On February 11th, 2014, IAPHL members discussed the application of commercial sector processes for supply chain risk management to the public sector. Topics included an all-encompassing definition of risk management, supply and demand, and stakeholder involvement. This conversation was facilitated by Brian Serumaga, Dr. Noel Watson, and Joseph McCord
Original message: This month, we shall be focusing on adapting the commercial sector processes for supply chain risk management to the public health sector. We shall introduce basic concepts of risk management, and then point you to the risk management process that has been developed by the USAID| DELIVER PROJECT for public health supply chains. We hope that you will engage with these materials and provide comments and thoughts from your own experience or knowledge to enrich this online discussion.
When the term risk management is mentioned, most people immediately think about how unexpected events, like hurricanes and tsunamis, can affect supply chain operations. But, the concept of risk management is much broader than this. Whereas unexpected events often have detrimental effects for supply chain operations, they are not the sole focus of risk management. Risk management for public health supply chains focuses on how to organize the logistics activities of the supply chain in order to ensure that commodities needed for health programs are continuously available, without disruption. The key phrase here is ‘ensuring a continuous supply of commodities without disruption’, in the face of several risks that are present in the supply chain.
Risk management is not limited to a single occasion. It is a continuous process of assessing and responding to risk within the supply chain. In this discussion, we shall provide a simple process for identifying and analyzing the sources of risk within the supply chain and for developing a robust response to manage risk. Our discussion will be centered on —
- Two case studies describing how risk management has been successfully used in the public health supply chain context
- A short facilitator’s guide that the supply chain manager can use to lead stakeholders through a risk management workshop for a health program
- The Risk Assessment and Control (TRAC) spreadsheet that can be used to analyze supply chain risk and to select appropriate responses.
“In my experience, risk management first needs some definition. Many in the private sector (especially in the US) view risk management as a financial role to protect an organization from sudden financial losses. However, in supply chain, the definition deals more with preventing the interruption of product flow along with preventing the introduction of counterfeit or otherwise unfit (e.g., expired) product.
From a supply chain perspective, the definitions and methods are not very different between public and private sector. One good resource on risk management is the Supply Chain Risk Management Best Practices Guide available from the Supply Chain Risk Leadership Council (www.scrlc.com) (in disclosure, I am a Co-Chair of the SCRLC). Although this guide is generic, it does apply in many ways to public sector health supply chains.”
(Taylor Wilkerson, USA)
“I hope we will be looking at Supply Chain Risk Management not only from a physical product movement perspective i.e “Logistics”, but from a product integrity i.e “quality” angle also. The objectives of logistics and quality are not always mutually reinforcing. The fact of Risk being about probability and uncertainty throws in quite a bit of complexity that we as practical professionals must systematically endeavor to simplify in our RM approach. We should therefore look forward to and welcome the materials that will be shared for information and comments.
Finally, in my view, there seems to be a tendency to look at Risk in a negative way, when in fact the issue can sometimes throw up great opportunities which, if managed well, can make a positive difference in our programme implementation objectives. In other words, we should avoid the trap of seeing Risk Management somehow as a “witch hunt” or distraction, but rather as another tool at our disposal for “making things happen”; which is what any management is all about.”
(Murtada M. Sesay, Sierra Leone)
“I am currently undertaking PSM assessment of GF grants (for HIV, TB and Malaria) in 17 countries across Caribbean, Africa, Central and South Asia and can unequivocally state that more than 90% of the times the reason for stock outs of essential drugs and commodities at service delivery points (SDPs) is due to poor SCM than non-availability of these items.
Though the reasons and solutions are usually evident, it will be very helpful to have structured RM review strategies and processes to help the in-country stakeholders (usually the Ministry of Health) take a critical look at the supply chain and undertake prompt RM. I also believe that capacity development (regular trainings and on-job supportive supervision) of the skilled human resources (pharmacist, warehouse managers etc.) in the area of RM in SCM is pertinent to institutionalize RM – translating policy into action.”
(Kiran Kamble, India)
“Anything that can go wrong constitutes risk. Sometimes defined as the probability of unwanted event taking place and the likely impact the event will have on the organization.
In the public sector supply chain functions in global health, I feel the following are some of possible risks:
- Supply failure
- Quality issues
- Loss due to theft, expiry, damages
- Inaccurate demand forecasting leading to overstocks or under stocks.
- Transport failure from supplier to central medical stores(cms) or from cms to health facilities
- Political interference in sourcing of health commodities
- Lack of adequate finances to secure supply of essential commodities
The first step in managing such risks would be to identify them. We can identify the possible risks by brainstorming, learning from past experiences both within our supply chain and those of others and by analyzing the movement of commodities from the source to the consumer and figuring out what might go wrong at each stage.
Secondly we need to figure out the likelihood of each of those risk events materializing and the consequences of those risk events should they materialize.
Thirdly, deciding based on the severity of the anticipated consequences of the risk events, who or at what level the risks will be managed. Risks with potential of paralyzingly the organization can be handled at corporate level while risks with potential of causing least consequences can be managed departmentally or by certain individuals.
Fourthly, we need to decide on how to handle each identified risk. Risks can be taken, transferred, terminated or treated depending on their nature. From time to time we need to be analyzing the identified risks, seeing wether they still apply to our supply chain or not and attaching the possible current consequences to the risks that still apply. We can also endeavor to identify any possible new risks. The plans of how to handle these risks should be updated from time to time.
(Livingi Abel, Zambia)
“As has been emphasized, the ideal is to have a continuous, repeatable process of anticipating, preparing, and monitoring potential disruptions to the performance of your supply chain. Given the breadth of responsibility across public health supply chains, executing risk management requires some effort.
Taylor has shared some great resources including the Supply Chain Risk Leadership Council’s Best Practices Compilation (which includes a broad list of example supply chain risks in the appendix), and the chapter “Governing Tangible Risk,” which provides a succinct overview of supply chain risk management as a process. Livingi also provided an excellent, even more succinct summary of the supply chain risk management process. A key aspect to the first step they mention (identifying risk) is to drive at the root causes of ‘unwanted events’ such as stockouts or quality issues in order to enumerate the exact bottlenecks that need to be addressed. As Livingi mentions, a good approach to identifying relevant sources of risk is to brainstorm with knowledgeable managers who are able to draw on past experience. From there partners can prioritize risks based on how likely they are to occur and how disruptive to performance they could be, and subsequently identify and execute specific interventions as necessary.
Attached is a case study of this process in action for the global procurement and distribution operations within the USAID | DELIVER PROJECT. While this took place at a global level, the approaches and outcomes could easily be translated to these kinds of operations within a country.”
(Joe Mccord, USA)
“I would however like to pose the question if risk management can be implemented from both the supply and demand perspective of the supply chain? This would imply involving even more stakeholders in the brainstorming sessions such as Programme Managers, Health Promotion focal persons etc…Would this be a feasible approach or would it be opening a Pandora’s Box?”
(Chengetanai Mangoro, Sierre Leone)
“Demand stakeholders and supply stakeholders in the same supply chain make very different contributions to the supply chain and should therefore be addressed as two separate stakeholder groups in considering supply chain risk and effectiveness.
Demand stakeholders are responsible for understanding markets, leading demand driving activities, for monitoring true demand (sales/distribution) relative to current assumptions, and for knowing when it is time to either restate assumptions and change the forecast or do something else that changes the reality of consumer demand (e.g. distribution drives, marketing/BCC activity etc.)
Supply side stakeholders are responsible for using the agreed forecast to maintain optimal inventory levels and order intervals, mitigating the risk of over-commitment to anticipated quantities that are in fact assumptions and may therefore change as markets evolve, and for keeping accurate inventory records so products are kept in full supply whilst minimizing exposure to risk caused by stockouts, overstocks, sub optimal storage conditions and poor quality stock tracking.”
(Nicole, IAPHL member)
“I believe that the whole essence of sharing information, tools and techniques is to provide options from which stakeholders can select from that is applicable within the country context and program specifics.
Basically to create an understanding of what will be done and how their inputs will help the process. Risk itself can result from inadequate information or data and the process of stakeholder involvement in the quantification is a way of mitigating inherent risk in the supply chain system through shared understanding and consensus building. During quantification, we risk inaccurate forecast or supply planning when information or data is not available. We also risk stock out, overstocking or understocking when we don’t understand both the supply and demand angle to the quantification process.”
(Bayo Adekola, Nigeria)