THE SUPPLY CHAIN MANAGER’S HANDBOOK A PRACTICAL GUIDE TO THE MANAGEMENT OF HEALTH COMMODITIES 2017 JSI THE SUPPLY CHAIN MANAGER’S HANDBOOK A PRACTICAL GUIDE TO THE MANAGEMENT OF HEALTH COMMODITIES ABOUT JSI THE SUPPLY CHAIN John Snow, Inc. (JSI) is a U.S.-based health care consulting firm committed to improving the health of individuals and communities worldwide. Our multidisciplinary staff works in partnership MANAGER’S HANDBOOK with host-country experts, organizations, and governments to make quality, accessible health care a reality for children, women, and men around the world. JSI’s headquarters are in Boston, A PRACTICAL GUIDE TO THE MANAGEMENT Massachusetts, with U.S. offices in Washington, D.C.; Atlanta, Georgia; Burlington, Vermont; Concord, New Hampshire; Denver, Colorado; Providence, Rhode Island; and San Francisco, OF HEALTH COMMODITIES California. JSI also maintains offices in more than 40 countries throughout the developing world. RECOMMENDED CITATION John Snow, Inc. 2017. The Supply Chain Manager’s Handbook, A Practical Guide to the Management of Health Commodities. Arlington, Va.: John Snow, Inc. ABSTRACT The Supply Chain Manager’s Handbook: A Practical Guide to the Management of Health Commodities is the starting point for anyone interested in learning about and understanding the key principles and concepts of supply chain management for health commodities. Concepts described in this handbook will help those responsible for improving, revising, designing, and operating all or part of a supply chain. John Snow, Inc. (JSI) has written The Supply Chain Manager’s Handbook based on more than 30 years of experience improving public health supply chains in more than 60 countries. Cover graphic: Photo courtesy of USAID | DELIVER Project JOHN SNOW, INC. 1616 Fort Myer Drive, 16th Floor Arlington, VA 22209 USA Phone: 703-528-7474 Fax: 703-528-7480 The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for Email: [email protected] International Development or the United States Government. Internet: www.jsi.com ii THE SUPPLY CHAIN MANAGER’S HANDBOOK A PRACTICAL GUIDE TO THE MANAGEMENT OF HEALTH COMMODITIES THE SUPPLY CHAIN MANAGER’S HANDBOOK A PRACTICAL GUIDE TO THE MANAGEMENT OF HEALTH COMMODITIES iii TABLE OF CONTENTS 4.2 National Essential Medicines List ...................................................................................................46 ACRONYMS .......................................................................................................................................................... 4.3 Registration of Pharmaceutical Products ..................................................................................... 47 4.4 Standard Treatment Guidelines ......................................................................................................48 PREFACE ................................................................................................................................................................ 4.5 Funder Requirements ........................................................................................................................49 4.6 Laboratory Supplies and Equipment Standardization ..............................................................50 1. INTRODUCTION TO LOGISTICS What a Supply Chain Manager Needs to Know ................................................................................... 1 5. QUANTIFICATION OF HEALTH COMMODITIES 1.1 What Is Supply Chain Management? .................................................................................................. 1 What a Supply Chain Manager Needs to Know ................................................................................53 1.2 Why Supply Chains Matter ...................................................................................................................3 5.1 Introduction to Quantification ...........................................................................................................54 1.3 The Supply Chain and the Six Rights ............................................................................................... 5 5.2 Key Steps in Quantification ..............................................................................................................55 1.4 The Role of the Supply Chain Manager ........................................................................................... 6 5.3 Using the Quantification esultsR .................................................................................................... 72 1.5 Logistics Cycle: Organized Logistics Activities .............................................................................. 8 5.4 Reviewing and Updating the Quantification ................................................................................ 73 1.6 Supply Chain Integration ....................................................................................................................12 1.7 Supply Chain Evolution-The Path to Integration ...........................................................................15 6. HEALTH COMMODITY PROCUREMENT 1.8 Segmentation in the Public Health Supply Chain Context ........................................................16 What a Supply Chain Manager Needs to Know ................................................................................ 75 6.1 The Complexity and Challenges of Procurement ....................................................................... 76 2. SUPPLY CHAIN STRATEGY AND DESIGN 6.2 Developing the Procurement Strategy ......................................................................................... 78 What a Supply Chain Manager Needs to Know .................................................................................18 6.3 Steps in Procurement (Focus on Competitive Tendering) ....................................................... 87 2.1 National Supply Chain Strategy (or master plan) ..........................................................................18 2.2 System design .....................................................................................................................................20 7. INVENTORY STRATEGY What a Supply Chain Manager Needs to Know ................................................................................93 3. INFORMATION SYSTEMS FOR DATA VISIBILITY AND USE 7.1 Purposes of Holding Inventory .........................................................................................................94 What a Supply Chain Manager Needs to Know ................................................................................25 7.2 Considerations for Defining an Inventory Strategy ....................................................................95 3.1 What is a Logistic Management Information System? ................................................................26 7.3 Defining and Implementing the Inventory Strategy ...................................................................98 3.2 Data Selection .....................................................................................................................................30 7.4 Inventory Control System and Policies ........................................................................................ 101 3.3 Data collection ..................................................................................................................................... 33 7.5 Monitoring and Measuring Inventory Performance ................................................................. 104 3.4 Data visibility ........................................................................................................................................ 34 3.5 Digital LMIS ..........................................................................................................................................36 8. WAREHOUSING AND DISTRIBUTION 3.6 Data Use ...............................................................................................................................................39 What a Supply Chain Manager Needs to Know .............................................................................. 109 3.7 Data Quality ...........................................................................................................................................41 8.1 Warehousing ........................................................................................................................................ 110 8.2 Distribution .......................................................................................................................................... 119 4. PRODUCT SELECTION 8.3 Outsourcing ........................................................................................................................................ 122 What a Supply Chain Manager Needs to Know ................................................................................ 43 8.4 Performance Measurement ............................................................................................................123 4.1 Purpose of Product Selection ........................................................................................................... 44 8.5 Health and Safety ..............................................................................................................................124 iv THE SUPPLY CHAIN MANAGER’S HANDBOOK A PRACTICAL GUIDE TO THE MANAGEMENT