Lecture 1:

Introduction to Supply Chain Management in Healthcare

Definition of Supply Chain Management

- According to the Council of Supply Chain Management Professionals (CSCMP)—

“Supply chain management encompasses the planning and management of all activities
involved in sourcing and procurement…and all logistics management activities. Importantly,
it also includes coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across companies.”

- The CSCMP also defines logistics management as—

“[The] part of supply chain management that plans, implements, and controls the efficient,
effective forward and reverses flow and storage of goods, services and related information
between the point of origin and the point of consumption in order to meet customers’
requirement…

Logistics management is an integrating function, which coordinates and optimizes all logistics
activities, as well as integrates logistics activities with other functions including marketing,
sales manufacturing, finance, and information technology.” (CSCMP 2011)

In other words, you can consider logistics activities as the operational component of supply
chain management, including quantification, procurement, inventory management,
transportation and fleet management, and data collection and reporting.

- CSCMP def: Planning and managing activities involved in sourcing, procurement, logistics,
coordination, and collaboration with partners.
- Integration of supply and demand management within and across companies.
Why Logistics Matters

- Evolution of Logistics Importance

- 1950s-1960s: Logistics was considered a custodial activity
- 1970s-1980s: Public health logistics began to gain recognition
- 1990s-2000s: Focus shifted to ensuring commodity security.
- Present: Logistics is now recognised as a critical component of healthcare systems

Purpose of Health Supply Chain Management

- Effective supply chains ensure commodity security and determine the success of public
health programs.

- Commodity Security
- Commodity security exists when everyone can obtain and use quality essential health
supplies whenever needed.
-Financing, policies, and commitment are also necessary.
- Program managers must recognize the importance of logistics and the people who make it
work in achieving their goals.

- Determining Program Success

- Well-functioning supply chains result in Quantifiable benefits such as:
- Increased program impact
- Enhanced quality of care
- Improved cost efficiency and effectiveness

Understanding a logistics system

- A restaurant is a simple example of a logistics system.
- The kitchen is a storage facility, waiters provide transportation, and tables are service
delivery points.
Components of Health Supply Chain Management

A. Logistics Cycle: Organizing Logistics System

Serving Customers
- The logistics cycle involves selecting, procuring, storing, and distributing products to meet
customer needs
- Excellent customer service and commodity security are ensured by fulfilling the six rights
(Get them yourself) and every activity in the logistics cycle contributes towards achieving
them.

Product Selection
- Various national committees involved
- Consideration of logistics requirements during product selection.

Quantification
- Process of estimating quantity and cost of products.
- Accurate quantification ensures uninterrupted supply.
- For example, a hospital can estimate the number of surgical gloves required based on the
surgeries performed daily, determine their cost and establish a reorder point and lead time for
procurement

Procurement
- It is the process of obtaining products or services from an external source that meet the
specifications of the organization or program.
- The procurement process involves developing a supply plan, quantifying the required
quantities of products, selecting a supplier or procurement agent, and following specific
procedures that ensure an open and transparent process that supports the six rights.
- Health systems or programs can procure from international, regional, or local sources of
supply; or they can use a procurement agent for this logistics activity.

Inventory Management
- This involves storing and distributing items procured by health systems.
- It ensures product availability and minimises waste.
B. Heart of the Logistics System
Logistics Management Information Systems
- Information is essential for the logistics system to run smoothly.
- The LMIS collects data about commodities and is used for filling routine supply orders for
health facilities.
- The health management information system (HMIS) collects information on the total
number of patients seen or diagnosed and is used for evaluating program impact and for
decision-making.

Other Activities at the Heart of the Logistics Cycle

- Organization and Staffing
- Budget
- Supervision
- Monitoring and Evaluation

C. Quality Monitoring
- Ensures an efficient and effective logistics system
- Refers to the quality of the product and the quality of work
- Integration of quality monitoring throughout the logistics cycle.
Discussion: What are the challenges of ensuring product quality throughout the supply chain
and what strategies to address them? Please do it yourself

Four Ways of Integrating Quality Monitoring Throughout the Logistics System

1. Between Product Selection and Quantification & Procurement
2. Between Quantification & Procurement and Inventory Management
3. Between Inventory Management and Serving Customers
4. Between Serving Customers and Product Selection
D. Policy and Adaptability
- Government policies have a significant impact on logistics activities, including selection,
procurement, distribution, storage, and dispensing protocols.
- Fiscal and budget policies are among the most influential policies affecting a logistics
system, which affects the funding for procurement and infrastructure.
- The logistics system must be adaptable and flexible to cope with changing circumstances,
such as changes in demand, funding policies, or reforms in the health sector.
- An adaptable system can successfully obtain the necessary resources and maintain
commodity availability.

E. Product Integration
- Product integration involves combining the management of some or all logistics functions
for different commodity categories into a shared supply chain.
- In a product integration system, some logistics functions may remain separate, while others
are combined based on handling requirements, cost, and customer service.
- Procurement can be separate (vertical) while storage and transport functions can be
integrated in product integration.
- For example, a country may integrate the storage and transport functions for family
planning and HIV commodities to reduce costs and improve customer service.
- While procurement remains separate, the integration of storage and transport can result in
better use of resources and time.

F. Supply Chain Integration

- Supply chain integration is a performance-improving approach that maximizes customer
service by developing seamless linkages between various actors, levels, and functions within
a given supply chain.
- The main objectives of supply chain integration are to improve efficiency, reduce
redundancy, and often reduce costs, which can be achieved through logistics management
units, joint strategic plans, information-sharing mechanisms, and technical working groups.

Get the difference between Product and Supply Chain integrations yourself

Allocation (push) and Requisition (pull) systems.

- Push-based supply chains involve products being pushed from the production side to the
retailer, while pull-based systems involve consumers pulling the products they want or need.
- In public health logistics, allocation systems involve the higher-level facility deciding what
commodities to push down the chain and when to move them, while requisition systems
involve the lower-level facility ordering commodities as needed.
- Both approaches have their advantages and disadvantages.
- It is important for both the higher and lower levels to understand who decides what
quantities are to be ordered to avoid confusion and assumptions that may lead to lower-level
staff not ordering when they should.

Advantages & Disadvantages

Allocation (Push) System
Advantages:
- The higher level is confident in its own calculations and the quantities it issues.
- Fewer people need to be trained to calculate resupply quantities.
- Managers feel they have more control over the system.

Disadvantages:
- The higher level must calculate all orders, even for lower-level facilities.
- The information used by the higher level to make calculations may not be as current, which
can lead to errors.
- The higher level may not be able to respond as quickly to changes.

Requisition (Pull) System

Advantages:
- The lower level has the most up-to-date information and may be able to anticipate
upcoming needs.
- Lower levels may assume they have more control over the system.
- In a manual system, the lower level has the most current information.

Disadvantages:
- The lower level must be able to do calculations, and the upper level may still need to verify
them.
- Lower levels may not have the skills needed to calculate resupply quantities.
- The lower level must allocate time to make calculations, which can take away from serving
customers.
Consumed vs Issued
- Logistics decisions should be based on information about products given to or used by
customers
- Dispensed-to-user data (consumption data) is the quantity of products given directly to
customers
- Usage data is similar to consumption data, but it's used by the consumer but is not
dispensed directly to them
- Issues data is information on the movement of products between any two storage facilities
- Logistics decisions for planning should be based on consumption data whenever possible

Other Key Logistic Terms:

Get them yourself

GROUP PRESENTATIONS ON MONDAY, FEBRUARY 26, 2024

G8: Discussion on Real-life examples of supply chain challenges in healthcare

G1: Reflection paper on the importance of SCM in healthcare