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The challenges associated with developing well-functioning supply chains

For positive impact, supply chains need to deliver the right product and quality, at the right place, time and cost. How can this be achieved?
The shelves of village pharmacy are shown in this image. The shelves have a small supply of medication on them.
© Nossal Institute for Global Health at the University of Melbourne

Health product supply chains are essential for the health system. It is through them that medicines, vaccines and a whole array of health products are made available to the population. To save lives and improve wellbeing, supply chains need to be able to deliver the right product, with the right quality, at the right place, time and cost. And this is a challenge for most public supply chains in developing countries.

Supply chains and their management consist of an ecosystem where people, organisations, resources and technologies work together to ensure desired health outcomes. Elements of the health system, such as regulations, procedures, information systems and financing are intrinsic to maintain their two-way functionality: delivering the product to the individuals; and gathering information upstream that helps planning, forecasting, decision-making and market shaping.

The impact of health supply chains goes beyond the direct beneficiary of the products. A healthy mother and father will have an impact on their children. A healthy family will have an impact on their community and its economy. Healthy communities and economies will benefit a country. This causal chain underpins the need to recognise health supply chains as determining factors of health system strengthening.

There are major differences between the private and public nature of supply chains, mainly the way in which ecosystemic complexities are organised according to the purpose that they serve. In the research article Health Product Supply Chains in Developing Countries: Diagnosis of the Root Causes of Underperformance and an Agenda for Reform, Yadav Prashant (2005) analyses structural differences, main challenges and their root causes of public health supply chains in low income countries. Their weaknesses and ineffectiveness have direct implications on the capacity of the health system to respond to the healthcare needs of the population. This is particularly important at a time when major global investments in disease eradication (e.g., HIV, tuberculosis, malaria, new vaccines) further strain the capacity of supply chains with ever-increasing requirements of the latest products that require more storage space, temperature control and/or procedures.

The first comparison made by Prashant (2015) is between supply chains in OECD and low-income countries. In general, a large portion of the population of OECD countries is insured, products are obtained in retail pharmacies, and there is a small network of private distributors and wholesalers, usually three to five. For instance, 90% of the market in the United States is concentrated in three companies. Furthermore, supply is frequent – sometimes daily, information starts with the provider and flows upstream and data is collected by private third party companies that feed into supply chain planning.

In low-income countries, on the other hand, governments control procurement and distribution using Central Medical Stores (CMS) and government-owned transportation. The CMS is responsible for distribution to the district or regional levels that take on the responsibility of distribution – through a Push1 or Pull2 system – to health facilities in districts or regions. The governance structure of the CMS is heterogeneous and usually mimics the administrative structure of the health system, including the bureaucratic constraints of essential functions. Procurement is a complex and lengthy process carried out once a year or once every two years. Downstream distribution happens every month or every 3 months depending on country. Control and decision-making processes are further complicated when products funded by some bilateral agencies are procured directly by the agency or procurement agent acting on their behalf, and when there is lack of coordination in decision-making between CMS or regional or district store and health facilities.

Challenges of public sector medicines supply chains include diffuse accountability, uncertainties in financing, unnecessary levels of complexity, long resupply intervals, lack of interest in funding operating costs, supply chain planning data and incentives for supply chain staff. The private sector already plays a key role in the provision of pharmaceuticals even in low-income countries. However, they, too have challenges: poor reach in rural areas, high prices, poor quality and sub-optimal assortment, and shortage of pharmacists and proliferation of informal drug sellers.

Prashant recommends the following to guide the development of an agenda for supply chain reform:

  1. Reducing tiers in the system
  2. Increasing the frequency of replenishment at each tier
  3. Streamlining information flows
  4. Measurement of supply chain costs and other performance metrics
  5. Market competition for CMS
  6. Outsourced transport
  7. Facilitating consolidation and disintermediation in the private sector supply chain
  8. Segmented supply chains, not one-size-fits-all
  9. Attracting and retaining supply chain leadership and technical talent
  10. Fostering transparency and strong governance in the supply chain

In other words, strengthening the supply chain can only be done with a health system strengthening perspective.

When we worked in Nepal some years ago, we were reviewing the drug supplies for essential maternal health commodities. In remote birthing centres where there were less than five births happening each month, we found that some clinics had over 50 doses of the drug to treat one of the complications of pregnancy, eclampsia (very high blood pressure). The staff in that clinic had not seen a case of eclampsia in the last five years. Yet they had the drugs to manage 50 cases and the drugs were going to expire within the next 9 months.

The mismatch between supplies and clinical requirements was very stark and was a result of a push system, where the central supplies had sent out drugs to clinics without there being any consideration of the likely requirements (number of births, expected number of eclampsia cases etc) at each level of the health system.

1. Push system: the CMS or regional/district stores send goods to health facility based on allocation rules.

2. Pull system: health facilities submit requisitions based on usage and other parameters

From the ‘downloads’ section below, download the fillable PDF template that has been provided for you before completing the following activity:

Focusing on your own work setting, complete the table by reflecting on the benefits and constraints of the type of system in place

Yadav, P, 2015, ‘Health product supply chains in developing countries: diagnosis of the root causes of underperformance and an agenda for reform’, Health Systems & Reform, vol. 1, no. 2, pp. 142-154.
© Nossal Institute for Global Health at the University of Melbourne
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