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<h2 class="hd hd-2 unit-title">Introduction</h2>
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<h4>Introduction</h4>
<p>The main objective of a supply chain is to deliver a product from the point of origin to the point of consumption in the most effective and efficient way possible. According to the World Health Organization, supply-chain systems should “supply the right goods, in the right quantities, in the right condition, to the right place, at the right time, and at the right cost”.</p>
<p>While most supply-chain practitioners would generally agree with this statement, the specific practices adopted by organizations to satisfy this objective vary widely. Within the health care field specifically, the goal of supply-chain management is to guarantee the availability of the products needed to treat patients by maintaining an adequate supply of medications and medical supplies, preventing stock-outs, and reducing waste from expired and damaged goods. However, the practices adopted by health care organizations in the United States, for example, may vary from those organizations working in resource-limited settings in other countries due to the challenges described below, including uncertainty, fragmentation, long lead time, poor infrastructure, a lack of qualified personnel, the cost of technology, and the need for the prioritization of supply chain, good communication, qualified personnel, effective processes, and accurate data.</p>
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<h4>Performance Impact</h4>
<p>When an international health care organization’s supply-chain system is functioning well, clinicians do not worry about how a health care commodity is manufactured, from which supplier it was purchased, or how it was transported from the country of origin to their facility. Nor are they concerned about how long it took for a shipment to get through customs or whether all items were received, unloaded, inspected, and put away in an efficient manner. However, when a supply-chain system is not aligned with clinical objectives and is performing poorly—for example, when a much-needed antibiotic is stocked out or when critical surgical equipment has been damaged—clinicians take notice. It is under these circumstances that clinical staff become familiar with supply-chain management, or, more appropriately, with the lack of an effective and efficient supply-chain management system. Thus, clinical staff are important stakeholders in supply chain management decisions and it is the supply chain’s role to ensure that clinicians have the resources needed to do their jobs.</p>
<p>Technology, data collection, and electronic medical record system integration can play an important role in a well-designed supply chain and improve quality of care. However, adoption of technology without an understanding of the cost of implementation and maintenance can be detrimental. The cost of hardware, software, and operational costs, as well as the long-term support required to develop a good supply-chain management system can be expensive, and organizations should undertake a thorough cost-benefit analysis prior to implementation.</p>
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<h2 class="hd hd-2 unit-title">Benefits of a High-Performing Supply Chain</h2>
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<h4>Impact</h4>
<p>A well-run supply-chain system can have a dramatically positive impact on a health care system. It can lead to better quality of care for patients, cost savings for the organization, and improvements in the public health system.</p>
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<h4>Quality of Care</h4>
<p>When a supply-chain system is functioning well, patients get the medicines and supplies they need in a timely manner. Clinicians do not need to make do without optimal products or substitute substandard items due to stock-outs or expiry. In addition, in an efficient supply-chain system, the quality of the medications and medical supplies that are administered to patients have been thoroughly authenticated at every step of the supply chain, from regulation at the point of manufacturing, to national drug registries and customs clearance processes, order or shipment receipt processes, and the final check that a pharmacist or nurse makes on dosing, formulation, and expiration date at the point of consumption. These added authentication steps reduce the risk of accidentally using medicines or supplies that are counterfeit, expired, or damaged, which enhances patient safety.</p>
<p>Quality of care can also be improved by data collection and integration between an electronic medical record system and a supply-chain system. This comprehensive view of the entire supply chain can be useful in understanding which products led to successful patient outcomes, projecting future programmatic and budgetary needs, protecting against corruption, and ultimately allowing for an increase in the number of patients served.</p>
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<h4>Cost-Effectiveness</h4>
<p>An effective supply-chain system can also lead to cost savings for a health care organization. By accurately tracking, reviewing, and projecting an organization’s supply needs, stock utilization is optimized. This translates to cost savings from fewer expired medicines and supplies. It also means valuable space and money are not wasted on managing slow-moving, obsolete, or overstocked products.</p>
<p>When an organization is able to correctly predict which goods it will need at which times, purchasing options also open up. For example, group purchasing organizations are entities that create purchasing power for small companies by compiling their various needs into larger volumes, thus gaining access to bulk rates. Using such options to save money is only possible if an organization can forecast its needs effectively.</p>
<p>A framework contract is an agreement between organizations and vendors that may lead to cost savings for an organization. The goal of this type of agreement is to lock in prices for specific products over a fixed term to avoid price fluctuations due to factors such as global stock shortages. In order to put a framework contract in place, an organization will need to compile a list of specific products it anticipates needing to order over the term of the agreement and provide the vendor with a sense of the volume that is likely to be ordered. Relationships with suppliers and transporters should be continuously reviewed to ensure they remain the best choice for the organization.</p>
<p>Shipment costs also vary widely, which can be used to an organization’s advantage if lead times for necessary medicines are known ahead of time. For example, it is much cheaper to ship goods via sea freight than by air. However, because sea freight takes longer to arrive at the destination port than air freight, relying on sea shipments requires more advanced planning and more accurate projections of needed goods.</p>
<p>Air transportation is very expensive, so is only worthwhile when used in cases of emergency such as a stock-out of a critical medicine (or when other factors such as temperature requirements necessitate shipping by air). An organization may also respond to a stock-out event by purchasing supplies in the local market, which may have higher costs and may not adhere to quality standards. Such emergency procurements, if stock-outs occur frequently, can present a large financial burden for an international health care organization.</p>
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<h4>Strengthen the Public Health System</h4>
<p>Ideally, international health care organizations would work with the public sector in order to support the existing supply chain infrastructure and not create parallel systems. If an organization is responsible for filling in gaps in government procurement or supporting public health facilities or programs, a high-performing supply chain system is important for the success of those efforts. Ensuring that patients are not turned away due to stock-outs also means that other facilities in the catchment area are not overburdened by an influx of patients. An effective organization or treatment program within an organization can also lead to collaboration with other health care groups. Best practices can be shared to improve national health outcomes, and consumption data can be shared to help with forecasting. In emergency situations, stock, equipment, or warehouse storage space can also be shared among organizations or with local governments. </p>
<p>Effective supply-chain systems will incorporate a review of all prospective vendors, including local businesses. Ideally, a health care organization will purchase at least some medicines and supplies locally, which will not only support the local economy, but also build up local capacity by creating jobs at vendor sites. For example, certain bulky or heavy items, or locally manufactured items, may be cheaper and more efficient to procure on the local market once international shipping costs and transit times are taken into account.</p>
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Unit Exercise
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<div class="wrapper-problem-response" tabindex="-1" aria-label="Question 1" role="group"><div class="choicegroup capa_inputtype" id="inputtype_c504190541ac46b0877928e5d7cbeae8_2_1">
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<legend id="c504190541ac46b0877928e5d7cbeae8_2_1-legend" class="response-fieldset-legend field-group-hd">Which of the following is NOT a usual consequence of a high-functioning supply chain?</legend>
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<h2 class="hd hd-2 unit-title">Impact of Poor Supply Chain Management</h2>
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<h4>Introduction</h4>
<p>Poor supply chain management can cause international health care organizations to fail, seriously affecting their financial security by wasting resources and reacting to emergencies rather than accurately projecting future needs. Poor supply-chain management practices can lead to problems related to inventory availability, quality assurance, patient care, and larger systemic issues that can adversely impact all aspects of the organization, including an organization’s reputation with the public sector, partner organizations, and the patient population it serves.</p>
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<h4>The Medical Supply Chain</h4>
<p>Inventory availability problems occur when there is no visibility into what items are in stock, understocked, overstocked, expired, or about to expire, or when there are insufficient human resources to adequately respond to these supply-chain issues. The impact of stocked-out, understocked, and expired items is obvious—patients do not get the treatment they need. The consistent availability of medications is especially critical for complicated treatment regimens such as antiretroviral therapy for HIV/AIDS; missing doses of antiretroviral therapy can lead to increased morbidity and drug resistance, and even death.</p>
<p>Unfortunately, there are many ways the quality of medicines and medical supplies can be compromised. Medicines can be counterfeited by the supplier, tampered with during shipping, or damaged during put-away or while in storage. The quality of vaccines and other cold chain medications are even harder to maintain, as their storage conditions (temperature and humidity) must meet recommended standards that are monitored and validated at every step along the supply chain. Quality assurance is a major issue, as it is difficult to maintain staff accountability, product authentication, and close tracking in long supply chains.</p>
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<h4>Common Challenges</h4>
<p>For international health care organizations working in resource-limited settings, implementing a successful supply chain system is fraught with challenges. Each of these challenges are magnified in the global health context, as resources are scarce, supply chain expertise is not well-established, and problems have a direct impact on patient care. Here are just a few of the challenges that health care organizations face when implementing supply chain solutions:</p>
<ul>
<li><strong>Prioritization</strong> - Health care organizations working in resource-limited settings may not sufficiently invest in a robust supply chain system considering other priorities and the need to allocate limited resources.</li>
<li><strong>Uncertainty</strong> - Comes in many forms: supply-side shortages, delivery time variability, population growth, supply-chain disruptions due to natural disasters, political unrest, untrained staff, and many other causes.</li>
<li><strong>People</strong> - Lack of trained supply chain personnel is also a significant barrier to effective supply chain management. Thus, many organizations rely on staff who do not have supply chain management training, such as clinical staff, to take on supply chain responsibilities.</li>
<li><strong>Communication</strong> - Organizations should establish clear communication between all parts of the supply chain, from procurement staff to warehouse personnel, and between the supply chain group and other departments and managers at the organization. It is important that managers have a clear understanding of supply chain principles and how organizational decisions, from spending cuts to changes in service delivery, impact work along the supply chain</li>
<li><strong>Lead Time</strong> - Defined as the latency period between the moment when a product need is identified (i.e., through routine replenishment or a specific request) to the moment when the product is delivered and ready for consumption</li>
<li><strong>Infrastructure</strong> - Especially troublesome in more rural locations, where the combination of these issues creates a perfect storm of supply chain dysfunction. e.g., Power outages can also lead to damaged equipment, which will need to be repaired or replaced. </li>
<li><strong>Fragmentation</strong> - Not due to a lack of intelligence, but rather to project- or funder-specific supply chain systems for certain products, as well as the desire to supplement stock levels with donations from partner organizations. Can also be caused by a mistrust of or dissatisfaction with the organization’s supply chain system. E.g., clinical and supply chain staff who have witnessed the effects of ineffective supply chains often decide to take personal responsibility to meet their own and the organization’s supply chain needs</li>
<li><strong>Data</strong> - High-quality data allows supply chain staff to make informed decisions on product and vendor selection and order quantity and timing; high-quality data helps an organization be proactive rather than reactive and increases the efficiency of daily tasks. Unfortunately, due to the long lead times experienced by international health care organizations, low stock situations created by using poor data for planning can also take a long time to correct.</li>
</ul>
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<h2 class="hd hd-2 unit-title">Technology on Supply Chain Management</h2>
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<h4>Technology</h4>
<p>Technology can prove to be a tremendous asset in a well-designed supply chain. However, adoption of technology without an understanding of the cost of implementation and maintenance can be detrimental.</p>
<p>Organizations of all sizes have a desire to use the latest technology in hopes that it will solve their supply chain problems. Whether they are planning to adopt a brand new warehouse management system or implement radio-frequency identification (RFID) barcoding, these decisions should not be taken lightly. A good supply chain management system can cost millions of dollars to implement and maintain over the first few years of ownership, which can cripple a small nonprofit organization. If the organization is further unable to hire the right people to work with this new technology, the effects can be exacerbated. </p>
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<h4>Cost-Benefit</h4>
<p>Decisions about the adoption of technology should be informed by an understanding of the true cost of implementation and maintenance. Decision-makers should perform an exhaustive cost-benefit analysis to better understand what it will cost in monetary and human capital to get the system off the ground. The cost of technology adoption is often viewed myopically as the purchase and installation of software.</p>
<p>Some common costs that need to be considered include:</p>
<ul>
<li>Hardware</li>
<li>Software</li>
<li>Development costs - Even "free" software usually needs to be customized.</li>
<li><span style="font-size: 1em;">Operational costs - including hiring and training human resources, and adjusting standard operating procedures.</span></li>
<li><span style="font-size: 1em;">Long-term support - Maintenance, upgrades, planned obsolescence.</span></li>
</ul>
<p>The lack of understanding around the total cost of ownership can add a huge financial and human resources burden to the organization. More challenges can arise when management fails to take proper steps to include warehouse and operations staff as stakeholders in decision making.</p>
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<h2 class="hd hd-2 unit-title">Take Home Messages</h2>
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<h4 style="text-rendering: optimizeLegibility; margin-top: 0px; margin-right: 0px; margin-left: 0px; padding: 0px; border: 0px; outline: 0px; font-variant-numeric: inherit; font-stretch: inherit; font-size: 16px; font-family: 'Open Sans', 'Helvetica Neue', Helvetica, Arial, sans-serif; vertical-align: baseline;"><span style="text-rendering: optimizeLegibility; margin: 0px; padding: 0px; border: 0px; outline: 0px; font-style: inherit; font-variant: inherit; font-weight: 600; font-stretch: inherit; font-size: 1.4em; line-height: 1.4em; font-family: inherit; vertical-align: baseline;">Take Home Messages</span></h4>
<ul style="text-rendering: optimizeLegibility; border: 0px; outline: 0px; font-variant-numeric: inherit; font-stretch: inherit; line-height: 1.4em; font-family: 'Open Sans', 'Helvetica Neue', Helvetica, Arial, sans-serif; vertical-align: baseline;">
<li style="text-rendering: optimizeLegibility; margin-top: 0px; margin-right: 0px; margin-left: 0px; padding: 0px; border: 0px; outline: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: 1.4em; font-family: inherit; vertical-align: baseline;">There are many challenges to implementing effective supply chain management, especially in resource-limited settings.</li>
<li style="text-rendering: optimizeLegibility; margin-top: 0px; margin-right: 0px; margin-left: 0px; padding: 0px; border: 0px; outline: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: 1.4em; font-family: inherit; vertical-align: baseline;">Supply chain management is more than just the technology that keeps track of inventory and stock movements—it also includes the people and processes put in place to ensure the efficient and effective flow of supplies.</li>
<li style="text-rendering: optimizeLegibility; margin-top: 0px; margin-right: 0px; margin-left: 0px; padding: 0px; border: 0px; outline: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: 1.4em; font-family: inherit; vertical-align: baseline;">An effective supply chain can lead to better quality of care for patients, cost savings for an organization, and stabilization of the public health system.</li>
<li style="text-rendering: optimizeLegibility; margin-top: 0px; margin-right: 0px; margin-left: 0px; padding: 0px; border: 0px; outline: 0px; font-style: inherit; font-variant: inherit; font-weight: inherit; font-stretch: inherit; font-size: inherit; line-height: 1.4em; font-family: inherit; vertical-align: baseline;">An ineffective supply chain can have disastrous effects on a health care organization as well as the larger health care system that surrounds it.</li>
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