distribution systems

From 2006 to 2014, Supply Chain Management System (SCMS), the global procurement and distribution project for the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR), distributed over US$1.6 billion worth of antiretroviral drugs and other health commodities, with over US$263 million purchased from local vendors in 14 countries in sub-Saharan Africa. A simple framework was developed and 39 local suppliers from 4 countries were interviewed between 2013 and 2014 to understand how SCMS local sourcing impacted supplier development. SCMS local suppliers reported new contracts with other businesses (77%), new assets acquired (67%), increased access to capital from local lending institutions (75%), offering more products and services (92%), and ability to negotiate better prices from their principals (80%). Additionally, 70% (n=27) of the businesses hired between 1 and 30 new employees after receiving their first SCMS contract and 15% (n=6) hired between 30 and 100 new employees. This study offers preliminary guidance on how bilateral and multilateral agencies could design effective local sourcing programs to create sustainable local markets for selected pharmaceutical products, laboratory, and transport services.

The costs of delivering specific products are poorly understood and ballpark estimates are often used to inadequately plan for the budgetary implications of supply chain expenses. The purpose of this research was to estimate the country level costs of the public sector supply chain for artemisinin-based combination therapy (ACT) and rapid diagnostic tests (RDTs) from the central to the peripheral levels in Benin and Kenya. A micro-costing approach was used and primary data on the various cost components of the supply chain was collected at the central, intermediate, and facility levels between September and November 2013. Information sources included central warehouse databases, health facility records, transport schedules, and expenditure reports. In Benin, supply chain costs added US$0.20 to the initial acquisition cost of ACT and US$0.34 to RDTs; in Kenya, they added US$0.24 to the acquisition cost of ACT and US$0.19 to RDTs (normalized to US$1). Total supply chain costs accounted for more than 30% of the initial acquisition cost of the products in some cases and these costs were highly sensitive to product volumes. The major cost drivers were found to be labour, transport, and utilities, with health facilities carrying the majority of the cost per unit of product. Product volumes should be considered when costing supply chain functions rather than dollar value. Further work is needed to develop extrapolative costing models that can be applied at country level without extensive micro-costing exercises.

Subscribe to RSS - distribution systems