Once quantification has occurred, it is necessary to determine when and in what quantities orders should be placed. The most important factor in this determination is the lead time for a product, which is the length of time between placing an order and actually receiving the product in question. When ordering products, the following factors must be taken into account:
- The supplier’s lead time: A lead time of three to four months from the placement of the purchase order is common for pharmaceuticals bought internationally. However, extreme shortages of some products (such as Coartem and long-lasting insecticide-treated nets (LLINs) during 2012) have increased lead times for these products to as long as a year. At the beginning of the project, procurement officers should obtain estimates of lead times for various products to ensure that they will be received when needed. Initial orders will be based on these estimates, but subsequent orders should be based on the actual experience with prior orders.
- Lead times for the procurement process: These will vary, depending on whether the procurement officer intends to conduct open competitive bidding, limited competitive bidding, direct contracting, or shopping. The procurement officer determines in advance the appropriate process for each product and estimates the time it will take, taking into account any necessary reviews by the local contracts committee or the Advisory Committee on Procurement (ACP). The use of long-term agreements (LTAs) reduces the processing lead time considerably.
- Distribution: It is also necessary to determine how long it will take for the product to be available to the end user. This estimate includes the time for customs clearance, inspections and transfer from a central warehouse to the local facility from which the product will be disbursed to the user.
Forecasting must also factor in the shelf-life of the product and storage capacity, bearing in mind the following:
- Some products, such as bed nets, require a lot of storage space, so more frequent deliveries may be needed.
- Some products may need a cold chain.
- Some diagnostics have a short shelf-life, which may also require more frequent deliveries.
Quantification and forecasting should always be done in basic units—tablets, vials or capsules. This makes it easier to track consumption needs and to compare the prices of different suppliers.
The quantifications should be broken down into monthly needs. If the coverage is expected to be equal throughout the year, the calculations can be made for one year then divided by 12 months. If, however, it is anticipated that coverage will increase as the programme scales up, then a new calculation will have to be made for each period in which coverage is expected to increase. Similarly, if, as is sometimes the case for malaria, there is a higher prevalence during certain months of the year, the calculations must reflect this.
When the above-mentioned estimates are added together, the procurement officer has a good idea of when to begin the procurement process. Using the procurement planning tool developed by the UNDP Global Fund/Health Implementation Support Team, the procurement officer should always start with the date when the end user needs the product and work backwards to determine when the procurement process should commence. Additional resources on procurement planning are available here.
It is also important that orders include a ‘buffer stock’ in case of any unexpected delays in the arrival of subsequent orders or losses due to expiration, theft, damage or other factors. Buffer stocks should be expressed in time periods, with four months minimum recommended for ARV, ACT and limited-supplier TB.
Lead time and buffer stock levels provide the basis for calculating the minimum stock levels, at which point re-ordering must take place at the various levels of the supply chain.
The Country Offices (COs) should monitor deliveries by regularly following up with the procurement partners through email, and by regularly monitoring the status of shipments in transit through K&N's online tracking and tracing system. The COs must contact the UNDP Global Fund/Health Implementation Support Team (Alfonso.Buxens@undp.org) for support in obtaining online access to the tracking system.
The COs can also develop their own tools for pipeline management.
WHO and partner organizations have developed a regularly updated online PSM Toolbox as a central repository for a wide range of health-related procurement and supply management (PSM) tools. The Toolbox can assist with quantification and forecasting exercises, in addition to other areas of a PSM plan. It is also available on CD-ROM.
Please refer to the UNDP online PSM training for further guidance on quantification and forecasting.