The scourge of HIV/AIDS is made all the more tragic when treatment programs are available - but not for hard-to-reach areas in developing nations. That began to change in 2003 when President George W. Bush announced establishment of the President's Emergency Plan for AIDS Relief. From that grew a partnership of major names in international public health and development, entities that have made huge strides in HIV/AIDS prevention and treatment in Africa and elsewhere.

By 2005, Bush's initiative, known as PEPFAR, had formed the Supply Chain Management System (SCMS) to provide a flexible, reliable, cost-effective and secure supply of products for HIV/AIDS programs in 16 countries. Charged with administering the SCMS project, the U.S. Agency for International Development awarded the contract to the consortium known as the Partnership for Supply Chain Management.

PFSCM moved quickly to support rapid scale-up of HIV/AIDS treatment programs, creating a reliable, integrated, global supply chain where none existed, leveraging economies of scale to reduce the cost of medicines and other commodities, supporting local supply chains and serving as an emergency provider of choice for the global AIDS response.

Key innovations included regional distribution centers in sub-Saharan Africa, transformation of supply chain infrastructure and performance in multiple countries, and innovative quality assurance programs for pharmaceuticals, rapid test kits and other commodities.

The program has virtually eliminated stock-outs at the central level level in PEPFAR-supported countries, providing a reliable supply of life-saving medicines to support more than 2.2 million people on HIV/AIDS treatment. Key performance data include: $20m delivered on average per month; on-time delivery of 80 percent; expiry rates of .73 percent; $95m in emergency orders delivered to 25 countries to avoid life-affecting stock-outs; annual cost of HIV medicines dropped from about $1,500 per patient to between $100 and $200; monitoring and ensuring quality of medicines delivered, including lasting quality assurance (QA) systems.

Less than 10 years ago, some 30 million people were infected with HIV just in Africa, but only 50,000 had access to treatment. The hardest hit countries - most in sub-Saharan Africa - lacked basic supply chain infrastructure and systems.

At the time, many doubted that HIV/AIDS commodities could be reliably delivered to such areas. Public health supply chains were plagued by frequent stock-outs, overstock, expiry and wastage.

Yet today, SCMS provides 77 percent (by volume) of the anti-retroviral medicines (ARVs) supplied by PEPFAR, supporting some 2.2 million people on treatment.

Before SCMS was created, procurement of health commodities in targeted countries was a transactional, one-off event - each purchase treated as a separate activity, with limited connection to national health strategy and patient needs. Programs paid a premium for commodities. Shortages and stock-outs of commodities caused dangerous "treatment holidays" for patients. Emergency ordering wasted money on rush fees and high freight costs. "Too little product and patients died, too much product was a waste of taxpayer money," says Gordon Comstock, deputy director for global supply chain at PFSCM.

Lack of inventory control wasted valuable commodities due to expiry, improper storage and theft. Poor coordination among donors and funders and among suppliers and countries led to redundancies and gaps in products and service. But no more.

SCMS currently pools procurement for HIV/AIDS programs across 19 PEPFAR-supported countries. High volume and high frequency of procurement - averaging over $20m in commodities and more than 200 shipments per month - have helped SCMS develop relationships with key suppliers and freight forwarders, leveraging lower prices and ensuring availability of commodities and space on key shipping routes. The volume of pooled procurement through SCMS also provides the project unique market intelligence - to identify trends in pricing of commodities and shipping, availability of supply and other factors that can impact AIDS programs at the community level.

To support global pooled procurement and reduce turnaround times for ARVs, SCMS established regional distribution centers (RDCs) in Ghana, Kenya and South Africa. These RDCs hold strategic stock, provide regularly scheduled shipments to neighboring countries and expedite emergency orders to prevent stock-outs The RDCs are independent commercial enterprises, attracting private-sector clients like GlaxoSmithKline, Merck Serono and Pfizer. Merck Serono, one of the first large private-sector clients, is using the RDCs to reduce logistics costs and improve market position. After four months of trade, the average street price of their products was down substantially and their volume of trade had trebled.

In many countries, warehousing for public health programs was in no position to support rapid scale-up of HIV/AIDS programs. Boxes were stacked on the ground, and inventory was tracked manually, if at all. Loss of stock through expiry and damage was common. Fully effective cold chain facilities were rare.

Interventions include installation of or expanding warehousing structures, racking, cold rooms and forklifts and introducing best practices in inventory control, security, logistics management information systems and distribution, and bar-coding.

When PEPFAR began, some countries had existing logistics management information systems (LMIS), but none were adequate to support a rapid increase in the number of HIV/AIDS treatment sites. Countries without robust LMIS lacked the data needed to inform forecasting, supply planning and procurement, as well as distribution and resupply. SCMS helps strengthen recording and reporting of key data. The particular technology used - from paper and pen to sophisticated software and use of cellphones - is less important than ensuring the system is sustainable and provides the quality data needed for decision making, including stock on hand, expiry/loss adjustments, consumption and distribution.

SCMS has supported strengthening of data management in a number of countries. Because public health programs in developing countries often rely heavily on international aid, one aim for SCMS-supported countries is a five-year quantification that supports a gap analysis of future funding. Stakeholders can then work to fill the gaps through coordination, advocacy and negotiation, avoiding risk of stock-out and costly emergency orders.

Leveraging data from supply plans, SCMS has changed the way medicines and other essential health supplies are delivered to the countries. Each quarter SCMS provides suppliers current aggregated forecasts, and by ordering nine months in advance, maximizes manufacturing efficiencies - including buying production lines. While most other comparable programs continue to ship by air, SCMS increasingly uses sea and road freight to reduce costs. The project now ships about 75 percent of freight by ocean and land, saving up to 85 percent on shipping costs compared to air shipments. For the life of the project, SCMS has saved its clients more than $76.6m in shipping costs.

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Supply Chain Management System


Keywords: supply chain, supply chain management, supply chain IT, logistics management, logistics services, 3PL, third party logistics, inventory control, warehouse management, sourcing solutions, supply chain risk management, PEPFAR, pharmaceutical supply chain