5 THINGS

ABOUT

HEALTH COMMODITY
SUPPLY CHAIN MANAGEMENT
16 May 2016

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or
policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not
guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use.
Terminologies used may not necessarily be consistent with ADB official terms.

#1

Effective
commodity supply
chains are crucial
for health security

More lives saved and improved quality of life

Effective health supply chains improve

efficiencies and service quality
Improves

cost
efficiency
and
effectiveness

Reduces overstock,
waste, expiry,
damage, pilferage,
and inefficiency
Protects program
investments;
Accelerates cost
recovery

Increases
program
impact

Builds trust in
the health
system
Increased
health
service use

Enhances
quality of
care

Improved
service
delivery
Motivates staff

Health commodity management

capacity needs to keep up with Asias
expanding pharmaceutical market
UHC: Expansion of access to
health care
Indonesia: 155M covered

60%

Expanding pharmaceutical market

13% annual growth rate
$214B
(2010)

$386B
(2017)

Increased profitability of private

healthcare companies
31% annual growth rate
USD5.4M
(2005)
USD27.6M
(2011)
Average revenues

Diabetes

51M
(China)

43M
(India)

Expanding prevalence of noncommunicable diseases (NCDs)

Vulnerability to pandemics and
natural disasters
SARS, avian flu, earthquakes, etc.

Supply Chain Strengthening Supports

Sustainable Development Goals

SDG 3.8: Achieve universal health coverage,

including financial risk protection, access to
quality essential health-care services and
access to safe, effective, quality and affordable
essential medicines and vaccines for all

#2

Health supply chains

should be
customer-centered

Logistics Cycle
Serving
Customers

Product
Selection
Warehousing,
Storage and
Distribution

Quantification
Procurement

Source: USAID | DELIVER

 Logistics systems begin and end

with the customer / patient
Time

Quality

Cost

Product

6 Logistics Rights

Quantity

Place

#3

Information
is the heart of a
health commodity
supply chain

Information
Management

Management & Supervision

Information Management
Financial Management
Human Resources

Batch and expiry information

Patient Information
Product lead times

Inventory levels & distribution

Price and market information

Commodity budgets

Management & System

Resource Allocation
Decision-Making

#4

Health supply
chains are
fragmented

Private
supply chain

Manufacturer

Regional Distributer

Public
supply chain
MoH

Donors

MOH
Procurement
Agent

Donor
Procurement
Agents

Central Level

Wholesaler or Pharmacy

Provincial or District

End user

End user

Essential
medicine

Funding
source

TB

Reproductive
Health

HIV

Vaccines

MoH
Donor X

Donor Y

Procurement
agent
NGOs

Central Level
Provincial or District

End user

MOH
Procurement
Agent

#5

Coordination and
planning is required
to achieve efficiency
and effectiveness

Medicines & Health Commodities

Finances

Information

= Manufacturing lead
times
= National drug strategies
and regulatory frameworks
= Procurement and
funding cycles
= Procurement policies
= Decentralization or
other health reform
= contract monitoring &
payment
= Quality Control and
Monitoring

= Inventory management
and reporting
= Rational Drug Use
= System performance

Indonesia after Tsunami in 2004

4,000 pounds of pharmaceutical donations

60% of products not on essential medicines list
70% labeled in a foreign language

25% had an inadequate expiry date

661 tons of medicines had to be destroyed at the
cost of EUR2.4M

ADB opportunities

ADB Investments in Supply Chain

Largely commodity procurements not dedicated system strengthening
ADB Project

Procurement Related Funding

CDC2
Total Budget: $54M

Procurement of laboratory equipment

Cambodia: $2.5M
Lao PDR: $1.85M
Vietnam $10.88M

CDC2
Additional Financing
Total Budget: $9.5M

Procurement of malaria program equipment and

consumables (rapid diagnostic tests, artemisinin-based
combination therapies, long-lasting insecticide-treated
mosquito nets)

Lao Policy
Health Sector
Policy Loan
Total Budget: $20M

USD 548,000 for equipment and vehicles

R-CDTA
Total Budget: $4.5M

Purchase the minor laboratory equipment, rapid tests

(January 2016 March 2017).
$75,000 for microscopes
$186,000 for other laboratory equipment

GMS Health Security

Total Budget: $114M

Assessment of laboratory equipment

$9,000 budget for the purchase of laboratory equipment

ADB Supply Chain Investment

Opportunities
Largely commodity procurements not dedicated system strengthening

Infrastructure
Development

CMS Infrastructure at the central or regional levels

Expanded storage facilities (hospitals, etc.)
Fleet refurbishment

Information
Management

Integrated LMIS systems

Automated national drug quality registries

Management
Strengthening

WHO MQAs accreditation

Warehouse accreditation (ISO Organization)
Public procurement reform

Integrate into ADB health security programming

References
1. Asia Rising: Health Care. A report from the Economist
Intelligence Unit, 2014
2. Logistics Management Units: What, Why and How of
the Central Coordination of Supply Chain
Management. USAID | DELIVER, April 2010
3. Managing Access to Medicines an Health
Technologies. Management Sciences for Health. 2012.
4. Rapid Analytical Review and Assessment of Health
Systems Opportunities and Gaps in Indonesia, Health
Finance and Governance Project, USAID 2015 DRAFT
5. The Logistics Handbook: A Practical Guide for the
Supply Chain Management of Health Commodities.
USAID|DELIVER, 2011

ANNEX 1. Logistics Cycle

Logistics Cycle
Policy
Environment

Serving
Customers

Warehousing,
Storage and
Distribution

Product
Selection

Quantification
& Procurement

Policy
Environment

Source: USAID | DELIVER

Logistics Cycle Serving Customers

Policy
Environment

Serving
Customers

Management &
Warehousing,
Supervision
Storage and
Information Management
Logistics system begins
end with
Financialand
Management
Distribution
Human Resources
customer

Product
the Selection

6 Logistics Rights: Product, Quantity, Place,

Time, Quality and Cost
Policy

Quantification
& Procurement

Environment

Logistics Cycle Commodity Selection

Policy
Environment
= List of common health problems

Serving

= Choices of standard
Customers
medicines and non-drug
treatments
Management &

Supervision
Warehousing,
= Drug Therapeutic
Information Management
Committee Financial Management
Storage and
Distribution
= National DrugHuman
Policy Resources

= National Treatment
Guidelines

Quantification
& Procurement

= Essential Medicines List (EML)

Commodity
Selection

Policy
Environment

Logistics Cycle - Quantification

Policy
Environment

Serving

= Calculate product demand

Customers

= Data accuracy?

= Consumption-based

Management &
Supervision
=
Morbidity
based
method
Warehousing,
Information Management
Financial Management
Storage and
Human Resources
Distribution

Quantification
& Procurement

= Partner
Coordination

Product
Selection

Policy
Environment

Logistics Cycle - Procurement

Policy
= Environment
Procurement
Planning

Serving = Transparent vendor

Customers

= Alignment of
procurement and
funding cycles

Warehousing,
= Accurate
Storage
and
specifications
Distribution

selection

= supplier performance
monitoring

Management &
Supervision
= contract monitoring
Information Management Product
& payment
Financial Management Selection
Human Resources

Quantification
& Procurement

Policy
Environment

Logistics Cycle Warehousing, Storage

& Distribution
Policy
Environment

Serving = Customs clearing

Customers
= Inventory control

Warehousing,
Storage and
Distribution

Management &
Supervision
= Distribution
planning
Product
Selection
Information Management
Financial Management
Human Resources

= Product put-away, picking

and packing
Policy
Quantification &
Environment
= Product security & worker
Procurement
safety
= Distribution

Logistics Cycle Policy Environment

Policy
Environment

Serving
Customers

Management &
Warehousing,
Product
= Public procurementSupervision
Storage
and
= Quality testing
Information Management
policies
Selection
Financial Management
Distribution
Human Resources= Health worker tasks
= National strategies

= Decentralization or
Policy
reform
Quantificationother healthEnvironment

= Treatment protocols

& Procurement

ANNEX 2. Supply Chain

Strengthening Examples

Aggregate Orders to Achieve Cost

Savings Pooled procurement
PEPFARs SCMS project
USD2.5 billion in medicine and health
commodity procurements from 2005 2015
(65 countries)
Indefinite quantity contracts (IQCs) and
blanket purchase agreements (BPAs)
Generic procurements of ARVs increased
from 9.17% (2005) to 76% (2008) with an
estimated total savings of USD323M *

*Annual ARV expenditures USD116M (2005) to USD202M (2008)

Strengthen Central Medical Stores (CMS)

to strengthen public system
Pharmaceutical or medical supply
warehouse for the public sector
Often the national procurement agent
Government main client
Distribute to regional or provincial stores
Implement various outsourcing models
3PL providers
Drug quality quarantine point
Increasing trend towards independence
from MOH

Nepal: Introduction of Pull (Requisition)

Logistics System reduces stock-outs
1994: 40% commodity stock-out rate under
push system
2004 2010: Transitioned to a pull or ordering
systems at all 75 districts
2012:
o Reduced stock outs of family planning
products to 2%
o Improved inventory reporting by facilities from
88% to 96%

Bangladesh: Coordinate supply chain

through Logistics and Supply
Management Units
Based at the
Directorate of Family
Planning and central
and Regional
warehouses
Over 280 staff
Oversee the national
quantification,
forecasting and
procurement

planning process
Manage LMIS
Identify needs and
gaps
Distribution planning
Manage international
procurements for FP
and RH commodities