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Medlog and Pharma

Frontiers ISSUE 01

The Role of Multi-Nationals in Building Solutions in Humanitarian Logistics Similarities and Differences Between Consumer Beverages and Medicine Supply Chains

The Last Mile of Logistics Africa Pharmaceutical Supply Chains medlog and pharma frontiers 1

Africa Pharmaceutical Supply Chains In emerging markets, due to a lack of coinage (change), shop owners often give you some candy or bubble gum to replace small change. Once in a Vietnam pharmacy, I was handed a single antibiotic tablet. When I enquired about the risks associated with this practice, the pharmacist assistant looked at me blankly. While this might have been an isolated case, for any pharmaceutical manufacturer and supplier there are some key challenges to consider prior to entering and operating in emerging markets. African markets hold enormous potential, but there are a number of issues to consider prior to entry. counterfeit and parallel imports – In fragmented emerging markets there are sometimes poor control over first time buyers of drugs as well as limited visibility and quantification. Distributors, selling to the private sector, often sell drugs from manufacturers that have not been pre-approved. For many organizations, including government health departments, counterfeit and parallel imports are a major concern, as drugs often enter through poorly controlled borders. A good example is the Nigerian border with Benin where “porters” are hired to take pharmaceutical drugs across the border.

– A high percentage of drugs is of sub-standard quality. Degrading also plays a key role if affecting quality, often due to poor storage and transportation conditions. Waste management also remains a challenge, often caused by poor processes and limited locations to destroy waste and expired products.

degrading and sub-standard

- African manufacturers can have difficulty forecasting demand, dealing with fluctuating costs, depreciating currencies and managing their pipelines. Thus, the availability of certain stock keeping units (SKUs) can fluctuate dramatically. Problems with in-bound supply chains and limited access to foreign exchange often result in fragile domestic supply chains.

demand planning

retail outlets – Country retail markets tend to be highly fragment-

ed, with few franchises and chains. In many countries there are high barriers to entry that also contribute to unregistered outlets. In some countries, such as Mali, there is a waiting list of pharmacists hoping 2 medlog and pharma frontiers

to be granted a license to practice in rural and urban areas. Some countries are trying to increase the number of registered outlets, with a concentrated effort to create an organized supply chain e.g. the Accredited Drug Dispensing Outlet project (ADDO) in Tanzania. drug flow – African countries operate differently and the system is often characterized by weak distribution networks and fragmented competition. There are also significant regional differences, largely related to past colonial Idumota Market, Lagos structures (e.g. Franco West Africa versus East Africa). Often, drugs are distributed through many channels ranging from importers, distributors and sub-distributors. In Nigeria, open markets, such as Idumota, also play a critical role in distribution. poor visibility and transparency – Supply chain often lack visibility when it comes to the availability of SKUs. Often there is also a lack of transparency when it comes to prices and quality.

– Poor transport infrastructure, especially in landlocked countries, can restrict market access. Large wholesalers provide delivery services in large cities. However, in most cases, wholesalers do not provide last mile distribution and pharmacists and retail outlets must often collect stock themselves. Similarly, customers in peri-urban or rural areas often have to pick up supplies at wholesalers. Orders are often generated through telesales. In some countries, like Ghana, individual drug salesmen supply upcountry markets through van sales. Another strategy is that rural outlets bundle together for delivery. In some cases, wholesalers might have upcountry networks, supplying upcountry outlets. Distribution may also make use of national bus routes to service upcountry networks.. However, in most countries, rural distribution remains a challenge.


Similarities and Differences Between Consumer Beverages and Medicine Supply Chains There is increased interest in the similarities and differences between consumer beverages (e.g. Coca-Cola) and medicine supply chains. There are are number of initiatives under way, specifically from a Public Private Partnership perspective.

Here are some additional links, including our own articles on this topic:

There is a lot to learn from the Coca-Cola system. However, it is also important to take into consideration some of the challenges and differences. Here are a few points to consider:

Johns Hopkins Bloomberg School of Public Health. Improving Access to Essential Medicines Through Public-Private Partnerships. By Kyla Hayford, Lois Privor-Dumm and Orin Levinev.

– The Coca-Cola System (TCCS) generally use standardized containers and pallet size in their local operations. This simplifies material handling and improves distribution speed. In Africa, most sales come from returnable glass bottles and crates and material handling is mainly manual labour, handled with less care than what you would require for medicine.

material handing

– TCCS in emerging markets manages a limited number of SKUs (20-60), dominated by a handful of SKUs. For example, in some markets, Coca-Cola 300ml contributes a large percentage of their sales. The situation is far more complex for medicine.

stock keeping unit (sku) complexity

reverse logistics – TCCS’s reverse logistics in emerging markets mainly focuses

on returning glass bottles and limited expired products. For medicines, expired products are a far bigger risk and there are normally detailed processes (or there should be) in place to deal with the reverse logistics and destroying of expired products. – For medicine supply chain, service points (e.g. heath clinics, hospitals) are well defined and there is limited growth, with clear product flow. The TCCS outlet base is constantly changing with new shops opening and closing. Seasonality also plays an important part, especially in the sub continent (e.g. Bangladesh) where a large number of outlets close during the rainy season. In many cases TCCS has limited control (and even knowledge) of products flow from distributors, sub-distributors, wholesalers and other stock points to retailers and eventually consumers, especially in peri-urban and rural areas. The product flow is driven by the brand, margins and incentives.

The Coca-Cola Company. Facing up to an epidemic. Coca-Cola is using it’s distribution expertise to help the Medical Stores Department (MSD) of Tanzania, which coordinates the cross-country delivery of key medicines and HIV anti-retroviral drugs. INSEAD. Always Cola, Rarely Essential Medicines: Comparing Medicine and Consumer Product Supply Chains in the Developing World. A working paper by Prashant Yadav, Orla Stapleton and Luk N. Van Wassenhove.

product flow

The Supply Chain Lab. The last Mile of Logistics for medicine supply chains. The Supply Chain Lab. Public-private partnerships- Where can companies contribute?

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The Last Mile of Logistics I recently spent some time in Tanzania looking at the “last mile” of logistics of medical supplies in the country. The project focused on assessing the challenges with reaching health clinics and dispensaries, particular in rural areas. Below are some issues to consider when drafting your “last mile” strategy:

tribution distances tend to be large and DCs limited. Overnight routes and driver per diems can increase costs and reduce truck utilization. Evaluate the need for more DCs and the role cross docking can play in streamlining distribution processes and reducing cost.

territory and road infrastructure – Gain a clear understand-

demand planning

– In a number of African markets there are aggressive plans to expand and increase the footprint of health facilities. It is important to understand what impact this will have on the supply chain or pipeline.

ordering cycle – Review the ordering cycle (or frequency) and

ing of the road conditions and travel time required for delivery. Also, consider seasonality and how the rainy reason will affect your distribution. Not all roads are passable during the rainy season and your mode of transport, e.g. four wheel drive, may also change. Road infrastructure and seasonality will also impact your network design, e.g. designing routes.

service delivery point growth

distribution centers (dcs) or cross docking

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– In Africa, dis-

– Tanzania has moved from a push system (demand determined at central level) to a pull system (demand determined at health facility level). Health workers at health facilities are responsible for submitting demand requirements (or R&R forms). Common problems include delays in submitting forms and limited capacity or capability to complete forms. It is important to identify and understand bottlenecks. Determine what can be done to simplify the process, e.g. limit the pull to certain Stock Keeping Units, and help reduce the workload for health workers, e.g. introduce regional demand coordinators. order groupings, if any. Assess unplanned orders and volume per drop for each segment, e.g. health facilities versus dispensaries.

– Ad hoc deliveries need to be evaluated, especially at the “last mile” level. Ensure that documented scheduling is in place.


delivery process–

Determine how long on average the delivery process takes (time) and review the written guidelines for delivery. For example, in Tanzania all goods received in villages need to be checked by the Village Health Committee. It is a good system to ensure checks and balances, but has the potential to create delays due to committee members not being available. use the right vehicles – The Landcruiser is widely used but not always the right vehicle for the job. A number of African countries have poor infrastructure but Landcruisers, with high capital costs, are not always required. See my previous post on this issue. distribution incentives

–Review how incentivizing employees

can drive efficiencies. Incentives could focus on truck turn around time, loading and dispatching. the use of 3rd party distributors – 3rd party distributors (3PLs) can play an important role in distribution. Local operators allow you to tap into a lower cost structure and can also provide greater flexibility.

– A 4PL is defined as an organization that assembles resources, capabilities, and technology of its own organization and other organizations to design supply chain solutions. In Africa, health facilities tend to have limited capacity and capability to identify and manage 3rd party distributors. 4PLs or agents have the potential to play an important role here and help reduce the workload for health workers. Local operators or 4PLs are also in a much better position to negotiate better transport rates and manage scheduling.

fourth party logistics (4pl) or transport agents

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Public-private partnerships

Where Can Companies Contribute? Like the private sector, many not-for-profit organizations are involved in supply chain logistics, aiming to get needed products to their clients as efficiently as possible. In emerging markets such as Tanzania, streamlining in-country supply chain can be a complicated undertaking. Many not-for profit organizations are acknowledging that their supply chain capability and capacity, while a key undertaking for their operations, is not where it should be. In February and March I spent six weeks on the ground in Tanzania assessing supply chains in the not-for-profit sector, ranging from medical supplies to social products (e.g. water tablets and condoms). I was trying to answer the key questions: Where are the key supply chain challenges and how can the private sector assists? the “last mile of logistics” – In the emerging markets where I work, I often hear the central excuse of poor infrastructure to describe sub-optimal performance. In reality the situation is far more complex. Far too often a lack of systems and routines are the main culprits for programs failing to deliver. Systems are visible up to certain level (e.g. distribution to a district warehouse) with the “last mile of logistics” not clear or often ad hoc. Effective

distribution of medical supplies to dispensaries and health clinics, for example, requires detailed planning, territory design and mapping. Too often, distribution to service points (e.g. dispensaries) is plagued by bottlenecks and poor product and information flow. The private sector is by no means perfect, but it can play a major part in assisting organizations in the design and implementation of the required systems in this “last mile of logistics”. – working with Third Party (3PL) and Fourth Party (4PL) logistics companies are increasingly becoming an important business strategy for success. Many public sector companies are still in the early stages of 3PL and some are ignoring 3PL and 4PL completely, to their peril. The private sector can play an important part in this regard. During my visit it became apparent that some organizations need to look “beyond the Landcruiser” as a delivery vehicle. Vehicle configuration is critical part of cost effective distribution and the increased availability of other more cost effective means of distribution (e.g. motorbikes) in Africa makes alternatives a viable option.

transportation challenges


–The not-for-profit sector sometimes lacks the

organizations need to look beyond the Landcruiser as a delivery vehicle 6 medlog and pharma frontiers

require resources, capacity and capability required to conduct detailed assessments of their operations. Companies often use internal assessments and audits that could be adapted with little effort to evaluate the public sector’s route-to-market and supply chain systems. Such a technical exchange need not just be viewed as corporate social responsibility. Private sector project teams can gain valuable insight and learnings from the market that can be used in their operations and industry. technology challenges – The private sector can also be a vital technology partner. A good example in Tanzania is the “SMS for Life” project. Novartis has teamed up with Roll Back Malaria, Vodafone and IBM to design and implement a system focused on everyday SMS technology. The system aims to eliminate stockouts, improve ordering and to increase visibility in the supply chain.

– Large multinationals have the required expertise in the system to draw on when it comes to equipment (e.g. forklift) purchases. Not-for-profit organizations are often isolated from such knowledge and sometimes procure the wrong equipment for the job. During my site visits I noted such challenges (e.g. the need for narrow aisle forklifts) and a number of interviewees stated that they would like to receive input from the private sector regarding the procurement of operational equipment.

to all channels (e.g. nightclubs) and some might make use of a multi-channel strategy (purchasing from more than one channel or distributor) because of relationship and category mix (e.g. other products). For not-for-profit organizations, conducting detailed research can be an expensive undertaking and often their operations are more geared for social marketing than logistics and Route-to-Market. In such cases, some consumer goods companies that already conduct detailed consumer and dealer research might assist with vital channel and market insight using data that are already available in their system. capability training – Consumer goods companies have invested

heavily in business skills training for their distributors and outlet base. The same business skills training can benefit the public sector’s partners such as health clinic and dispensary workers who also require basic business skills to conduct their business effectively.

procurement challenges

& dealer insights –Deciding on the right distribution strategy for social products such as condoms can be a challenging undertaking. For instance, not all distributors will distribute channel

supply chain council– The private sector can also take a leading role in establishing an in-country supply chain council. Councils are great ways to share knowledge and learn from fellow council members. Council events can includes site visits, workshops and key note speakers from industry leaders. During my visit in Tanzania a number of private and public partners expressed an interest in a supply chain council.

The role of public-private partnerships is evolving and there are a number of areas where companies can contribute, make an impact and at the same time gain valuable market and operational insight for their own operations. medlog and pharma frontiers 7

The Role of Multi-Nationals in Building Solutions in Humanitarian Logistics tively engages with academic institutions such as Yale and Harvard on PPPs. the right fit – Not all companies will be a good fit for every workstream, but if companies focus on their core skills (e.g. Coca-Cola & distribution, DHL & supply and cold chain, IBM & technology), great value can be added to projects. Most workstreams will likely focus on solving everyday problems and will not require groundbreaking technology (e.g. drones responsible for “last mile” logistics).

– One of the great advantages of MNCs is their ability to tap into local networks and connect project teams with local operations and expertise on the ground. Local operations understand local trading conditions and can access local cost structures. In my experience, this is also invaluable exposure to international project teams, who witness how these companies operate in a difficult operating environment and solve problems at local level, often with limited resources. In one of our projects we received great insight from SabMiller about transportation management in South Sudan. They shed light on some of the technical difficulties when importing vehicles and the challenges with recruiting qualified technicians that might have otherwise been missed.

local networks

Cynics may claim that traditional corporate social responsibility (CSR) initiatives were about throwing money at a problem and being rewarded with a glossy brochure and a few great photo opportunities for the annual report. Whether or not this perspective is fair, today’s public private partnerships (PPPs) are far more engaging as companies play an active part in project teams and provide technical skills focused on their core area of expertise. Partnerships are not necessarily formed at Davos. You don’t need a prime minister or president that is passionate about development and no rockstar is required to initiate a successful partnership . There are great opportunities to form partnerships at local levels, which are likely more sustainable and certainly less susceptibility to shifts political or popular culture. what can mncs bring to the table? financial – In addition to financial support, increasingly companies are supporting project teams and are also involving other players. These players could be other large multi-nationals or even local players with a footprint in the respected country. MNCs can act as connectors between companies, bilateral donors and academics. For example, The Coca-Cola Company ac-

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point of engagement – MNCs can opt for a number of points of engagement that can include boards, technical advisers, imbedded projects teams and shared resources. In some cases MNCs might also decide to appoint a resource to liaise between the project team and the local operation.

MNC as the superhero? It is important to note that MNCs will be unable to solve all challenges and also struggle with some of the same challenges as humanitarian logistics organizations. MNCs have yet to write the definitive guide on “last mile” logistics Africa. Some have been successful in certain areas (e.g. Coca-Cola micro distribution in Africa) but there is still a lot to learn for most organizations. However there are a number of areas where MNCs can add value, including:

demand planning & procurement – As humanitarian organizations move from emergency to development modes of operation, there is an increased need to understand demand planning and procurement.

what happens in their community and they take great pride in their ability to solve problems. Companies also become a more desirable place to work as employees take an active part in solving humanitarian logistics challenges.

– Information is not always well documented and good network design can add significant value in the long term. MNCs can also bring unique insights about “last mile” logistics and working with distribution partners.


routing and scheduling

Scheduling and vehicle maintenance remain areas of opportunities for many organizations. Riders for Health, a non-profit organization, has made this their core focus. However, there remain significant opportunities in this area for many organizations. Furthermore, MNCs can also provide great insight on 3rd party logistics and negotiating transport rates.

transportation management-

Incentives insights- There is increased interest how MNCs employ incentives to motivate employees and increase productivity.

– There is also lot to learn from humanitarian organizations. For example, in mobile technology, the not-for-profit sector has been on the forefront of adopting and piloting a number of projects that could be of interest in the business world. MNCs sometimes have limited knowledge is certain areas. For example, very few MNCs will have a clear understanding of rural distribution and employees can learn a lot of solving complex problem in challenging environments.

- There is also a real opportunity to share infrastructure, especially in rural areas where it is always hard to make the numbers work. Too often ambulances act as delivery vehicles in Africa, when idle capacity is available in the vicinity. With the right partnership, shared resources can bring mutual benefit to parties involved.

shared infrastructure

Benefits to MNCs?

employees and community – Most employees love to give back

to the community. Local employees have a vested interest in

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Medlog and Pharma Frontiers is published by The Supply Chain Lab. To learn more about how The Supply Chain Lab can help you with your Medical Logistics and Pharmaceutical strategy and operations go to: or our blog or contact: Tielman Nieuwoudt 23 Wellington Road, Parktown Johannesburg, South Africa +27 11486-9439 James Yuen 14 Robinson Road # 13-00 Far East Finance Building Singapore 048545 +65 6304-8967

Medlog & Pharma Frontiers  

Medlog and Pharma Frontiers focuses on supply chain issues in the pharmaceutical and medical logistics industry.

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