The Supply Chain Management Systems Project was created about eight years ago by the U.S. Agency for International Development (U.S. AID) in response to President George W. Bush's initiative to fight the global pandemic of HIV/AIDS, particularly in Africa where drug treatments were not widely available.
A budget of $7bn for the effort was based on the cost of drug treatments at the time, but those costs have since come down. Lower costs, coupled with a highly efficient and effective supply chain, have enabled SCMSP to far exceed expectations, according to De Souza, warehousing and distribution principal advisor for the project.
"Initially, the target was to get half a million people on treatment with our $7bn budget," he says. "In fact, we have put more than 4 million people on treatment and have spent just over $1.2bn."
De Souza says this achievement would not have been possible without a supply chain that has transformed the way life-saving drugs are delivered to Africa. Historically, he explains, drugs were procured by donors and/or governments on an annualized basis. "Procuring organizations would forecast their need for the coming year and place a 12-month order, so all these high-value and temperature-sensitive goods would arrive in developing countries that didn't have adequate storage facilities or the expertise to store them," he says. "As a result a lot of product spoiled or expired before it could be used - or went missing due to pilferage and theft."
The designers working on SCMSP knew this model had to change. Rather than forward positioning a year's worth of commodities in each country, they proposed that demand be aggregated by region and product held in regional distribution centers, with regular deliveries to medical facilities.
SCMSP today holds stock at three facilities in Africa, each serving multiple countries with monthly or bi-monthly deliveries. "This way we avoid out-of-stock situations and expired stock situations," De Souza says. "Also we are able to pretty rapidly adapt to changes in demand, which is really important if the World Health Organization adopts a change in recommended drug therapy." Before, if a country had 12 months of stock and the prescribed drug regimen changed, existing stock would become practically worthless, he explains. "Under the current model, stock is limited to three or four months' worth so it is easier to accommodate a change in regimen and keep patients on the most optimal treatment option."
De Souza notes that the program's stock turns per annum are high for the industry, expired product is very low and theft of stock within the system is "virtually zero, which attests to a very well contained and controlled system."
De Souza credits SCMSP's private sector logistics partners with helping it achieve this success. He particularly points to UPS, which is the program's major international freight forwarding partner, and Imperial Health Sciences, an African supply chain company that manages the program's three distribution centers.
"UPS has brought expertise in demand planning to the table and has made it possible to transition most freight from air to ocean, resulting in significant savings," he says. "Over the life of the project, the regional hub strategy and the shift from air to ocean has saved the U.S. government more than $100m, just in freight expenses."
Leveraging the private sector to help fulfill public health needs in this way "is fairly ground breaking since historically such projects have seen little private sector involvement," says De Souza. "We are very proud of those accomplishments and so is U.S. AID."
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