Module 2

Commodity Management:
Introduction To Concepts

UNIT 2:
Concepts of Commodity Pipeline
 Session Objectives
• Define Commodity logistics system
• Define terms used in a Commodity
Pipeline
• Describe a commodity pipeline.
• Describe Max-Min Inventory System
• Describe how to determine a Commodity
Pipeline length.
 Definition of Commodity Logistics

• Commodity Logistics is the branch of

management that ensures that the needed
recourses by a working group e.g. ART
commodities reach their destination in the
required amount, in the least possible time
and at the least possible cost.
 Commodity Pipeline

• The entire supply chain of facilities through

which commodities move to get down to
the patient.
In-country Commodity Pipeline
 Definition of Commodity Pipeline Terms

• Review Period:
The routine interval of time between
assessments of stock levels to determine if an
order should be placed
• Lead Time:
The time interval between when new stock
is ordered and when it is received and
available for use.
• Note: “the lead time is always shorter than review
Period
 Commodity Pipeline Terms (2)

• Push System:
This is an ordering system where the person
Who issues the supplies determines the
quantities to be issued.
• Pull System:
This is an ordering system where the person
who receives the supplies determines the
quantities to order
 Commodity Pipeline Terms (3)
• Safety (or Buffer) Stock (SS):
Minimum stock kept on hand to protect against
stock-outs (e.g. due to delayed deliveries or
unexpected increases in demand).
• Review period Stock:
the quantity of stocks dispensed during the
review period.
• Lead-time Stock:
the quantity of stocks used between the time
new stock is ordered and when it is received and
available for use.
 Commodity Pipeline Terms (4)

• Maximum Stock Level:

The maximum is the level of stock above which
inventory levels should not raise under normal
conditions.
• Minimum Stock Level:
The minimum is the level of stock above which
inventory levels should not fall under normal
conditions.
• Shelf Life:
The length of time a product may be stored without
affecting its usability, safety, purity or potency
 Max-Min Inventory Control
System?

• A Max-Min inventory control system ensures the

desired stock levels are maintained at all levels
of the supply pipeline.
 Purpose of a Max-Min Inventory
Control System

• Informs the person in charge of

commodities when to order or issue, and
how much to order or issue

• Ensures maintenance of an appropriate

stock level of all products to avoid
shortages and oversupply
 Types of Max-Min Inventory control
systems
• Forced-Ordering Max-Min system
The storekeeper is forced to order for all the
products at the end of the review period.

• Continous review Max-Min system

The storekeeper is required to assess the stocks
each time the stocks are issued.

• Standard Max-Min system

Stocks are assessed at the end of each review
period and at any time the stock appear low.
 Factors Considered In Max-Min
System Design
• Number of items managed by the program.
• The quality and quantity of transport available
• The level of training implemented
• The level of reporting in place or expected.
• Whether push or pull system is best
• The level of supervision expected
• Availability of storage space.
Setting the Max and Min Stock levels

• Min Stock level = Lead time stock level +

Safety stock level

• Safety stock level >= ½(Review period stock

level)

• Max stock level >= Min stock level + Review

period stock
 Commodity Pipeline Length

• The total time it takes a product to get from the

top of a pipeline to the customer at the service
delivery point.

• Dependent on;
– the commodity shelf life,
– the transportation system,
– human resource availability,
– Security,
– Government regulations,
– the number pipeline levels defined & Max-Min
parameters
Commodity Pipeline Length