Logistics and Supply Chain Management of Drugs

Question 1

What is health commodity security?

Answer 1

Health commodity security exists when every person is able to obtain and use quality essential health products whenever they need them.

Question 2

What is the importance of medicines?

Answer 2

i. Medicines save lives and promote health
ii. Medicines promote trust and participation in health services
iii. Medicines are costly
iv. Medicines are different from other consumer products
v. Substantive improvements in the supply and use of medicines are posssible

Question 3

Learn the Customer Security Framework diagram.

Question 4

What are the components of a supply chain?

Answer 4

Supplier > Manufacturer > Distributor > Retailer > Consumer

Question 5

What is a supply chain?

Answer 5

A supply chain is a group of inter-connected participating companies that add value to the stream of transformed inputs from their source of origin to the end products or services that are demanded by the designated end-consumers.

Question 6

Mention 5 features of a supply chain.

Answer 6

1. There has to be more than one participating company for a supply chain to be formed
2. There is a legal independence between the participating companies in a supply chain
3. The companies are committed to adding value to the stream of material flow in the supply chain
4. The customer for whom the product/service is created is at the end of a supply chain
5. A supply chain’s existence is hinged on to serving the end-consumer in the market place

Question 7

Define Supply Chain Management (SCM).

Answer 7

SCM is the active management of supply chain activities to maximise customer value and achieve a sustainable competitive advantage.

These activities include product development, sourcing, production, logistics, as well as the information systems required to coordinate these activities.

Question 8

Discuss the 4 intrinsic flows of a supply chain.

Answer 8

1. Material flow: This involves the flow of materials at the beginning of the supply chain to the finished products that reach the end consumers.
2. Information Flow: Throughout a supply chain there is a multitude of information flows such as demand information flow, forecasting information flow, production and scheduling information flow and design. Information can be in either direction
3. Finance Flow: It is basically the flow of money in a supply chain. Without it, a supply chain will surely demise. The end-consumer is the only source of finance flow for any supply chain.
4. Commercial Flow: This refers to the flow of change in ownership of materials from one party to another. The transactional process of buying and selling shifts the material flow’s ownership from the supplier to the buyer repeatedly until the end of the supply chain – the end-consumer.

Question 9

Define Logistics.

Answer 9

Logistics activities are the part of SCM that plans, implements, and controls the efficient forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer’s requirements.

Logistic activities include:
quantification, procurement, inventory management, transportation and fleet
management, data collection and reporting.

Question 10

Highlight the importance of logistics.

Answer 10

• It increases sales/ program impact
• It enhances quality of care
• It improves efficiency and cost effectiveness
• It reduces losses due to overstock, expiry, damage, pilferage, etc.;
• It reduces losses due to understock
• It protects other major program investments (e.g. ARV program)
• It maximizes the potentials for cost recovery (in a drug revolving fund
  program)

Question 11

What are the 4 logistics pillars?

Answer 11

• FORECAST :- accurately estimate commodity requirements
• FINANC:- obtain or organise adequate financial resources
• PROCURE:- conduct timely and efficient acquisition of products
• DELIVER:- ensure reliable distribution to customer

Question 12

What is the purpose of logistics systems?

Answer 12

To get the right quantities of the right goods to the right place at the right time in the right condition at the right cost.

Question 13

Learn the Drug Supply Chain Management Cycle and the Logistics Cycle diagrams.

Question 14

Discuss the stages involved in the logistics cycle.

Answer 14

1. Serving customers: This is the most important part of the cycle. “Customer” could refer to the hospital, final users of the commodity or intermediate facilities in the supply chain, etc.
2. Product selection: Usually done by national formulary, therapeutics committee, government-appointed group etc., taking into consideration, logistics requirements e.g. Cold chain for products that require refrigeration; storage facilities
3. Quantification & Procurement: Quantification is the process of estimating the quantity and cost of the products required for a specific service or health program, to ensure an uninterrupted supply for the service or program, and determining when the products should be procured and distributed. Health systems or programs can procure from international, regional or local sources of supply, or use a procurement agent.
4. Inventory management (storage and distribution): Inventory Management’s role is to store and distribute the products throughout the system. Storage must be adequate to maintain the quality of products and to
   manage all of the products in the system.
   Transportation must also be secure and reliable, and it must be available on a regular basis.

Question 15

An effective procurement process should

Answer 15

• Procure the right drugs in the right quantities
• Obtain the lowest possible purchase price
• Ensure that all drugs procured meet the recognised standards of quality
• Arrange timely delivery to avoid shortages and stockouts
• Ensure supplier reliability with respect to service and quality
• Set the purchasing schedule, formulas for order quantities and safety stock levels to achieve
  the lowest total cost at each level of the system.

Question 16

Mention 7 qualities of a good distribution system.

Answer 16

It should:
i. Maintain a constant supply of drugs
ii. Keep drugs in good condition
iii. Minimize drug losses due to spoilage and expiry
iv. Rationalize drug storage points
v. Use available transport as efficiency as possible
vi. Reduce theft and fraud
vii. Provide information for forecasting drug need

Question 17

Discuss the stages of the Distribution Cycle.

(Learn the Distribution Cycle)

Answer 17

1. Procurement: The distribution sequence intersects the procurement process at the point at which drugs are available for
   delivery to the health facilities.
2. Transport/port clearance: If drugs are to be imported, port
   clearing has to be done through an agent or individually.
3. Receipt and inspection: Do a complete inspection of every
   shipment as soon as it is received (port or local supplier) and keep
   the new supply separate until inspection is complete. Check for
   damage, missing items, packaging, date etc.
4. Inventory control: effective inventory records and procedures -
   basis for coordinating the flow of drugs through the distribution
   system and primary protection against theft and corruption.
   Record keeping must be detailed to provide an audit trail that
   accurately traces the flow of drugs and funds through the system.
5. Storage
6. Requisition of supplies: could be push or pull system. (Pull system is a distribution system in which each
   facility determines the drug quantities to be requisitioned. Push system is that in which the procurement
   unit or warehouse determines what drug quantities are to be issued. ) The forms and procedures for
   requisition are a key part of the inventory control system. The requisition system may be manual or
   computerised but it should always be designed to simplify distribution by facilitating inventory control,
   providing an audit trail for tracing the flow of drugs, assisting in financial accounting and listing drugs
   issued.
7. Delivery: drugs may be delivered by warehouses or may be collected by health facilities. Cost effective
   choices have to be made between public and private sector carriers. Selection has of method of
   transportation should take into account vehicle maintenance, fuel, safety etc and all other logistics.
8. Dispensing to patients: The distribution process achieves its purpose when drugs reach hospital, wards,
   outpatient clinics, health centres, or community health workers and are appropriately prescribed and
   dispensed to patients.
9. Consumption reporting: This is the closing link in the distribution cycle. The rate of consumption and
   stock balances back up the distribution system to the procurement office for use in quantifying needs.
   This requires good inventory and requisition records

Question 18

What are the major elements of a distribution system?

Answer 18

1. Systems design (geographic or population coverage, number of levels in
   the system, push versus pull system, degree of centralisation)
2. Information system (inventory control, records and forms, consumption
   reports, information flow)
3. Storage (selection of sites, building design, materials handling systems,
   order picking)
4. Delivery (collection versus delivery, choice of transport, vehicle
   procurement and maintenance, routing and scheduling of deliveries)

Question 19

Discuss 8 factors that affect logistics systems (Heart of The Logistics System)

Answer 19

1. Logistics Management Information System (LMIS): collects data about commodities; this information is often used for activities, such as filling routine supply orders for health facilities
2. Organisation and staffing: Well-trained, efficient staff are required to monitor stock levels, place orders, and provide products to clients.
3. Budget: Allocation and management of finances directly affect all
   parts of the logistics cycle, including the quantities of
   products that can be procured, the amount of storage space
   that may be available, the number of vehicles that can be
   maintained, and the number of staff working in logistics.
4. Supervision: - Routine, effective supervision, coupled with on-the-job
   training in logistics, helps to both prevent and resolve supply problems and
   human resource constraints.
5. Monitoring and evaluation: n how well the system is performing, the areas
   that can be improved, as well as the system’s impact on service provision.
6. Quality monitoring: Quality Monitoring is indicated around the entire logistics cycle because all
   parts of the cycle must be monitored to ensure they are functioning
   properly. If not, they must be corrected. Accurate information is the key in
   monitoring. Quality monitoring refers to the quality of the product and the
   quality of the work.
7. Policy: * Government regulations and procedures affect all elements of the logistics system.
   * Governments have established policies on the selection, procurement distribution; storage
   etc and the quantities customers receive
   * Fiscal and budget policies are often some of the most influential policies affecting a
   logistics system, whether related to securing funding for product procurement; or to pay
   for critical infrastructure, such as storerooms and transportation.
8. Adaptability: Needed for success of logistics systems as it will impact on commodity availability.
   * Systems must be well designed to be flexible and adapt to constantly changing
   circumstances, such as changes in demand for a product, or changes in funding
   policies for logistics activities.
   * Adaptability speaks to the logistics system’s ability to successfully obtain the
   resources that are necessary to address changes in demand