Opinion: A vision for a 21st century supply chain

In the age of Amazon, efficient global commercial supply chains are essential for successful companies to deliver their products to consumers. These companies use sophisticated analytics, have end-to-end visibility in all aspects of their supply chain operations right down to the last mile, and operate with a level of precision that their customers demand. As we manage the United States Agency for International Development Global Health Supply Chain Program — Procurement and Supply Management Project, or GHSC-PSM, we are increasingly incorporating these commercial tools, techniques, and approaches, and adapting them into the low-resource settings that we serve.

We recognize that the challenges we face are not experienced by established commercial supply chains of similar size and scope. Rather, our deliveries of life-saving health commodities are provided to areas with sometimes poor infrastructure, connectivity and, at times, places where civil order has broken down. At its core, our work is humanitarian. People, not profit, is what drives our mission. So, when we were challenged in the project’s second quarter of deliveries with a low on-time and in-full delivery rate, we knew we had to take action to turn things around.

Over the past two quarters, we have addressed some of the structural challenges that were inhibiting our ability to achieve our goals. I’m pleased to say that in October, we achieved a 71 percent on-time delivery rate, have delivered 88 percent of everything promised to date, and are on track to achieve and sustain our goal of an average 80 percent on-time delivery rate in the next few months. This on-time delivery rate is being achieved with parameters that are more restrictive — with shorter windows of time for a delivery and more exacting metrics — than has ever been achieved by a program of our type.

In all but a few countries, we deliver primarily to central warehouses and not to the clinics or other service delivery points where patients get their medicines. We continue to conduct daily order prioritization and analysis to ensure that these warehouses do not run out of product. When there has been a delay in delivery, to date we have found no evidence that this has forced any patients off treatment.

Does that mean we won’t continue to have some challenges? Of course not. The complexities of our work will continue, but we are now providing a service to our client and beneficiaries that is at least the equivalent, if not better than they have received previously. And with the early warning, incident management, data visibility, visual management, and other systems we have put in place, we have the capacity to detect problems early and ensure that they are systematically resolved.

Although there are significant differences between operating global supply chains for commercial consumers and one for global public health commodities, we endeavor to run our global supply chain as any business would and our goal is to pair private sector efficiency with our social mission. Here’s how we plan to establish an efficient and cost-effective 21st century supply chain.

Bring the best of commercial supply chains to global health

GHSC-PSM’s goal is to ensure uninterrupted supplies of health commodities to save lives and to create a healthier future for all. To accomplish this, we work with partners all over the world to determine the best methods of operating a global supply chain that delivers essential commodities to those who need them when they need them.

We take a patient-driven approach and are committed to ensuring we have as much visibility as possible into all ends of the supply chain and address any stock-level concerns. We’re actively working with governments, faith-based organizations, and other in-country partners to collect data and understand each country’s health commodity needs to ensure a consistent supply of lifesaving health products. To complement these efforts, the project has established a commodity security unit to systematically analyze ongoing commodity needs by using multiple data points to better understand the stock levels beyond the central warehouse to service delivery points throughout the country. All of this is giving us greater visibility than has ever been achieved before into the supply chain last mile.

Our work in delivering vital medical supplies across the world also draws great strength from our strategic partnerships. Although we have a number of consortium partners, we’ve developed a mission-driven, one-team approach, drawing on the best experiences from the commercial, small business, and global health partners in our consortium. Their expertise, along with our innovative information technology system, allows us to track supplies in real time — and, crucially, to act quickly if there is a warning that supplies may be delayed.

Introduce competition to increase efficiency and reduce costs

One key way we increase efficiency and reduce costs is to bid out as many aspects of our supply chain as possible, including shipping lanes, ensuring that we can deliver more health supplies for the same dollar. Rather than partnering with individual logistics and warehousing firms as was the previous practice, we use “fourth party” logistics, a system whereby we continually compete for logistics services to obtain a best value in capability and cost. We make certain that all key delivery lanes and crucial warehousing contracts are put out to competitive bid at least once a year. For example, after conducting an optimization analysis of our network of regional distribution centers worldwide, we created a new strategy that is projected to save $38 million over six years through reduced warehousing and transportation costs. That is $38 million that can be used to procure more health commodities for more people.

Consider market dynamics to lower prices

We also drive greater efficiency by seeking the best possible pricing terms for the supplies we deliver. One key is leveraging our market influence around the globe to understand market trends and get the best deal possible. Another is doing in-depth analysis of the market dynamics that go into manufacturing medicines so we better understand manufacturers’ price points. Using this production economics analysis, GHSC-PSM has already generated significant cost savings and will continue to do so in the coming months and years. For instance, the project has negotiated contracts that have yielded $8 million in savings per year for an important HIV treatment, $1.3 million per year for viral load tests, and $1 million per year for malaria medication.

Push for excellence

The project’s focus on optimization is also yielding benefits at the country level. In Nigeria — one of the few countries where we are responsible for delivering commodities throughout the supply chain all the way to local clinics — the project has opened state-of-the-art central warehouses in Abuja and Lagos that have increased storage capacity and improved supply management, security, and delivery, leading to significant time and cost savings. We are also increasing the use of cutting-edge technology with our distribution partners — electronic proof-of-delivery notes, temperature logging, and real-time GPS tracking of fleets as products move downstream — to improve the quality of orders and deliveries, improve the efficiency of the system, and reduce total landed costs of deliveries. The cost savings for storage and transportation alone is projected to be $2.3 million this year. In this way, GHSC-PSM has enabled Nigeria to move forward with the most cost-effective tools that will enable lifesaving supplies to continue to reach those who need them most.

Increasing data accuracy and visibility is also crucial to effective commodity delivery and management. GHSC-PSM is pioneering the use of several promising technologies for many countries, including a commercial off-the-shelf, as well as open source logistics management information system. In Malawi, GHSC-PSM introduced the country’s first ever web-based LMIS system, now operating in 33 hospitals and five health facility hubs, which provides a more streamlined and simplified visualization of stock levels to help trigger and expedite shipments to health facilities in need of resupply. This ensures hospitals, clinics, and pharmacies receive the medicines and supplies they need.

Part of our effort in driving efficiency and quality is to emphasize a local approach to procurement. Rather than conducting all procurements centrally, we use a decentralized system in some cases to ensure that procurements are responsive to local needs and can be done flexibly and at lower cost.

We have accomplished a great deal during these first two years and have already begun to see the increased flexibility, responsiveness, and efficiencies that come from building a strong 21st century global health supply chain. Although we’ve faced challenges during our first year of deliveries, we are back on track, and are seeing the benefits of incorporating commercial practices into all aspects of our work. Looking ahead, we remain as committed as ever to continual improvement and innovation — the people we serve deserve nothing less.

For more information about GHSC-PSM, please read our most recent news story on the Chemonics website or visit the project website.