In-country distribution systems are made up of people, warehouses, transportation, and inventory; they can be organized in many different ways with varying results. The number of levels, the number and location of warehouses, transport equipment, transportation routes, and inventory quantities are all part of a supply chain network. All of these contribute to a supply chain’s ability to meet health program goals. To be successful, a public health program should always have sufficient quantities of products to meet the needs of their clients, and at the same time, should avoid surpluses that waste products and money.
For example, if you expand a health program to offer more commodities and services, you can impact the supply chain network’s performance. Where should you store the new commodities? Do you need more warehouses? Do you have enough trucks to transport the new commodities? How much of the new commodity should you store in the warehouses? Having too many warehouses can be very costly—you must consider the actual cost of the buildings and other real estate related costs, as well as the cost of equipment, labor, and amount of inventory held in the warehouses. On the other hand, the lack of warehouse space can be costly; it could significantly increase the need for transportation equipment and the number of shipments, which could outweigh the savings in warehousing costs.
A supply chain analysis can answer some of these questions. The results will help you consider a range of options to calculate the most efficient distribution system, such as warehouse locations, transportation and inventory costs, product demand at each level, a product’s source location, and any physical constraints—an inability to change warehouse size or slow transportation routes between locations. Because of the many possible solutions, the USAID | DELIVER PROJECT uses a software tool to assist in the analysis and presentation. The tool enables advisors to do the following:
Supply Chain Modeling You can build a model of the existing supply chain, including any potential alternatives, which might include building a new warehouse, expanding a warehouse, or adding more transportation equipment.
Supply Chain Optimization You can optimize the current supply chain network and propose alternative options. The tool can compare costs related to different scenarios and indicate where savings can be made. For example, the tool compares the savings from eliminating one level of a system against any associated increase in transportation equipment and costs; this will give you the total supply chain cost. The analysis could show that you can serve the same number of family planning clients with less money; or for the same investment, you could serve more clients if you had a shorter pipeline, more frequent deliveries, and a more efficient system overall. The tool can also represent real world constraints. For example, it could include a requirement to maintain a central store.
Supply Chain Simulation Based on the network chosen in modeling or optimization, use this tool to simulate the supply chain network’s performance across a specific time period—for example, one year. You will be able to see the projected impact on the network and the simulated changes in the supply chain operation, such as the amount of inventory to store at a warehouse.
Reporting Use this tool to generate graphs and table reports to assess any alternatives to the supply chain network; it will also assist users who are proposing long-term strategies and short-term plans.
Supply chain analysis and design complements the project’s strategic framework for supply chain segmentation. International public health supply chains are becoming more and more complicated. In some cases, vertical supply chains are being integrated. In other cases, such as the management of HIV/AIDS, and malaria and tuberculosis, increasing amounts of funding are becoming available to procure large quantities of products, many of which are fairly new to the countries. These circumstances often result in new pressures on procurement, quantification, warehousing, transport, and inventory management, which can impact the management of contraceptives. Not only do products managed by the central medical store have different characteristics (shelf life, requirements for cool or cold chain, for example); they may also have different purposes, or a different type of service delivery point where they will be dispensed. It quickly becomes apparent that all products cannot and should not be managed in the same way. You cannot apply a one size fits all approach.
The goal of segmentation, a successful supply chain approach in the commercial sector, is to make a complex supply chain more manageable by sorting products according to customer service policies and product characteristics. For example, IUDs, with their long shelf life and relatively predictable demand, can be managed effectively in a three- or four-level 24-month pipeline, while antiretrovirals (ARVs) require a shorter pipeline because of their 24-month shelf life. The project already informally uses a segmentation approach in its work. The strategic framework will formalize this process. Countries will be able to easily accommodate new products without the need to revert to a new design effort each time a new product is introduced or additional funding becomes available.
If you would like to learn more about supply chain analysis and design, please contact the project’s supply chain management team.
