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Supply Planning of Health Products

Supply planning is a critical process to avoid stock-outs and treatment disruption, overstocks and wastage. Accurate quantification, monitoring of consumption levels, establishment of minimum stock levels (the point at which re-ordering must happen) will minimize the risk of stock-outs and ensure continuity of treatment and value for money.

Once the quantification of needs is completed, it is necessary to determine when and in what quantities orders should be placed.

The quantification outputs 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.

It is also important that orders include some buffer stock in case of any unexpected delays in the supply chain, such as delayed arrival of subsequent orders, unexpected changes in consumption levels, or programmatic changes. Buffer stock should be expressed with time periods and calculated based on both the agility of the national supply chain and any programmatic constraints.

The most important factor in this determining when orders should be placed is the lead time for a product or product category. The lead time is the length of time between confirming an order with a manufacturer/supplier and actually receiving the products at the service delivery point.

Lead time and buffer stock levels provide the basis for calculating the minimum and maximum stock levels; once stocks reach the minimum level, order should be initiated at the various levels of the supply chain.

NOTE

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.

The following factors must be taken into account during planning:

Lead times for the procurement process: This includes the time from the business unit creating a request up until the time the purchase order is issued to the manufacturer/supplier. The procurement process lead time will vary depending on the selected procurement method (such as open competitive bidding, limited competitive bidding among LTAs holders, direct contracting, or shopping). The procurement officer should determine, in advance, the appropriate procurement method for each product category and estimate the time it will take, according to the procurement policies and guidelines. This includes taking into account any necessary reviews by the local contracts committee or the Advisory Committee on Procurement (ACP). The use of the UNDP Health procurement architecture noticeably reduces the processing lead time, while ensuring compliance with the QA Policy.

The manufacturer’s / supplier’s lead time: An average lead time of three to four months, from purchase order confirmation until products are made available to ship, is typical for health products purchased internationally. However, shortages (e.g., due to lack of availability of raw materials or production capacity) happen regularly, resulting in increased lead times. At the planning phase, procurement officers should obtain estimates of the current lead times for the different product categories to be procured to determine the time to launch the procurement and ensure that products will be received when needed. While initial orders will be based on these estimates, subsequent orders should take into account prior experience.

Quality monitoring – pre-shipment inspection, sampling and testing: For most categories of products purchased through UNDP, pre-shipment inspection and testing is not recommended. For certain categories of products, the implementation of pre-shipment inspection and testing activities may be required, as a risk mitigation measure rather than as a quality assurance mechanism. Pre-shipment inspection with randomized sampling and testing is required for the following product categories: Finished Pharmaceuticals Products (FPPs) Recommended for Use by the WHO Expert Review Panel (ERP); In-vitro Diagnostic Products Recommended for Use by the WHO Expert Review Panel (ERP); Condoms, if the product selected is not listed in the UNFPA list; and all Vector Control products. The lead time for sampling and testing varies depending on the product category.

Shipping, delivery and logistics: It is also necessary to determine how long it will take for the various product categories to be available from the time the products are available “to ship” up to the “last mile” delivery point. This estimate includes the time for customs clearance, inspections, and transfer(s) from the central warehouse to the local facilities where the product will be issued to, or used by, the patient/client.

Note: Quality monitoring – post-shipment inspection, sampling and testing: UNDP COs must perform post-shipment inspection at the time of the reception of the goods by visual inspection and review of import documentation that the products received are in line with the purchase order and the specifications. UNDP GFPHST does not advise conducting routine post-shipment quality control testing, except if the information collected, on transit and logistic conditions, during the post-shipment inspection indicates the likelihood of a risk on the quality or the performance of the products procured.

Storage capacity: Some products, either due to their high volume (e.g., bednets, condoms) or particular storage conditions (e.g., cold chain products) may present challenges related to the available space/conditions in country and, therefore, the supply plan may need to be adjusted, such as through more frequent deliveries.

Shelf life of the product: Some products, particularly diagnostic products, have a short shelf-life (less than two years, or sometimes only one year) and therefore require more frequent deliveries.

When the above mentioned estimates are added together, the procurement officer has a good idea of when to begin the procurement process. The Health Procurement Action Plan (HPAP) is mandatory for all business units engaged in the procurement of health products, regardless of the funding source and the partner conducting health procurement (see Health Procurement Architecture). Using the relevant HPAP template (either Global Fund or non-Global Fund depending on the source of funding), the procurement officer should always start with the date when the end users need the products and work backwards to determine when the procurement process should commence. Guidelines for creating the HPAP are available here and here.

Additional guidance to support this area of work are also available through resources listed below:

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