products, how items are procured, when items are distributed, where and how items are stored, and the quantities customers receive (often called dispensing protocols). Logistics managers can influence these policies but they may not be able to change them. Logistics managers should stay up-to-date with current policies and complete them as specified. Government policies may also influence what group performs certain logistics functions and where these functions are performed. The classic example is the deconcentration of health budgets to peripheral levels and the impact that has on the drug procurement practice. The logistics cycle needs to support a variety of partners who control separate parts of the process.

Dynamic conditions

Politically volatile regions, changing governments, natural disasters, and displaced populations are not represented in the logistics cycle, but the structure of the logistics cycle must be flexible enough to respond to these dynamic conditions. Additionally, the logistics system needs to be flexible not only to negative changes, it must also be responsive to positive changes, such as the increase of existing products as more funding becomes available, the introduction of new products, program expansion, or new campaigns. A flexible yet resilient logistics system will be able to meet a variety of challenges without sacrificing the availability of the product at the customer or client level. For more information on logistics systems, download a PDF of The Logistics Handbook: A Practical Guide for Supply Chain Managers in Family Planning and Health Programs.