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Outsourcing to 3PLs for improving workforce effectiveness

Critical Issues Series: Strengthening Human Resources for Supply Chain Management of Health Commodities Panel: Increasing Workforce Effectiveness . Outsourcing to 3PLs for improving workforce effectiveness. Noel Watson, MIT-Zaragoza Program Zaragoza Logistics Center, Spain Oct 6 th , 2010

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Outsourcing to 3PLs for improving workforce effectiveness

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  1. Critical Issues Series:Strengthening Human Resources for Supply Chain Management of Health Commodities Panel: Increasing Workforce Effectiveness Outsourcing to 3PLs for improving workforce effectiveness Noel Watson, MIT-Zaragoza Program Zaragoza Logistics Center, Spain Oct 6th, 2010 (Work here is joint with VillageReach, USA and Transaid, UK)

  2. Challenges for 3PL outsourcing in Government-run Drug distribution systems • Sources of resistance for governments and policy makers • the operational dynamics of government run drug distribution systems are still mostly a mystery. • poor understanding of the performance potential for 3PL providers • not trivial to combine government run distribution systems and 3PL providers for targeted performance.

  3. Our Approach • Addressing the mystery of SC performance: • Understand the key drivers of the multi-dimensional performance of a government run drug distribution system • Determine the current costs of distribution in the sample country • Performance potential for 3PLs - Cost Simulations (not focus of this presentation) • Create a cost model for the study to accommodate general performance prediction. • Estimate the potential costs and performance of distribution using outsourced models (including selectively outsourced hybrid models) • Execution of Outsourcing • 3PL screening and engagement • Public Sector Development: How should they learn to manage 3PLs?

  4. Addressing the mystery: Conceptualizing Supply Chain Performance and Drivers • Basic Operational Capabilities • Capacities • Discreet Activities • Storage, etc • Advanced Oper. Capabilities • Service offering • Product + • Problem Solving • Connectivity • Ease of monitoring • 3PL related • Managing 3PL • 3PL managing client

  5. Supply Chain Costing • Challenges • Sampling methodology [1],[2],[3],[4] • Data Availability • Costing Analysis specific to the situation [2] • Incremental cost, cost recovery, cost allocation • Estimating costs for collection system with varying transport options is difficult [1] • Estimating timing of wasted stock [1] • Resistance to costing [2] • Our approach • Handles collection system settings • Incorporates cost of time of non-SC personnel involved in SC activities • Comprehensive; transportation, inventory, commodity, management etc.

  6. Supply Chain Improvement Opportunities: 3PL Contribution & Cautions • Why not use 3PL • Base’s Skill Atrophy/Retardation • Increase Complexity • Adds another tier to decision chain requiring coordination and 2-way information sharing • Risk of poor service • Poor oversight by base • Inappropriate or lacking 3PL’s experience • with current or redesigned management approach • with current or redesigned SC structure

  7. Executing 3PL engagement • Major Challenge: Developing 3PL Management Capability • Requires appreciation for good basic and advanced capability in order to appreciate/recognize it in 3PL • Management at a distance • A capability like that of basic/Advanced • Time; Mentorship (Toyota Example) • Visualizing improved performance – case studies, site visits • Explicit Capability Development plan, e.g., starting small, planning • Initiating 3PL Relationships: 3 step Screening process • Experience Screening • Capability Screening • Basic, advanced, 3PL related • RFQ screening • Needs description

  8. Our approach to 3PL Outsourcing in Public Sector • Sources of resistance • Understanding SC dynamics • Focus on distinguishing capabilities • Meeting costing challenges • Understanding performance potential for 3PL providers • Cost-simulation modelling (Not focus of this presentation) • Complexity of incorporating and managing 3PL • Challenges & recommendations for developing 3PL management capabilities • Recommendations for initiating 3PL engagement • Piloting ideas in Kano, Nigeria • Results will be available later this year

  9. Bibliography • Huff-Rousselle, M. and S. Raja, Ghana: Estimating the Cost of Logistics in the Ministry of Health Supply System. 2002, Family Planning Logistics Management (FPLM)/John Snow, Inc., for the US Agency for International Development. • Vian, T., Uganda: Assessing the Costs of Distribution to Health Sub-Districts. 2003, John Snow, Inc/DELIVER and Boston University, for teh US Agency for International Development: Arlington, VA. • Vian, T., Zimbabwe: Assessing the Cost of Transporting HIV/AIDS Commodities: A Case Study in Financial Analysis. 2003, John Snow, Inc/DELIVER and Boston: Boston University, for the US Agency for International Development: Arlington, VA. • Baruwa, E., M. Tien, and D. Sarley, Zambia ARV Supply Chain Costs: A Pilot of the Supply Chain Costing Tool. 2010, USAID | DELIVER PROJECT, Task Order 1: Arlington, VA.

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