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1. CLICK TO ADD TITLE The 5th Global Health Supply Chain Summit November 14 -16, 2012Kigali, Rwanda What can we learn from Consumer Goods on supply chain? How can we smartly apply that to Health? Hassan Belkhayat & Doan Hackley McKinsey & Company [SPEAKERS NAMES] [DATE]

2. In Africa, CPG has much lower stock-out rates than EHP EHP1 stock-out rate CPG1 stock-out rate: prepaid mobile phone credit cards % of time, annual average % of time, annual average Kenya Kenya Amoxicillin 25 Uganda Nigeria Pills 50 Tanzania Nigeria Senegal Depo 46 DRC Nigeria POS: ~55,000 Nigeria POS: ~710,000 1 EHP : Essential Health Products; CPG : Consumer Packaged Goods Source: DHS 2006, BMGF Contraceptive supply chain diagnostic in Senegal and Nigeria 2011

3. Learning from CPG, despite differences, given similar challenges seem in EHP Similar challenges • Breadth of distribution • Ensuring high quality of delivered product • Managing “compliance” • Increasing efficiency Financing Structure Performance management Forecasting Operators Differences • Product economics • Management model • Complexity of delivery • Regulatory considerations • Product demand dynamics

4. SCM is the end to end integration of key business processes Procurement planning Production planning Logistics planning Order and demand management Information flow Materials management Manufac-turing Distribution Customer service management Physical flow • Distribution – network configuration, transportation management, operations of distribution centers, 3PL, and retailers • Objective – deliver high-quality products, on time, in the demanded volumes Source: McKinsey

5. A distinctive approach to supply chain improvement End to end • Holistic perspectiveon performance • From customer to supplier • Quantitative (metrics) and qualitative (maturity of processes) • Correlation between structural set up and performance Fast and focused • Fast and effective approach with relevant key insights • Focus on understanding key performance drivers • No extensive data mining • Top-down quantification and prioritization Linked to action • Prioritized action planis key outcome • Rapid estimation of impact potential • Prioritize measures by impact and implementation effort • Best-practice repository and deep-dive analysis tools Source: McKinsey SCM Practice

6. Quantitative – KPI benchmarks Qualitative – maturity of practices • 30 KPIsacross three dimensions – service, cost, capital • Comparison with average and top quartile • 20 practicesacross four dimensions –strategy, operating system, management infrastructure, mindsets and capabilities • Calibrated with proven maturity model McKinsey 360º SC diagnostic… Source: McKinsey SCM Practice

7. Assess impact potential • Impact assessment tailored to supplychain strategy – e.g., service level vs. cost • In health – stock-outs & quality, but also on overall coverage (consumption) …then assess impact potential and prioritize actions Move to action – prioritize measures • Description of measures across all performance dimensions • Best-practice SC repository including case studies and detailed approaches Source: McKinsey SCM Practice

8. 1 Explicitly linking supply chain strategy to corporate strategy; setting clear, well-understood aspirations 2 Using segmentation to embrace the complexity that matters 3 Designing and building forward-looking networks that meet service, cost, and risk aspirations 4 Creating lean, end-to-end value chains by optimizing across functions 5 Executing world-class integrated demand and production planning processes with discipline 6 Getting the right talent on board and holding them accountable 6 lessons on what drives performance Source: McKinsey SCM Practice

9. Methodology applied to Senegal contraceptive supply chain Quantitative Qualitative Room for action • Central level stock-outs • Inappropriate forecasting • Lack of performance management– procurement and stock levels • Non standardized order management • Revive RHSC to review central stock levels monthly • Change forecasting tool and methodology (target driven) • Implement informed push system for distribution (private logistician) Average # days of stock out per year at SDP level >300 >150 Implants Injectables Source of stock outs • Distribution issues • Complex network design • Malfunctioning order management • Low staff capabilities; medical staff as logisticians Target < 2% stock-out at facility level Supply chain key component of the FP strategy to move from 12% CPR to 27% 60% 40% Central level Distribution issues Source: BMGF Contraceptive supply chain diagnostic in Senegal and Nigeria 2011

10. Potential concrete solutions: best practice CPG ideas Inventory management: right stock level? Financing: how to pay for inventory Streamlining the design: how many steps? Performance management:how to get /use data to improve performance? Outsourcing:who and how to optimize? Source: Team analysis

11. Solutions for public health inspired by CPG best practices Inventory management: right stock level? Financing:how to pay for inventory? • Revive a RHSC with all donors to follow on a monthly basis stock • Trigger procurement when stock levels hit a minimum level • Initial endowment from MoH of base stock to facilities as a working capital • Facilities only reimburse for products sold Streamlining the design:how many steps? Performance management:how to get /use data to improve performance? • Products flow straight from regional warehouse to facilities • Products are delivered using a standard and optimized route • Central unit following impact on stock-outs and consumption (merged potentially with RHSC) • Data of stock-outs and consumption collected monthly by operator Outsourcing:who should operate? • Outsource logistic duties (order management, transportation, stock monitoring) to a private operator • Contract includes penalties if stock-outs are >2% and data flow not on time • Medical workers focus only on medical tasks

12. Senegal case-study results : massive supply chain improvements PIKINE DISTRICT- 2012 fugures Stock-outs Share of SDPs experiencing at least one stock-outs during a month (%) DIU Implants Injectable Pills Baseline Feb March April May June July August Sept Oct Source: ISSU, operator : baseline average last quarter 2011

13. Senegal case-study results : supply chain and performance management increases health impact PIKINE DISTRICT Consumption Number of units per month dispensed +52% DIU Implants +940% +61% Injectable +73% Pills Baseline Feb March April May June July August Sept Oct Source: ISSU, operator. Baseline : average consumption per month during last quartner

14. Ongoing performance management is critical to satisfy customers ... without firefighting!