WHITE PAPER Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency

chemonics.com | April 2021 Contents

Acknowledgments...... 1 Preface...... 2 Acronym List...... 3 Executive Summary...... 4

1. Benefits and Challenges of Private Sector Engagement (PSE) in Health Supply Chains...... 7 Benefits of PSE...... 7 Challenges of PSE...... 8

2. Country Health Supply Chain Maturity and Readiness for PSE...... 11 Health Supply Chain Maturity Levels...... 11 Country Readiness for PSE...... 13

3. Spectrum of PSE in Health Supply Chains...... 17 Government Stewardship Model and Private Sector Led Supply Chains...... 17

Case Studies: Leveraging PSE to Strengthen Supply Chain Functional Capabilities Strategic Governance and Financing...... 19 Human Resource Development...... 19 Information Systems and Data...... 20

Case Studies: Leveraging PSE to Strengthen Supply Chain Operational Capabilities Procurement and Purchasing...... 21 Supply Network Design and Optimization...... 23 Forecasting and Supply Planning...... 23 Storage and Distribution...... 24

4. Conclusion...... 28 References...... 29

Cover photo: Boat transport in Mozambique of LLINs. GHSC-PSM Mozambique/Mickael Breard Acknowledgments

This white paper was authored for Chemonics International Inc. by Dr. Krishna Jafa, chief executive officer, Precision Global Health LLC, and the following Chemonics staff: Giuliana Canessa Walker, Edel Tessema, Rachel Harp, and Gretchen Knoth. Key informant interviews were conducted by a team from the Integration Lab at the University of Notre Dame’s Keough School of Global Affairs as part of a partnership between Chemonics and the University of Notre Dame: Uriel Galace, Jamison Greene, Laura Guerra, and Shadwa Ibrahim. This document was designed by Jennifer Moffatt and copy edited by Mina Grace and Cedric Tillman.

Chemonics would like to thank all key informants who added depth and shared valuable knowledge and expertise to shape this document: Mr. William Adjubai, Mr. Adolf Antwi, Mr. Laud (Reginald) Baddo, Mr. Kieran Batty, Mr. Mickael Breard, Ms. Catherine Clarke, Mr. Simon Cole, Mr. Edmealem Ejigu, Mr. Martin Ellis, Mr. Theophilus Faruna, Ms. Barbara Filip, Dr. Innocent Ibegbunam, Mr. Andrew Inglis, Mr. Bob Keating, Ms. Ambreen Khan, Ms. Dany Khy, Mr. Deogratius Kimera, Mr. Lefa Mabesa, Mr. Philip Lule, Mr. Nabeel Ahmed Maqbool, Mr. Hua Ni, Mr. Daniel O’Flynn, Mr. Kehinde Otto, Ms. Samantha Salcedo-Mason, Ms. Charlotte Stein, Mr. Jean-Marc Vander Stichelen, Ms. Ladi Stephen, Dr. Mohammad Tariq, Mr. Ralph Titus, Mr. Aloysius Bingi Tusiime, Dr. Prashant Yadav, and Mr. Brian Zuidema.

Suggested citation: Chemonics International. Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency. April 2021. Preface

Chemonics International Inc. is a development firm with more than 40 years of experience working in more than 150 countries. Chemonics is a trusted implementing partner that is committed to solving the world’s toughest development challenges with multidisciplinary teams working across sectors. Chemonics’ current global health and supply chain implementation portfolio includes projects funded by the United States Agency for International Development (USAID), The Global Fund, the Bill & Melinda Gates Foundation, and UNICEF. Most notably, Chemonics and partners lead the implementation of the USAID Global Health Supply Chain Program-Procurement and Supply Management (GHSC-PSM) project. GHSC-PSM has offices in 35 countries and collaborates with ministries of health (MOHs) and supply chain management professionals to build countries’ capabilities to optimize public health supply chains, thereby increasing access to lifesaving health commodities. Among other projects, Chemonics also leads the implementation of the USAID Global Health Supply Chain- Technical Assistance Francophone Task Order, which provides specialized supply chain expertise to Benin, Burkina Faso, the Democratic Republic of the Congo, Haiti, Mauritania, Niger, Senegal, and Togo.

With this white paper, Chemonics seeks to analyze the spectrum of private sector engagement (PSE) in health supply chains in low-income (LIC) and lower middle- income countries (LMICs), as well as the effectiveness of those engagements in each country’s supply chain maturity and performance.

This white paper draws from: 1. A desk review of peer-reviewed literature and gray literature; 2. Interviews from May to August 2020 with supply chain experts, donors, policymakers, and Chemonics’ country project supply chain staff for guidance, practical examples, and case studies; and 3. Supply chain expertise and experience of the main authors.

This paper begins with an overview of the key benefits and challenges of PSE in health supply chains. Next, it describes a supply chain maturity framework to inform PSE approaches in different country contexts, as well as a thoughtful assessment tool to be completed to understand the nuances and implications of the country’s political economy and stability, market capacity, and business enabling environment to determine if, when, and how to leverage the private sector. Finally, it presents case studies of PSE to accelerate health supply chain maturity. Acronym List

3PL Third-party logistics n.d. No date 4PL Fourth-party logistics NGO Nongovernmental organization ABC Activity Based Costing NSCA USAID National Supply Chain Assessment AIDS Acquired immunodeficiency syndrome OOP Out of pocket ARV Antiretroviral OTD On-time delivery CD4 Cluster of Differentiation 4 OTIF On time and in full CMS Central medical store PBC Performance-based contract COE Center of Excellence PEPFAR U.S. President’s Emergency Plan for DDD Decentralized drug distribution AIDS Relief EDI Estimated date of infection POC point-of-care EPSA Ethiopian Pharmaceuticals Supply Procurement service agency Agency PSA PSE Private sector engagement ERP Enterprise resource planning QAT Quantification Analytics Tool FSN Fast/Slow/Normal moving SCOR Supply Chain Operations Reference GAVI Gavi, the Vaccine Alliance SHARP USAID Nigeria Strategic HIV/AIDS and GhiLMIS Ghana Integrated Logistics Tuberculosis Response Program Management Information System SOP standard operating procedure GHSC-PSM USAID Global Health Supply Chain Program-Procurement and Supply TB Tuberculosis Management project UAV Unmanned aeriel vehicle Human immunodeficiency virus HIV UNAIDS Joint United Nations Programme on KPI Key performance indicator HIV/AIDS LabEQIP Lab Efficiency and Quality Improvement USAID United States Agency for International Planning tool Development LIC Low-income country VEN Vital, essential, nonessential LMIC Lower-middle income country VL Viral load LMIS Logistics management information VMMC Voluntary medical male circumcision system VSI Vendor-stored inventory Ministry of Health MOH UHC Universal health coverage MSL Medical stores limited Chemonics International

Executive Summary

SUSTAINABLE DEVELOPMENT GOAL (SDG) 3.8 STATES:

“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.”

Well-functioning health supply governments: They innovate, job challenges. This is borne out by PSE’s chain systems are an essential create, and, ultimately, strengthen increasing role in moving supply prerequisite for universal health capacity and resources so countries chain systems from less mature and coverage (UHC). They also play are self-reliant to address health fragmented to more mature and a critical role in humanitarian and and other development and better integrated. The private sector public health emergencies, such as humanitarian priorities (USAID, can help improve supply chain natural disasters and epidemics, 2018). As countries’ economic and performance and accelerate supply through the timely and sufficient political environments stabilize and chain maturity; a more mature delivery of quality-assured the private sector grows, PSE can be supply chain allows for broader PSE. medicines, devices, equipment, and a powerful way to leverage market Highlighting the bidirectional and other medical supplies. forces and private organizations dynamic beneficial nature of PSE is, to solve development challenges— therefore, critically important. Private sector engagement including in health supply chains—to (PSE) is a strategic approach achieve consistent, reliable supply PSE can advance and sustain to international development: chain performance to ensure health supply chain maturity. This donors and country governments geographic access, availability, paper provides a supply chain consult, strategize, align, affordability, and quality of maturity framework for supply chain collaborate, and implement with health commodities (Rockefeller practitioners to better understand the private sector for greater scale, Foundation, et al., 2008). the maturity of health supply chains sustainability, and effectiveness in LICs and LMICs before they of development or humanitarian PSE comes with benefits as well determine if and how to leverage outcomes (USAID, 2018). Globally as challenges. The advantages the private sector. The framework and locally, the private sector is of engaging with and investing in segments supply chains into five playing an increasingly important the private sector for supply chain levels of maturity from least to role as a partner to LIC and LMIC operations ultimately outweigh the most mature—1) reactive and siloed,

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 4 Chemonics International

Benefits and Challenges of PSE in Health Supply Chains

CHALLENGES ! KEY BENEFITS ✓ CHALLENGES ! for government entities when of Private Sector Engagement for the private sector when engaging with the private sector engaging with government entities

• Limited government capacity to • Governments are able to focus on • Delayed payments and short manage contracts and payments their core stewardship and strategic contracts • Political and operational concerns governance role to achieve UHC • Incomplete and delayed over loss of control • Operational efficiencies including information exchange • Lack of strong information systems cost savings • Lack of clear performance • Lack of activity-based costing • Distribution of risk metrics • Loss of jobs in the public sector • Access to innovation, skills, and expertise • Intersectional benefits

2) centralized, 3) integrated, 4) be leveraged reasonably quickly— Health supply chain collaborative, and 5) orchestrated— thoughtful and effective PSE and draws from Gartner’s requires key functional capabilities actors must learn demand-driven model for supply for sound stewardship to be in place, to trust each other chain maturity, the Association such as governance, financing, for Supply Chain Management’s human resources, processes, and and, together, build Supply Chain Operations Reference data systems. These functional (SCOR) model, and the Theory capabilities typically take longer a national road map of Constraints (Lockamy & to develop. If countries choose not that is tailored to McCormack, 2004) (Association to invest in them, the challenges for Supply Chain Management, described earlier will likely manifest, their local context. no date [n.d.]) (Gartner, 2017a) and ensuring sustainable supply (Goldratt, n.d.). The framework chains will be more challenging and then summarizes specific supply extended. chain functional and operational sector supply chain actors to capabilities, including for PSE, that Spectrum of PSE in health communicate needs and changes are typical at each maturity level. supply chains. This white paper in policy, regulation, drug regimens, describes several case studies to and other factors that affect supply Countries may not fit neatly into highlight functional and operational chain systems; poor and inconsistent one or more maturity levels. As capabilities to enable PSE. The communication is a key factor in the they graduate from siloed and studies also represent a range of failure of effective PSE. Donors and fragmented supply networks PSE approaches that advance implementing partners, meanwhile, to integrated ones within often supply chain maturity; they are also are learning and adapting their dynamic political economy and drawn from diverse country approaches to support LIC and stability contexts, however, they contexts, including Ethiopia, Ghana, LMIC governments. The end goal is likely will progress faster in some Malawi, Nigeria, Pakistan, Rwanda, to build resilient, integrated, data- functional and operational domains and Zambia. Together, these case driven, efficient, and cost-effective than in others. In practice, it typically studies highlight how public and health supply chain systems takes several years to realize private sector actors, donors, that leverage the comparative systemwide improvements and and implementing partners must advantages of the public and private move from one level of maturity to recognize that no single entity can sectors to measurably improve the next. A key reason is that private solve a country’s health supply chain and sustain strong supply chain sector capacity in core supply chain challenges alone. performance—and that ultimately operational areas such as storage benefit the populations that rely and distribution typically exist across Conclusion. It is important to hold upon these supply chain systems for LMICs and in most LICs and can regular forums for public and private their health and medical care.

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 5 Chemonics International

Adicional Logistics completes a transfer of long-lasting insecticidal nets (LLINs). GHSC-PSM Mozambique/Mickael Breard Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 6 Chemonics International

SECTION 1 Benefits and Challenges of PSE in Health Supply Chains

Benefits of PSE ✓ • Public and common goods in Considering the complexity of health recognition of the role that PSE health commodity selection and supply chains and the multiplicity of plays and can play where it is availability are addressed stages and roles, evidence supports underleveraged, to accelerate the a role for the private sector as an pace at which supply chain systems • Supply chain functions are linked operational and innovation partner mature to provide reliable access to to health insurance and provider to achieve UHC goals (Lydon et health commodities. PSE has several reimbursements al., 2015; Bornbusch et al., 2014). key benefits: • Market-shaping interventions build Public and private sector roles in more resilient supply chains over health supply chains will continue to a. Governments are able to time evolve as countries mature through focus on their core stewardship supply chain management practices. and strategic governance roles b. Operational efficiencies, The ultimate aim is to invest in to achieve UHC. including cost savings, are often strengthening health supply chain All key interviewees agreed that, realized. systems to become increasingly self- if public agencies and MOHs As governments evolve from a reliant and resilient over time; PSE is pivot from operating their own direct implementing role and bring a key approach to achieve government-owned supply chains in strong private supply chain this mission. and delegate to appropriate organizations, there is typically private sector service providers, consistent adherence to supply There are no readily accessible, governments can better fulfill chain best practices (Silverman, comparable, and consistently their stewardship roles and et. al., 2019). Typical benefits tracked measures of the proportion improve supply chain performance include (adapted from SCOR, of health commodities that are (Bornbusch, et al., 2014; Agrawal, Association for Supply Chain procured and distributed through et al., 2016). Typical benefits of Management, n.d.): private vs. public sectors in LICs improved stewardship include: • Improved supply chain reliability and LMICs. There is, however, • Stronger financing mechanisms with order fulfillment on time growing evidence that using the and sources and in full (OTIF) that includes private sector quantifiably improves correct product, place, quantity, supply chain performance and • An enabling policy, legal, condition/packaging, and cost effectiveness (Agrawal, et. al., regulatory, and product and documentation 2016). There is, therefore, increased patient safety environment

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 7 Chemonics International

• Logistics efficiency, including c. Risk is more evenly distributed. innovation, as well as human resource improved human resources Because competitive sourcing expertise to solve for supply chain management, route planning, increases private vendor diversity, issues (United Nations Commission and the resulting fuel and fleet there is less reliance on a single on Life-Saving Commodities- maintenance cost savings actor to perform critical functions Technical Reference Team on Private • Reduced order fulfillment cycle and, therefore, less risk (Agrawal, Sector Engagement, 2014). time that includes reduced time et. al., 2016). Greater accountability, to submit a purchase order, such as with performance-based e. While evidence is limited, receive an order at the shipping contracts (PBCs), also may there may be intersectional facility, process an order for reduce performance risks (United benefits in investing in PSE for shipping, order transit duration, Nations Commission on Life- health supply chains. receive an order, and turnaround Saving Commodities-Technical We have learned from other for loading and offloading Reference Team on Private Sector sectors, such as agriculture, that Engagement, 2014). One trade-off benefits realized in LICs and LMICs • Improved stock management in spreading risk, however, is the include increased job creation and with decreased expiries, potential to reduce economies of a stronger supply chain industry overstocking, and stockouts scale; this should be assessed in the over time that other sectors can • Improved housekeeping and local context. leverage (McKinsey & Company, warehouse management that, 2012; Beria Agricultural Growth in turn, increases storage d. PSE provides access to a Corridor Initiative, 2021). While capacity, including use of visual broader base of innovation, there is limited evidence of a similar management tools to reduce skills, and expertise. halo effect in the health sector, it order search time and ensure Private sector actors must is worth studying closely as these consistent adherence to first constantly innovate to remain countries’ economies and, therefore, expiry, first out best practice competitive, and they often attract private sector capabilities and staff who have professional supply supply chain talent needs continue • Organizations with deep supply chain certification and experience. to grow (Gavi, the Vaccine Alliance chain expertise can also leverage PSE, therefore, provides access to [GAVI] & Transaid, 2015; High Impact private investment capital and business process and technological Practices in Family Planning, 2020). drive innovation

Challenges of PSE for government entities when engaging with the private sector !

LIC and LMIC governments and Life-Saving Commodities-Technical on the completion of contract procurement service agencies (PSAs) Reference Team on Private Sector deliverables. While PBCs offer face several challenges when they Engagement, 2014). greater accountability, they also may are working with the private sector: create perverse incentives, such as b. Limited government misrepresentation of performance a. Political and operational capacity to manage contracts metrics or gaming. PBCs may come concerns over loss of control. and payments. with a high measurement and Governments may sometimes view In many LICs and LMICs, reporting burden and associated private actors with distrust and may government officials have limited high monitoring and verification be unwilling to share information capacity in PSE and related contract costs, rather than reasonable, with them, particularly if they are and subcontract management, necessary, measurable, and frugal concerned about misuse for profit or including the use of appropriate metrics, as well as transference of whether the information highlights and necessary KPIs to manage risk and upfront costs to private sensitive performance issues. Some and improve supplier performance vendors (USAID & Palladium, 2017). also highlight a potential risk that the (United Nations Commission on private sector will not complete a Life-Saving Commodities-Technical c. Loss of public sector supply project on time and on budget; this Reference Team on Private Sector chain jobs as PSE increases. often stems from a realization that Engagement, 2014). They often lack When operational supply chain key performance indicators (KPIs), the capacity to establish financial functions are transferred to the information systems, and other processes and flows to ensure private sector, MOHs need to accountability approaches are weak smooth, timely, and transparent manage evolving staff requirements, (United Nations Commission on vendor payments that are based including the redundancy of some

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 8 Chemonics International

public sector roles. There may potential to lose efficiencies an LMIS in place, governments be conflicting incentives, such as of scale and cost advantages struggle to achieve interoperability perceived influence of leaders based of ordering in greater volumes with vendor LMIS or enterprise on the size of the public sector (Silverman, et. al., 2019). resource planning (ERP) systems. workforce they oversee, corruption, Without reliable administrative and conflicts of interest. These e. Lack of effectiveness in data data from service delivery points become difficult to hide with the collection, analysis, and use due and each tier of a supply chain accountability that often comes with to weak information systems system, forecasting and supply PSE (United Nations Commission on and private actors’ limited planning will continue to be Life-Saving Commodities-Technical access to data. suboptimal (Yadav, 2015). Reference Team on Private Sector An information system that Engagement, 2014). consistently captures routine data f. There is a general lack of at all levels of a supply chain is a activity-based costing in health d. Decreased purchasing prerequisite to effectively track KPIs supply chain management. power caused by reductions for core supply chain functions, Although activity-based costing in efficiencies of scale leads as well as adherence to supply is widely used in the private to devolved procurement chain best practices. LIC and LMIC sector, it is rarely used in public responsibilities and budgets. governments may lack capacity to sector supply chains. It is difficult, While decentralization and set up and manage an information therefore, to perform cost- devolution are laudable governance system or be reluctant to cede effectiveness analyses to compare and administration goals, control and access to data to an government-run and private sector- subnational governments may outside logistics management run supply chain operations to build have different procurement rules information system (LMIS) vendor an evidence-based rationale of and budgets than the federal that has the requisite infrastructure value-for-money and cost savings government. This increases the and expertise. Often, even with with PSE (USAID, 2021).

Challenges for the private sector when engaging with government entities ! a. Delayed payments, short b. An adverse enabling Reference Team on Private Sector contracts, and unclear environment for business. Engagement, 2014). performance metrics. This may include ad hoc and sudden Private sector partners often view changes to contracting terms Despite these challenges, the working with the government and conditions that are based on advantages of engaging with and as risky. The most cited reason political influence or public outcry investing in the private sector for is that government agencies over drug shortages. If the private supply chain operations ultimately delay or default on payments sector partner is not informed of outweigh the challenges. This is because of bureaucracy or changes and permitted time to borne out by PSE’s increasing role limited financial resources (United adjust to emergent needs, it can in moving supply chain systems Nations Commission on Life- lead to confusion and financial loss. from less mature and fragmented Saving Commodities-Technical Other important challenges include to more mature and better Reference Team on Private Sector corruption and inconsistent, rapidly integrated systems. Highlighting Engagement, 2014). Additionally, shifting, or contradictory regulations the bidirectional and dynamic in countries where the private (United Nations Commission on beneficial nature of PSE, therefore, sector is emerging, short-term Life-Saving Commodities-Technical is critically important. government contracts are a disincentive for private partners, because there is uncertainty on The private sector can help improve supply their return on investment (GAVI & Transaid, 2015). If performance chain performance and accelerate supply metrics are not clear, consistent, chain maturity; a more mature supply chain and standardized, they can discourage private sector partners allows for broader PSE. from engaging with governments.

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 9 Worker operating a forklift in a warehouse in Mozambique. GHSC-PSM Mozambique/Mickael Breard Chemonics International

SECTION 2 Country Health Supply Chain Maturity and Readiness for PSE

Health Supply Chain Maturity Levels

There is wide variation in supply methodologies draw from a mix from these models, we segment chain performance in LICs and of sources: the SCOR model, LIC and LMIC health supply chains LMICs. To understand the ways that Gartner’s demand driven model along a continuum into five levels PSE can strengthen health supply for supply chain maturity, the of maturity, least to most mature in chain performance, it helps to Theory of Constraints, and the terms of resiliency in supply chain comprehend the broad supply chain contextualization and adaptation of management and operations and ecosystem in a given country. these models and theories through opportunities for PSE (see Table 1). the public health supply chain This framework is designed to help To understand a supply chain community’s learnings in LMIC and supply chain practitioners appreciate system’s maturity, practitioners rely LIC settings (Lockamy & McCormack, the variables that determine a supply on several supply chain maturity 2004) (Association for Supply chain’s maturity. It is not intended to assessment methodologies that Chain Management, n.d.) (Gartner, replace current maturity assessment vary in complexity and cost. These 2017a) (Goldratt, n.d.). Drawing methodologies.

Framework Snapshot

MATURITY

ORCHESTRATED INTEGRATED COLLABORATIVE REACTIVE AND SILOED CENTRALIZED

Country Readiness Functional Capabilities Operational Capabilities Political and Economic Stability | Strategic Governance | Financing | Supply Network Design | Forecasting Private Sector Capacity Regulation and Quality | People | and Supply Planning | Procurement | Processes | Data System | Metrics Storage and Distribution

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TABLE 1: Health Supply Chain Maturity Levels: Country Readiness, Functional Capabilities, and Operational Capabilities

MATURITY LEVEL REACTIVE AND SILOED CENTRALIZED INTEGRATED COLLABORATIVE ORCHESTRATED (Gartner, 2017b) COUNTRY READINESS FOR PSE Humanitarian crisis and/ More stable Stable macroeconomic and Resilient political economy Resilient political Political or conflict; political and macroeconomic and political environments economy Economy economic instability political environments Lower Human Development Growing private sector, Thriving private sector, Robust private sector, Robust private sector, Market Index ranking (United some outsourcing increasing outsourcing deep outsourcing deep outsourcing Nations Development capabilities capabilities capabilities capabilities Capacity Programme, 2020) and fragmented private sector FUNCTIONAL CAPABILITIES Donor oversight Government control and MOH oversight with MOH stewardship; Government oversight oversight transition to semi- autonomous PSA that for quality and pricing; Strategic autonomous PSA may be privatized fully relies on commercial Governance or contracted to a pharmaceutical and commercial entity medical equipment retail supply chain actors Largely from donors, Mix of donor, financial Increase in domestic Stable domestic High health insurance financial institutions institutions, and domestic financing; limited health financing; increasing coverage, low OOP Financing sources insurance coverage, health insurance spending high out-of-pocket (OOP) coverage, limited OOP spending spending

Regulation None or minimal Drugs regulatory agency Drugs regulatory agency; Drugs regulatory agency; Drugs regulatory agency; some pharmacovigilance pharmacovigilance post- pharmacovigilance post- and Quality marketing surveillance marketing surveillance United Nations agency Government staff, Staffing is increasingly Professional third-party Deep private sector and/or humanitarian may lack supply chain professionalized logistics (3PL) vendor supply chain expertise; People nongovernmental training and certification staff; specific commodities specific commodities (Human organization (NGO) staff/ opportunities (high cost, rare diseases) (high cost, rare diseases) Resources) donors may be procured by may be procured by government, so this government capacity is also needed Siloed, manual, and Central Medical Store Standardized and Collaborative with Information flows in disconnected (CMS) brings some integrated for efficiencies visibility across suppliers, real time for process Processes standardization, but of scale vendors, and customers optimization, efficiency, vertical and duplicative and cost savings supply chains continue Manual or spreadsheet- Fragmented LMIS LMIS integration through LMIS/ERP is stable and ERP aggregates demand based landscape interoperability and/or funded and information flows Data System unified system in real time; established control tower for larger countries Ad hoc metrics On-time delivery (OTD), OTD, OTIF OTD, OTIF; vendor- On-shelf availability Metrics OTIF for each funding managed inventory shifts stream to on-shelf availability OPERATIONAL CAPABILITIES Supply Network Siloed and fragmented CMS with parallel supply Increasing functional Full integration Full integration Design chains integration for efficiency Siloed, driven by program Driven by program Driven increasingly Driven by reliable and Driven by reliable and Forecasting targets targets, historical by consumption data; frequent consumption frequent consumption and Supply allocations, and some considers effect on data data Planning consumption data manufacturing and procurement Donors and humanitarian Mix of donors and CMS CMS CMS, with some vendor- Private Procurement agencies managed inventory

Storage and United Nations agency/ Government-owned and Mix of government and 3PLs,fourth-party 3PLs, 4PLs; E-commerce NGOs/donors operated warehouses 3PLs logistics (4PLs) innovations: drones, Distribution and fleet smart lockers, etc.

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Country Readiness for PSE

There are many ways to foster the private sector, a thoughtful and sequencing of supply chain and deepen PSE in health supply assessment should be completed problems to be solved and the chains to achieve improved to understand the nuances and need for careful preparation for supply chain performance, such implications of the country’s the financial mechanisms and as increased geographic reach, political economy and stability, management to enable PSE. This availability, affordability, and quality market capacity, and enabling approach allows relevant actors of medicines. No single approach environment for business. Rather to make informed choices about for PSE fits every operating context than a prescriptive approach, we the timing and types of PSE that or each stakeholder’s needs suggest a pragmatic approach may be appropriate in a country’s and capacities. Before engaging that considers the root causes broader context.

Steps to PSE Readiness

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 Conduct a Select the level Conduct an in-depth Prioritize Summarize health supply of maturity maturity model performance the assessment’s chain situational assessment challenges and results analysis (if possible) opportunities

STEP 1: Conduct a health supply chain situational analysis using this job aid questionnaire.

Political Economy Analysis (Check ✓ once completed)

Who are the main stakeholders? What are their perspectives, priorities, interests, and objectives in relation to health supply chains?

How is the local system affecting dynamics for and against reform? Is the MOH seeking to deliver change now or in the future that could be facilitated by an external provider?

What is the broader institutional context for reform, including incentives and power dynamics (within public health supply chain operators and government agency hierarchies)?

What are the existing solutions, assets, opportunities, risks, and assumptions to engage the private sector?

What is the support or opposition of MOH staff and civil society, among others, to engaging the private sector?

Does significant corruption exist in the country?

Is the government committed to a long-term relationship/partnership with the private sector?

Market Capacity

What is the size of the country’s economy? Is there an attractive market for private sector supply chain actors to invest and grow in the future?

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What supply chain private sector exists locally and regionally? What is their share of the market (in total and specifically in health, if it exists)?

What are the private sector’s core competencies? What is the purpose or the mandate under which they operate? What are the KPIs used to manage private sector performance?

What are the risks associated with working with the supply chain oversight body (MOH or other)? How can these be mitigated?

What are the minimum expected returns or conditions for the private sector to engage with the MOH?

Are the necessary people and assets available in the private sector/market? Are these accessible to the MOH?

What are the top private sector partners that can perform supply chain functions in your country/region?

Are there improvement opportunities that the private sector could deliver to the country’s health supply chain?

Enabling Environment and Public Sector Capacity (Functional Capabilities)

Does the country have a supportive legal framework and an enabling business environment for engaging with the private sector?

What is the country’s record on engaging the private sector? Are there any experiences at the MOH level?

What is the MOH’s core competency? What is the purpose or the mandate under which it operates?

What are the risks associated with engaging the private sector to lead a function or multiple functions of the supply chain?

Are there any adverse impacts of engaging the private sector that cannot be measured directly (i.e., loss of control over the specific function of the supply chain, internal resistance within the organization)? Can these be overcome?

What are the KPIs that demonstrate the MOH’s performance in managing their health supply chain? Is there a system for collecting and recording KPI data?

What is the level of data visibility in the supply chain leveraged for MOH decision-making?

Does the MOH have the technical capability to manage and steward private sector partners?

Does the country apply public financial management good practices that help secure funding for the health sector?

Are the financial systems set up to pay external partners in a timely manner?

Are the mechanisms in place to budget and segment costs by category (i.e., fuel, tires, wages) and region?

What is the percentage of health commodities that are purchased at the last mile through public sector channels?

Does the MOH have the capacity to meet current and future requirements? Does it have or can it attain the resources required to meet future demand (locally)?

Are supply chain education programs set up in national colleges and universities?

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Step 2: Leveraging the insights from Step 1, select the level of maturity that best reflects the health supply chain’s status on the maturity framework (Table 1). This provides a rapid identification of supply chain performance challenges and opportunities.

Step 3 (if possible): Conduct an in-depth maturity model assessment that leverages industry maturity models, such as the Association for Supply Chain Management, Gartner’s, and USAID’s National Supply Chain Assessment. Each model is unique. The ability to conduct an in-depth assessment will depend on stakeholders’ levels of engagement, political will, timeline, and available funding.

Step 4: Prioritize the list of performance challenges and opportunities. Use industry prioritization models, such as value vs. effort and reach, impact, confidence, and effort, among others.

Step 5: Conduct a cost and cost-effectiveness analysis for the top-ranked opportunities. Use these questions as guidance:

What are the public sector costs associated with the supply chain functions that are to be outsourced? Is there cost visibility at the requisite level to understand whether an outsourced proposal would deliver value for money? Could some items be cost in budgets elsewhere, or does the budget include items associated with another activity?

What are the direct costs (salaries and related expenses, fuel, warehousing expenses) and indirect costs (maintenance, depreciation, utilities, and others)?

What is the unit cost for the function (management and handling of one warehouse, cost of delivery to or from one warehouse, etc.) by the private sector?

What is the result of comparing public sector and private sector costs? Would the overall benefits of outsourcing a function to the private sector exceed the costs of doing so?

Step 6: Summarize the assessment’s results and ranked challenges and opportunities (including cost and cost-effectiveness analysis results) to produce an action plan for implementation, ideally including budget requirements. This report will serve as the country’s holistic guidance for when and how to engage the private sector, and what activities must be accomplished to set up a sustainable PSE mechanism. In Section 3, we will highlight the spectrum of PSE in health supply chains with illustrative examples of how to leverage PSE to strengthen functional and operational capabilities.

Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 15 Yin Kevkanitha takes inventory in the store room of a hospital in the Sonikhum District of Cambodia. Chemonics/Chris Norman Chemonics International

SECTION 3 Spectrum of PSE in Health Supply Chains

All key interviewees for this available, affordable, and quality- It is important paper recognize the benefits assured health commodities of PSE; they also acknowledge to improve health outcomes. A to note that that it takes time and effort to stewardship role requires skills in fully realize improved supply leadership, governance, financing, becoming a steward chain performance. To sustain regulation, market research, and does not decrease these improvements, however, it alliance building. Government is equally important to—first or staff and decision-makers also a government’s concurrently—equip governments need capacity in contract design, and other development actors negotiation, and management responsibilities with the capacity and mechanisms to allow them to execute and for key supply to leverage the private sector maintain fruitful partnerships appropriately and optimally. Also, with the private sector as service chain functions. as described above, the extent providers whose performance to which the private sector can is measured through PBCs. play a role in a country’s health Some important processes and supply chains varies as a function responsibilities include: health systems strengthening strategies of the maturity of the underlying • Ensuring sound financial flows economy, and of related political and financial integrity • Coordinating during public and economic stability, including an health emergencies or natural • Creating and maintaining enabling environment for business. disasters regulatory policies and procedures for public and private Government Stewardship Domestic financing, including sector actors to thrive Model and Private Sector facilitating direct foreign Led Supply Chains • Promoting product and patient investment, offers a substantial safety by ensuring quality- opportunity to increase the Governments play a critical assured products reach end allocation and efficiency of public stewardship role for health supply users and that there are revenue within the health supply chains with vision, oversight, disincentives for counterfeiting chain sector in LICs and LMICs. accountability mechanisms, and • Demonstrating leadership Financing steps begin with 1) resources. These factors ensure through commitments to disease resource mobilization at the the provision of accessible, eradication and national public national or international levels;

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Because many health supply chains involve the public and private sectors, effective collaboration between all stakeholders is crucial to attain efficiency and high- performing health supply chains. Private sector actors can contribute innovative solutions to the problems faced by the public sector.

2) the pooling of these resources; chain (pharmacies and drug shops) Some donors have established 3) identifying an agency or and other innovative service programs and mechanisms to mechanism that will administer delivery points (smart lockers, encourage PSE in public health those funds, budgeting adequately e-commerce). across countries that meet for priority activities; and 4) the necessary conditions. For overseeing implementation and In the early stages of health example, USAID has set up spending, which may be led by supply chain maturity, public and 20-year Development Credit governments or with support from private sector actors may leverage Authority programs, now under implementing partners. Improved donor-funded programs to share the Development Finance stewardship is a long-term endeavor risks. Donors and implementing Corporation, which guarantee rather than a short-term goal. partners can work to better capture partial credit to loan beneficiaries the interests and incentives that from the private sector. The Bill In mature health supply chains, drive the private sector in various & Melinda Gates Foundation where the government is a steward operating contexts. Creating extends direct equity investments, and a market-based approach is guidelines that respond to the fund investments, low-interest operationalized, it is mostly the political economy and local system loans, credit enhancements, private sector that leads the supply characteristics of the region or and volume guarantees to chain operational capabilities, such country will enable the public entrepreneurs, companies, and as the storage and distribution of and private sectors to continue organizations working throughout health products from the point of collaborating in dynamic donor- the health supply chain (Bill manufacture or from wholesalers supported initiatives, facilitating & Melinda Gates Foundation, to patients at retailers and health long-term planning and initiation n.d.). These instruments boost facilities. Although demand may be of market-based approaches in the investor confidence by derisking aggregated by a central authority, public sector. In addition to these private sector investment, which such as MOHs through outsourcing insights, donors and implementing incentivizes the private sector to or other contracting mechanisms, partners offer value by providing invest in projects that work toward private actors (companies, NGOs, highly specialized technical achieving development objectives. faith-based organizations) manage assistance and advisory services This trend will increase engagement the upstream and downstream that can inform government with financial institutions as credit supply chains by employing an spending and budgeting strategy sources to maximize the impact of entirely private sector workforce while developing organizational and private sector-led implementation and by leveraging the retail supply staff capacity. at the patient level.

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CASE STUDIES Leveraging PSE to Strengthen Supply Chain Functional Capabilities

STRATEGIC GOVERNANCE AND FINANCING Pakistan Commits to Several Firsts with Domestic Financing

In Pakistan, GHSC-PSM’s The project supported the first-ever 2017-23, ensuring availability of advocacy and continued provincial supply chain strategies for critical life-saving commodities for technical assistance resulted in the Punjab and Khyber Pakhtunkhwa mothers and children. the government of Pakistan’s (KP) governments for financial years historic commitment to domestic 2017 through 2022. GHSC-PSM also GHSC-PSM also helped the financing of approximately US$217 completed the first-ever forecasting government of KP to develop million for provincial and regional exercise with the creation of the a separate five-year scientific governments for supply chain Maternal, Neonatal & Child Health forecast for four strategic districts systems strengthening, including (MNCH) Very Essential Medicines covering 2020-25 based on a US$138.97 million for family Lists (VEMLs) for all provinces standardized medicine list to planning (FP) product procurement of Pakistan, which generated meet the needs of the people and and distribution until FY2021. adequate financing for the period communities of the province. ■

HUMAN RESOURCE DEVELOPMENT Center of Excellence for Inventory Management and Warehouse Operations in Ethiopia

The Ethiopian Pharmaceuticals inventory management operations. For example, the hubs relocated Supply Agency (EPSA), which The COE was piloted at the EPSA fast-moving items to decrease the manages the public health warehouse in Adama to adopt distance between the picking and commodities supply chain the private sector’s best practices dispatch locations. in Ethiopia, is committed to before scaling to ESPA’s 18 improving access to and equity branches. GHSC-PSM supports four GHSC-PSM supported sustainable of essential medicines and related pillars of work with this initiative: warehouse operations by developing and implementing standard health commodities. Despite 1. Training and mentorship significant process improvements, operating procedures (SOPs) and a 2017 warehouse assessment 2. Infrastructure on-the-job training for staff. SOPs of all branches revealed that 3. Process improvement and included receiving, product put- challenges remained, including standardization away, product picking, inventory poor warehousing and inventory tracking, and order processing. 4. Data analysis and utilization management practices and storage These practices improved inventory conditions. These inefficiencies With support from GHSC-PSM, accuracy, operations efficiency, resulted in pharmaceutical waste the Hawassa branch conducted performance measurement, and and product stockouts. an ABC/FSN/VEN analysis, commodities refill to health facilities. categorizing products by value Staff facilitated mentorship and The Center of Excellence (ABC), transaction frequency experience-sharing visits between (COE) initiative systematically (Fast/Slow/Normal moving), hubs to share lessons learned. The addressed these gaps by and importance (vital/essential/ COE initiative is part of a broader improving transparency and the non-essential items). The branch effort to obtain ISO 9001:2015 performance of people, processes, developed a product category certification and to embed a culture and governance with continuous matrix, which eventually was used of continuous improvement at all improvement of warehouse and to determine storage methods. levels of EPSA operations. ■

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INFORMATION SYSTEMS AND DATA Ghana Focuses on Governance and Change Management

The Ghanaian MOH’s five-year Supply Chain Master Plan calls for strong supply chains that enable effective management of health commodities. The Global Fund-supported Ghana Logistics Management Information Systems program partnered with GHSC- PSM to help strengthen the country’s LMIS, last-mile delivery, and warehousing and distribution services and expand PSE to expedite procurement of essential medicines. A central project goal is to have Ghana’s regional supply chain users rely on data for decision-making. To this end, the project focused on the design, Pharmacists at Goaso Municipal Hospital entering consumption data on the GhiLMIS system. development, and implementation GHSC-PSM Ghana of a comprehensive, end-to-end LMIS that collects, records, and reports logistics data. This data With 2,500 end users and complete rollout enables supply chain decision- to 161 sites including all of Ghana’s Regional makers to operate accurate, timely, and rational medicine selection Medical Stores, GhiLMIS is providing a and delivery. The Ghana Integrated Logistics Management Information unified platform for the country’s health System (GhiLMIS) platform, in supply chain stakeholders to report and particular, was developed to provide visibility and analytics collect data for decision making. that would decrease operational costs; enhance collaboration with upstream and downstream suppliers, distributors, and 3PL providers; are focused on supply and demand implementation of GhiLMIS has and improve management of chain planning, as well as warehouse, lowered inventory operations costs; of custody from Ghana’s CMS to transportation, and performance it also provides real-time inventory service delivery points. management systems. By and order visibility. By establishing aggregating data instantly, GhiLMIS a culture of data use as a business After the project chose technology enables dynamic decision-making, asset, the project promotes and vendor One Network—a global reducing stockouts, expiries, and enables system sustainability. supply chain software solutions costs, and improving management With its focus on governance firm which provides integrated of country resources. GhiLMIS and change management, the demand, supply, and logistics data has been used to support project ensures that GhiLMIS will management platforms— and manage the distribution of be fully utilized by the Ghanaian the GhiLMIS system requirements lifesaving commodities from the government and rolled out to all were defined by 35 use cases that central tier of the Ghana value service delivery points—including emerged from the Ghanaian MOH’s chain. Ghana’s government uses last-mile facilities—proactively supply chain business processes. it as a single source for reporting alerting and notifying users of GhiLMIS triangulates data from on supply chain performance important supply chain events. ■ multiple systems, including in- indices to its development and country and global platforms that implementing partners. The LEARN MORE HERE

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CASE STUDIES Leveraging PSE to Strengthen Supply Chain Operational Capabilities

PROCUREMENT AND PURCHASING An All-Inclusive Reagent Rental Model Optimizes Use of Laboratory Instruments

The Joint United Nations utilization, weak inventory equipment placement in testing Programme on HIV/AIDS management, reagent and supply laboratories. This model also (UNAIDS) set an ambitious stockouts, and expiries. Instrument includes data solutions for patient treatment target to help end the management, too, has gaps, with result transmission and instrument/ AIDS epidemic (UNAIDS, 2014): irregular routine maintenance, user performance to inform the VL By 2030, 95 percent of all people frequent breakdown of test dashboard, as well as network staff 1) living with HIV will know their instruments, and lack of or delays training and quality improvement. HIV status; 2) diagnosed with HIV with servicing and maintenance. infection will receive sustained Preparation to implement the ARV therapy; and 3) receiving To solve these challenges, GHSC- all-inclusive model included ARV therapy will have viral PSM took an all-inclusive reagent several steps: suppression. Progress toward 95- rental approach through the Global 1. Baseline mapping of public 95-95, however, is variable across VL request for proposals that looks health laboratory network and sub-Saharan Africa, and efforts to at entire value chain. systems—including functional move forward require laboratory instruments, current utilization networks that operate efficiently Instrument placement, preferably rates, and patient demand—to and at scale to ensure timely and through an all-inclusive/reagent provide a dynamic understanding accurate viral load (VL) testing. rental model, is a primary activity of the functionality of the that adds tremendous value to national laboratory network and Across Africa, laboratory the laboratory network. An all- supportive systems, including networks face several challenges: inclusive per-test cost structure commodity distribution. uncoordinated instrument spread across all same-branded procurement, lack of long-term instruments within the network 2. Forecasting and supply planning pricing, long procurement cycle and available to all stakeholders to quantify numbers of sites, times, breaks in cold chain during is also a useful approach for tests, products, etc. reagent delivery, weak sample efficiencies of scale. This model 3. Procurement and strategic referral networks, and laboratory includes consumables, service, sourcing included a shift from site infrastructure issues. Sites maintenance, vendor-managed capital procurement to all- experience low instrument inventory (in some cases), and inclusive reagent rental pricing

Figure 1. Lab Value Chain

VL/EDI Program Instrument Instrument Transfer Process Send Result Performance Strategic Network Placement Samples Samples to Patient Management

PRIMARY Planning Optimization

Procurement of Reagents, Lab Infrastructure Human Resource IT Infrastructure Accessories, Auxiliary Equipment SUPPORT

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based on an optimized network, accountable; and regular reports and placement; point-of-care with robust contracts that and check-ins for distributors (POC), tuberculosis (TB), and include defined service terms and and stakeholders to identify and HIV referral service integration; expectations, transparent pricing address issues. and careful consideration of broken down by key elements, utilization rates and equipment and incoterms and volumes that The reagent rental approach throughput. are defined in collaboration with resulted in a lower, predictable 3. Design of optimized laboratory all stakeholders. In October 2019, price per test; easier budgeting; and commodity distribution GHSC-PSM issued final awards higher supplier performance; networks that consider future to Abbott, Hologic, and Roche to greater coordination; and a sharing program growth and scale, as meet U.S. President’s Emergency of risk between manufacturers well as establishment of national Plan for AIDS Relief’s (PEPFAR) and stakeholders. For example, integrated sample transportation goals. This approach has provided instruments under the Mozambique networks. better data for donors and reagent rental agreements have 34 country governments to plan percent less down time compared 4. Scenario modeling to refine and budget; competitive pricing to those under traditional, stand- assumptions; MOH used the and terms to procure laboratory alone service contracts, optimizing Lab Efficiency and Quality supplies and services; appropriate their use and return on investment. Improvement Planning tool supplier diversity to reduce the Figure 3 compares traditional (LabEQIP) to model scenarios impact of quality and supply risks; equipment purchase-based models and laboratory networks, and increased cost savings and with all-inclusive advantages. revealing several challenges, efficient funds use. including data gaps, choices between sample referral network 4. Performance management is an Implementation of the all-inclusive approach included these steps: optimization, and budgetary essential part of the approach, and political constraints that with KPIs that measure service, 1. Mapping of laboratories’ and redesigning a laboratory network maintenance, reporting, and facilities’ geolocations. can entail. ■ management; supply chain 2. Equipment optimization with management that defines service appropriate site selection LEARN MORE HERE expectations and holds vendors

Figure 2. Traditional Procurement Approach vs. All-Inclusive Reagent Rental Network Approach

TRADITIONAL APPROACH NETWORK APPROACH Separate Upfront Capital Procurement Reagent Rental All-Inclusive Procurement EQUIPMENT PURCHASE EQUIPMENT PLACEMENT Price Per Test High, Variable Lower and Predictable Budgeting Difficult Easier Supplier Performance Poor High Infrastructural Requirements Poorly Defined Clearly Defined Coordination Poor High Risk Client Manufacturer/Distributor Result Transmission Poor High Efficiency Poor High

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SUPPLY NETWORK DESIGN AND OPTIMIZATION Leveraging Digital Tools for Network Optimization in Rwanda

To achieve UNAIDS “Treat All” LabEQIP, an easy-to-use open- complement, and External Quality strategy, the government of source platform developed by Assessment performance. After Rwanda implemented World Health USAID, U.S. Centers for Disease running data scenarios, the team Organization recommendations Control and Prevention, and recommended either of the two to emphasize VL testing to LLamasoft—is a data repository for programs above. The government monitor antiretrovirals’ (ARVs) laboratory network performance adopted the first scenario: to therapeutic effects. In 2017, the information; it also aggregates and scale down CD4 machines from GHSC-PSM project partnered analyzes data. Rwanda was the 92 (conventional and POC) to 22 with LLamasoft, an international second country to use LabEQIP for POC machines, redistributing POC software firm that enables logistics network optimization. The platform machines to recommended sites. providers to interconnect across links data from laboratories and their supply chain function. They other sources and aggregates it The result was that travel distance convened Rwanda’s government visually with maps, charts, and was reduced by 14 percent, and stakeholders to demonstrate infographics. LabEQIP allowed new referral sites reported workload the value of referral network Rwanda to analyze data and create reduction of 6 percent from the visualization and optimization efficient laboratory networks National Reference Laboratory through 1) the Cluster of with data-driven optimization side, which was overburdened. In Differentiation 4 (CD4) program’s and geographic information addition, an order of 22 machines scale down of conventional system-based visualizations. was cancelled, saving US$240,000 machines and redistribution of The tool monitored laboratory in equipment and installation. ■ POC machines, or 2) VL program instrumentation, location, sample scale-up. referral networks, human resources LEARN MORE HERE

FORECASTING AND SUPPLY PLANNING Using Predictive Analytics Tools for Forecasting and Supply Planning: The Quantification Analytics Tool

Forecasting and supply planning, solution that enhances data and program onboarding is or quantification, are critical supply access and system interoperability. planned for 2021. For long-term chain tasks. Each year, dozens Building on years of forecasting sustainability, QAT is hosted on of countries place orders with and supply planning experience Amazon Web services as a free, GHSC-PSM for essential health and utilizing open-source and pay- open-source platform for multiple commodities. Quantification to-use private sector software— supply planning initiatives. The enables countries to know how including Python, Power BI, Jura, tool also manages authentication, much to procure and when and Amazon Web Services—QAT authorization, and auditing through commodities should be delivered to is the first open-source, program- an open-source Identity Access support patients. Many forecasting agnostic, customizable global Management tool and produces and supply planning tools, however, health forecasting and supply comprehensive user, manager, lack consistent user interfaces, planning tool that links ERP and software documentation. By fail to meet basic pipeline systems to program managers’ combining private sector resources management requirements, and forecasts and supply plans. Since with innovative approaches do not allow data integration from December 2020, forecasting and and enhanced features, QAT multiple sources without manual supply planning personnel in Benin, will enable further automation, manipulation, often resulting in Zimbabwe, Ethiopia, Botswana, integrative predictive analytics, and quality and version-control issues. Nigeria, Zambia, Burundi, and optimization, ultimately bringing To address these challenges, GHSC- Laos have been trained on QAT; 10 greater stakeholder-partner PSM developed the Quantification country programs are submitting connectivity in modern public Analytics Tool (QAT), a modern quarterly supply plans in QAT, health supply chains. ■ open-source, web-enabled with dozens to follow in coming forecasting and supply planning quarters. Additional training LEARN MORE HERE

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STORAGE AND DISTRIBUTION Vendor-Stored Inventory: Shorter Lead Times and Greater Cost Savings for Voluntary Medical Male Circumcision and Male Condoms in Malawi

The global demand for voluntary to any GHSC-PSM and PEPFAR- country’s VMMC needs for the first medical male circumcision implementing country. quarter of FY2019. VSI has made it (VMMC) kits and male condoms possible for GHSC-PSM to procure as HIV/AIDS preventive measures In June 2018, GHSC-PSM received 790,000 VMMC kits in five countries has been steadily increasing. an urgent request for VMMC kits in and reduce lead times by 10 weeks, With that increase, lead times Malawi. The request came less than because kits are assembled and to manufacture and deliver a month before the country’s peak ready for processing within 10-14 commodities by a limited number VMMC campaign (July-September), days. The project can ship stock of qualified vendors also have when demand is at its highest. within 10 days of an order, reducing increased. With several social This campaign, in support of HIV the risk of stockouts in critical times, marketing campaigns for VMMC prevention, accounts for up to 40 preventing expiries and overstocks, and male condoms in the PEPFAR percent of all VMMC procedures and decreasing regional warehouse countries, it is critical to improve for the entire year. Under normal costs by circumventing regional availability by reducing lead times circumstances, a procurement distribution centers and shipping and costs of these products. of this size would take at least directly from the supplier to the seven months to manufacture and recipient country. Vendor-stored inventory (VSI) deliver. GHSC-PSM, however, had requires vendors to hold a recently introduced VSI agreements GHSC-PSM recently expanded specified amount of commodities with two prequalified VMMC kit use of VSI to no-logo male for the buyer’s sole use. GHSC-PSM manufacturers—Hong Kong-based condoms, saving more than over has negotiated VSI agreements SA Health Limited and South $76,000 in storage and shipping for several health commodities, Africa-based PrionTexMicronclean costs. This is projected to cut including VMMC kits and male Gauteng (Pty) Ltd.—and made costs by reducing the need for condoms. Under this approach, 18,321 kits available within six shipping and storage at regional inventory is available to address weeks to meet Malawi’s needs. Two distribution centers and will reduce urgent needs and is guaranteed additional shipments were made lead times by completing quality to be shipped within 8-10 business in the following weeks, fulfilling assurance procedures well before days from vendor warehouses immediate demand as well as the shipment. ■

STORAGE AND DISTRIBUTION Outsourcing Through a 3PL Service Model in Zambia

An important type of PSE occurs and public sector funding levels for the assessment of outsourcing when public health supply chain contract agreements. as a driver of cost savings while managers outsource or contract maintaining or improving supply core private sector services, such The Africa Resource Centre’s chain performance. It also is as warehousing, transportation, Outsourcing Toolkit for African important to transition the inventory management, and Healthcare Supply Chains highlights responsibility for strengthening procurement. This can take many that there are several enabling, human resources and capabilities forms, ranging from contracting crosscutting components that to the private sector partner to commercial sector storage and support successful outsourcing maintain a successful partnership. transport companies to transferring with the private sector. First, those Additionally, advocacy practices inventory control to commercial that are considering outsourcing and tools enhance outsourcing companies with vendor-managed must understand the government buy-in, contributing to an enabling inventory models. These supply policies and regulations for workforce environment. Systems chain functions can be partially or outsourcing in the private sector, and technology should be used to completely outsourced, depending and prepare a business case that is enhance data visibility, reporting, on factors such as capabilities of the based on improved performance decision-making, and overall supply private sector, expertise of public and cost savings over time through chain operations throughout sector health supply chain managers, outsourcing. Another factor is outsourcing.

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Outsourcing has become increasingly As a result, shorter contracts in contract management for MSL. common across developing country support larger, more diversified By using a KPI tracking tool that the contexts as emerging economies service providers, preventing local project developed in May and June take advantage of private sector companies from engaging and 2018, the 3PL provided coverage growth. Commercial or NGO 3PL participating (Beale, 2016). to an estimated 409,000 HIV/AIDS organizations and distributors patients by delivering to high- support functions such as storage, In Zambia, the national public volume facilities that accounted for transportation, and logistics. There health supply chain network is 43 percent of the MSL’s distribution. are many benefits to outsourcing doing its part to meet the universal From June to August 2018, average supply chain functions to 3PLs, test-and-treat initiative to reach results tracked were based on new including cost reduction, improved the 95-95-95 target. Its Medical KPIs that demonstrated improved efficiency, risk mitigation, and Stores Limited (MSL) are fulfilling performance in delivery: gaining private sector expertise. individual orders for each HIV • MSL alert notice shared (Yes/ Outsourcing reduces organizational logistics system, including ARVs, No) improved from 56 percent to risks and enables access to external HIV tests, lab commodities, and 83 percent, resulting in reduced resources, which can positively essential medicines to each health emergency requests impact operating costs and improve facility. GHSC-PSM supported the efficiencies while improving supply MSL to implement an innovative • Vendor response time (within 8-24 chain performance. health commodity distribution hours) improved from 28 percent system through a 3PL service to 88 percent, allowing ample time For more developed private model. The tripartite subcontract for MSL to plan loading time sector partners, there is another allowed for easy information • Loading time at MSL (6 hours) contracting approach called the exchange among parties, as well improved from 6 percent to 4PL strategy. These providers are as MSL training in managing a 3PL 61 percent, providing timely system integrators that coordinate contract. The 3PL subcontractor, dispatch of trucks and delivery of quantification; plan and conduct Lechwe Express Zambia, provides commodities procurement; and manage freight fleet for distribution. It specializes • Lead time to destination (24 forwarders, customs clearance, in handling ARVs, HIV testing kits, hours) improved from 33 percent and other 3PLs—essentially taking and malaria drugs. Lechwe utilizes to 89 percent, increasing stock responsibility for end-to-end a comprehensive live-tracking availability at the SDPs supply chain operations on behalf system, Hawkeye Trackers, to track of a client. shipments. • Condition of truck at delivery (Good) improved from 96 percent It is essential for government The system allows users to create to 100 percent, assuring good decision-makers to follow sound reports, including route maps, route distribution practices for vital procurement and contract animation, locations where the commodities management processes, as well vehicle stopped (including duration), as to establish KPIs and have data and boundary breach alerts. MSL The tracking tool increased systems that design and manage provides purchase orders, loads data visibility allowing for better contracts. To support outsourcing, commodities, and monitors the subcontract management of truck governments must increase fleet. GHSC-PSM provides support availability and loading and lead capacity to design and manage and technical assistance to MSL to times so that lifesaving commodities contracts that are advantageous manage Lechwe. The 3PL system were at the right place at the and beneficial to both sectors. handles routine deliveries from MSL’s right time. MSL and GHSC-PSM Government entities, including central store to regional hubs and measured the KPIs weekly after an MOHs, must manage contract high-volume health facilities and MSL focal person uploaded data. length, terms, and finances to emergency deliveries to districts or Monthly, a review team—MSL, the promote sustainability of the facilities. The intervention sought project, and the 3PL provider— partnership, minimize financial to improve Lechwe’s management discuss performance based on KPIs, risk for the private sector, and and performance and to promote acknowledge successes, identify achieve supply chain outcomes. If commodity security by increasing areas for improvement, and agree contracts with the private sector essential operations data for on interventions. ■ are too short, significant upfront performance monitoring, decision- investments may not be made. making, improvement, and training LEARN MORE HERE

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STORAGE AND DISTRIBUTION Patient Segmentation and Community-Based Drug Distribution— Pharmacy Partnerships in Nigeria

Decentralized drug distribution (DDD) benefits overwhelmed public health supply chains in developing countries: It improves patients’ ARV adherence and care retention, reduces transportation and human resource costs, and better serves urban and suburban populations.

Recently, there has been an The USAID Nigeria Strategic Consultation fees will be paid increased focus on patient HIV/AIDS and Tuberculosis (TB) to community pharmacies at segmentation and differentiated Response Program (Nigeria the patient level to offset the care delivery approaches, aiming SHARP) works to improve the cost of client tracking and to bring medicines and health care quality of high-impact HIV and reporting. Additionally, with these to patients rather than requiring TB prevention and treatment partnerships, the community them to go to facilities. With regard services and to strengthen local pharmacies’ business and networks to ARV distribution in particular, health systems to respond to the have the potential for expansion, various models have been utilized epidemic. With the emergence because patients are likely to to provide patient-centered care of the COVID-19 pandemic in return for future health needs to improve patients’ long-term Nigeria in early 2020, movement and medications. By partnering ARV adherence. restrictions and curfews hampered with community pharmacies, the services. Additionally, because of SHARP program seeks to achieve Emerging efforts such as DDD are the COVID-19 infection risk, many significant gains to HIV treatment being used to reach population individuals avoided health facilities. initiation, adherence, and retention. segments that rely on community- The SHARP program responded Specifically, partnerships with based and private clinics and drug by rapidly decentralizing services community pharmacies ensure shops. DDD increases the number from the facility to the community continuity of HIV services and of locations for clients to get their level. To expand service delivery reduce overcrowding of health medicine, particularly ARV for and further enable DDD, the facilities, minimizing COVID-19 HIV/AIDS. More patients remain in program partnered with community transmission and protecting care when they have easy access pharmacies for ARV therapy people living with HIV. Partnering to medicines, helping them to distribution. The Pharmaceutical with community pharmacies achieve viral suppression. DDD Society of Nigeria contacted alleviates the burden on generally uses the controlled distribution community pharmacies; 55 were high-volume, understaffed public of health products, allowing for enlisted to provide HIV/AIDS and facilities, resulting in reduced price markups and increased reproductive health commodities. patient wait times and ensuring engagement of the robust timely medication delivery. ■ small-business network and This approach will prove beneficial pickup points. for the public and private sectors. LEARN MORE HERE

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STORAGE AND DISTRIBUTION Unmanned Aerial Vehicles for Health Commodity Transportation and Delivery in Malawi

The strategic deployment of UAV operators and safety pilots Unmanned Aerial Vehicles represent an expanded pool of (UAVs) or drones can increase professionals in the drone industry availability and access to lifesaving in developing countries; they will health commodities. This option have new opportunities to promote reduces lengthy delivery times and support the use of UAVs in the for treatment, lab samples, and commercial space. The GHSC-PSM test results for hard-to-reach project laid the foundation for this health facilities and patients; activity by conducting a landscape it can also be advantageously assessment and a series of scoping integrated into existing supply chain trips to validate the existence of a systems. The use of cargo UAVs in clear-use case for UAVs; determine development is limited, due in part the level of existing local support; to a lack of funding, challenging and understand the regulatory, regulatory hurdles, and inadequate technical, and logistical challenges. coordination between donors and Cargo drone pilot program in Malawi as a last-mile delivery solution for the implementers. Moreover, there There are several key logistical country’s health supply-chain. Moving Minds has been a lack of transparent and operational preparations for Multimedia for UNICEF Malawi information sharing from past or smooth implementation of UAV existing UAV activities, most of activities: understanding regulatory greatest impact, and community which have been limited to one- to concerns, conducting scoping visits, engagement approaches. two-week periods. Consequently, securing stakeholder buy-in; setting Subsequently, GHSC-PSM secured the USAID GHSC-PSM project up a monitoring and evaluation clearance from Malawi’s Department conducted a comprehensive framework, and planning for activity of Civil Aviation to proceed with eight-month UAV-integration localization. The careful selection the activity. At the end of June activity in Malawi that explored of Swoop Aero, the Australian 2019, flight tests began at Malawi’s the benefits, cost, and operational small business and UAV provider national park, Nkhata Bay district considerations in using drones for that was contracted by the GHSC- hospital, and Likoma Island to public health delivery. PSM project, was central to this demonstrate UAV capability and to multimonth activity. Swoop Aero sensitize communities living in flight After a competitive procurement guaranteed the availability of assets paths. Today, the drones are making from UAV manufacturing and flight and had an in-country presence, 162-kilometer round trips daily, operating partners Wingcopter so it could quickly provide three- marking the first directional drone and Swoop Aero, GHSC-PSM used dimensional printing of replacement deliveries in Malawi. drones to deliver sputum and blood parts, as well as onsite maintenance. samples from seven hard-to-reach The provider also provided flight The UAVs carried VL and early points across Malawi to a testing data monitoring that was accessible infant diagnosis laboratory results to facility (Dubin, et al., 2019). The to all project stakeholders worldwide patients and returned with samples results were dispatched the same so they could track progress and for processing at Malawi’s Saint way. With the drone, the activity take corrective action. Swoop Aero’s Peters Hospital. For 140 patients quickly and efficiently tested and UAVs could assess return logistics on the island, the new method dispatched results for HIV and TB, for bidirectional flights, enabling the decreased test result delivery bypassing traditional transportation activity team to plan takeoffs and by eight weeks; it also reduced methods that would have taken landings in small spaces. resupply time of lifesaving medicines days or weeks by motorbike, ferry, and vaccines for emergencies. This and hired boat. The project developed a detailed operation has become the first to work plan that included flight conduct bidirectional delivery and Although it sought to demonstrate communication, safety protocols, collection of commodities over improved health outcomes, UAV maintenance and repair multiple months. ■ the activity also trained local schedule, risk mitigation strategies, stakeholders and partners. Trained proposed applications with the LEARN MORE HERE

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Conclusion

While they benefit from working of PSE in LICs and LMICs. Donors private sector actors, donors, with the private sector, public aim to focus support in pivotal areas, and implementing partners must health supply chain actors still such as procurement mechanisms recognize that no single actor can face a number of challenges when and health financing, to help LICs solve a country’s health supply chain engaging with the private sector and LMICs move from overreliance challenges alone. Government and for the right functions at the right on donor funding toward the public perception of the private time. Challenges include limited innovative, resilient, efficient, sector’s inability or unwillingness organizational or skilled human sustainable supply chains. Their to serve hard-to-reach populations resource capacity to manage support can include schemes for can be overcome with the right private sector contracts, as well as financial management backing to partnerships and contracting misalignment with private sector derisk private sector investments, mechanisms which combine services incentives and KPIs. There also is a funding public sector staff capacity used by profitable population lack of visibility into and timely data development on governance and segments with those used by less for the true operational costs for oversight of supply chain activities, affluent populations that rely on decision-making, and political and or supporting cost-effective public health service. Because poor operational concerns persist over analysis to outsource key functions and inconsistent communication is a a perceived loss of control. On the and better grasp the business key factor in the failure of effective other hand, the private sector faces case for bringing in private actors. PSE, it is important to hold regular challenges with the public sector, In this environment, donors and forums for public and private sector such as short contracts, disparate implementing partners can play a supply chain actors to communicate quality control approaches, delayed key role in developing educational needs and changes in policy, payments, inaccurate information, and certification programs and regimens, or other factors that affect and limited operational capacity. opportunities that institutionalize supply planning and procurement. the professionalization of supply The end goal is to have a resilient, PSE in health supply chains will chain and pharmaceutical integrated, data-driven, efficient, continue to evolve as countries management. cost-effective health supply chain mature in their supply chain that leverages the comparative management practices and The transformation of roles in health advantages of the public and private respond to dynamic shifts in supply chains and the timeline in sectors to measurably improve public health needs and markets. which these changes take place and sustain strong supply chain Meanwhile, donors and donor- will differ between countries; no performance—one that ultimately aligned implementing partners are single model will fit every operating benefits the populations that rely also learning and adapting their context or stakeholder need and upon strong performance for their approaches to facilitate higher levels capacity. Ultimately, public and health and medical care.

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Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency 30 Last mile delivery in Ghana. GHSC-PSM Ghana

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