Learning from Other Models: PEPFAR s Supply Chain Management System (SCMS)

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1 Learning from Other Models: s Supply Chain Management System (SCMS) Developing and Strengthening the Global Supply Chain for Second-line Drugs for Multidrug-Resistant TB: An IOM Workshop August 1, 2012 Gordon Comstock Director Global Supply Chain Partnership for Supply Chain Management

2 Partnership for Supply Chain Management commercial and non-profit organizations

3 What is SCMS? - a public, private partnership President s Emergency Plan for AIDS Relief () established the Supply Chain Management System (SCMS) in 2005 US President s mandate: Health impact: Establish and operate a safe, secure, reliable, and sustainable supply chain and develop self sustaining supply chain skills and capability within the countries. 2 million on treatment have all the drugs all the time. Value proposition: 1. Ensure patients have access to commodities 2. Reduce product and supply chain costs 3. Ensure product quality 4. Elevate importance of supply chain to delivery of health care

4 Why was SCMS created? no treatment holidays in face of emergency, global scale up Supply Chain Barriers Poor coordination among governments, funders, aid providers Little long-range planning and forecasting Limited procurement capacity Lengthy procurement lifecycles Timely order placements Inadequate warehousing and distribution Impact Treatment Programs Stockouts, overstocks, high product expiry, inappropriate treatments High costs, long lead times, poor quality Unreliable delivery, rationing, treatment interruptions Confusion, redundancies, gaps 4

5 Why is SCMS successful? Business Model Financial Structure Our global supply chain is only successful if all parts are integrated. Quality System Operational Strategies Each of these components alone would not make the system successful. 5

6 Financial structure enables continuous commodity supply Business Model Quality System Financial Structure Operational Strategies USAID working capital fund oils pooled procurement Country operating plans developed annually $ deposited upfront Funds not time bound Funds not performance restricted Funds no longer linked to and accounted for when product delivered Delinking facilitates pooled procurement based on country supply plans Enables prompt vendor payment Blended inventory price, not unique country cost 6

7 Business model aligns country requirements with donor values enhancing flexibility Business Model Quality System Financial Structure Operational Strategies Unique USG contract promotes flexibility in strategy, structure, people, and processes Focus on best value for global program balanced by country requirements Enables market dynamic procurement decisions Standardized product catalog based on client health needs New logistics model tightly integrating global supply chain with country supply chains Pre-position aggregated operating inventory in sustainable regional distribution centers 7

8 Operational strategies implement private sector supply chain best practices Business Model Quality System Financial Structure Operational Strategies Know your customer - relentless focus on forecasting, supply planning, and on time delivery Strategically manage vendor relationships Share procurement history and supply plans with manufacturers Employ long term master supply contracts pooling large volume procurement across countries to achieve lowest landed cost Harmonized labeling and product registration achieves operational efficiencies and lower costs Mode optimization enables cost effective freight forwarding, tracking and security 8

9 Quality systems are critical to providing quality medicines to people living with HIV/AIDS Financial Structure Bring stringent regulatory standards to public health Business Model Operational Strategies Quality System 9

10 Our demand and supply planning through Hubs in to Africa drives no stockouts Quantimed Forecast: ARV Example PipeLine Stockholdings Relative to Forecast Consumption 10

11 RDC advantages: Efficiency and cost savings Smaller, regular shipments to protect local systems Timely, accurate and safe transport including cold/cool chain commodities Delivery of drugs and commodities door-to-door Physical security en route as well as at facilities Chain of custody from supplier to recipient Rapid response to emergency requests Move product closer to market 6 10 inventory turns per year * Nairobi, Kenya

12 Global impact of SCMS pooled procurement Uninterrupted supply of ARVs for >2M people Central stockouts virtually eliminated Saved $1.3 B on $690M of ARVs delivered in comparison to accelerated access pricing Saved $91M in freight costs using sea/road 1,500 products in e-catalog 4,700 separate products procured over life of project 29,500 metric tons of products delivered 12

13 National impact of SCMS in-country supply chain model Align health care and supply chain Build platform for all products and health services Strengthen national infrastructure, systems, and human resources in 20 counties Forecasting, warehousing, distribution, laboratory optimization, logistics management information systems, QA Institutionalizing pre-service supply chain curricula at universities in 8 countries 13

14 SCMS pooled procurement challenges Small, fragmented, uncoordinated orders Customer specific product requirements Country registration demands Constraints of donor or national procurement regulations Multiple donors may introduce conflicting donor requirements on recipient Lack of or weak collaboration between donors and national authorities 14

15 SCMS pooled procurement benefits increased flexibility and mitigating risk Promotes fair competition/strengthened market Manages both gaps in, and duplication, of supply Increases product availability to avoid stockouts Complies with national & donor competition rules Achieves better terms through purchasing power Ability to focus on product specifications and harmonization Implements stringent quality requirements Provides access to broad expertise, best practices and technical assistance 15

16 Best conditions for pooled procurement aligned interests Balance between country ownership and pooled procurement Partnership between national governments,, IPs and SCMS Desire to provide data transparency/visibility Strong culture of demand forecasting and supply planning Ability to use contracted services to achieve best in class supply chain practices Integration of supply chain globally and locally 16

17 Global Fund product classification framework proposed by R4D Cycloserine PAS Amikacin Ethionamide Presentation to Global Fund MDC by Results for Development Institute, March 28,

18 18

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