Creating resilient health supply chains through localization strategies

Localization as a means of supply chain compression has been an industry trend for some years, and the COVID-19 pandemic has revealed the importance of shortening supply chains to improve resilience while reducing risks, costs, and waste.

In health supply chain management, localization strategies such as prequalification, pooled procurement, and private sector engagement through models and approaches like vendor managed inventory (VMI) and community engagement, not only help ensure the reliable supply of affordable health products, but also endow stakeholders with the resources and skills needed to be self-reliant.

John Snow, Inc. (JSI) a US-based public health research and consulting firm and its Kenya-based non-profit affiliate inSupply Health, brought together a select group of health supply chain experts to share their experiences in driving localization in the context of public health supply chains in low- and middle-income countries (LMICs).

Procurement services agent and subsidiary of JSI the Partnership for Supply Chain Management (PFSCM), as well as not-for-profit international development company Crown Agents, and the Ecumenical Pharmaceutical Network (EPN) an independent, Christian, nonprofit organization committed to the provision of quality pharmaceutical services, joined the discussion via Facebook Live on June 3, 2021.

The Facebook Live was the fifth one hosted this year on the topic of “Global Health Supply Chain Best Practices in 2021 and Beyond” and can be viewed here, with a summary below.

In the discussion, PFSCM provided an overview of its supplier prequalification program, and explained the importance of developing sources of supply closer to demand to reduce supply chain risks, costs, and complexities associated with importation. Local sourcing also helps to uplift suppliers and improve their compliance with international standards, and it stimulates local economies, and minimizes the environmental impact associated with global logistics.

The challenge with local sourcing is that not many local suppliers comply with the international quality standards needed to secure orders from international clients. PFSCM transfers valuable quality management knowledge and tools to suppliers enabling them to uplift themselves, and improve their processes, and practices to be more compliant with international standards.

Since the start of PFSCM’s supplier prequalification program, the organization has audited over 100 suppliers. The majority of PFSCM’s 39 current approved suppliers are based in Africa, with a handful in Europe.

Further, Crown Agents complemented the discussion with two topics that demonstrate the significance of private sector- and community engagement as drivers of localization.

Firstly, Crown Agents focused on VMI, which is a streamlined approach to inventory management that involves close collaboration with a supplier or third party to manage the order fulfilment process. VMI changes the traditional inventory management process by shifting the order management responsibilities from the customer to the vendor.

When designing a VMI solution, the customer and vendor align their plans to streamline the operational flow, ideally building on effective technology. This creates direct value through increased information flow and efficiency that reduces storage and transport costs. The resulting process governance also helps personnel to increase their focus on inventory control, thereby minimizing the risk of stockouts and uncertainty, ultimately, strengthening local supply chains.

Through the design and implementation of highly customized VMI models, Crown Agents supports countries on creating order management solutions that promote continuous process improvement, capacity building and innovation for increased sustainable impact.

Secondly, Crown Agents discussed the relevance of community engagement.

From Crown Agents’ experience in working in Zimbabwe, the organization learned that many LMICs have become dependent on one main system such as the government medical stores, and that such polarization often led to shortages and overpricing in the both the private and public sectors. This is especially notable when these systems fail and the private sector pivots to support the government during pandemics and outbreaks.

Crown Agents recommended that the public and private sector partner to diversify and strengthen local supply chains.

There are many ways to engage the private sector including contracting and collaborating. If well managed, these initiatives lead to increased efficiency, improved access to quality health products, and an overall robust local supply chain.

Crown Agents has over time partnered with the local private sector in several initiatives to the benefit of both the public and private sectors. This includes partnering with local manufacturers in Zimbabwe to provide medicines to the public sector. By engaging the public and private sector and understanding their challenges, Crown Agents provided much needed foreign currency directly to the local manufacturing entities to procure Active Pharmaceutical Ingredients and prefinance the manufacturing process to meet stringent global requirements.

This partnership helped the manufacturers to remain viable and provide medicines not only to the public sector, but also to the private sector, increasing national availability and affordability of medicines. Lead times and carbon footprint were also reduced. Other benefits were employment creation, economic activity, and increased resilience of the country supply chain system for those products.

Lastly, EPN shared their insights into how initiatives such as pooled procurement, product price sharing, and capacity building can help steer supply chain localization.

In Africa, and specifically East Africa and Cameroon, EPN manages Pooled Procurement projects that combine the demand of several faith-based Drug Supply Organizations and enable them to negotiate better prices, and qualify for bulk buying options. Price sharing among the EPN Member Organizations empower them with the information needed to negotiate prices directly with suppliers.

The above is just one localization approach the EPN uses to help its members, and other in-country stakeholders benefit from lower costs, and reliable supplies of quality products.

EPN also emphasized capacity building as a localization strategy.

It is well-known that health supply chains in LMICs are overly complex, and skilled staff are in short supply. The faith-based health institutions with which EPN works in Africa, face these same challenges.

EPN undertakes technical assistance projects to transfer knowledge to health care workers enabling them to develop their competencies to manage local supply chains self-sufficiently. This competency transfer may include training on: product handling, distribution, procurement, prequalification, quantification, preparation of product and tender files, manufacturer auditing, bid analysis and more.

In conclusion, the discussion among the supply chain experts reaffirmed the importance of developing local supply chains, and revealed how localization strategies can expand supplier bases, build capacity, and create public-private partnerships for equitable access to quality, affordable health products.

Watch the Facebook Live recording for the whole conversation.