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The 5th Global Health Supply Chain Summit

November 14 -16, 2012Kigali, Rwanda

 

Risks in Health Supply Chains: Simple SolutionsProf. Yehuda Bassok

University of Southern CaliforniaAnd

Center for Health Education and Research (CHEaR)

What is CHEaR?

• A group of people in academia that is dedicated to provide training in Health Care Supply Chains.

What is risk?

• Risk– The negative effects of uncertainty on objectives.

• In this definition, uncertainties include events (which may or not happen). Some times we know the probability of these events

• Uncertainties caused by ambiguity or a lack of information.

• There are two ingredients that are needed for risk to exist:– Uncertainty about the potential outcomes.– The outcomes have to matter in terms of providing utility.

• Example: Demand Risk– Demand for a new drug

• Events: 1. The demand will be 1M tablets per year 2. The demand will be 0.5M tablets per year 3. The demand will be 0.25M tab per ear

What is risk (cont.)

• How many units should be ordered?– Notice that whatever we do one of two things may happen:

• Shortages• Excess inventory

• Demand risk affects not only the countries • It also affects the pharmaceutical, who might be reluctant

to develop and produce drugs for LMIC

Example of Demand Risk

Types of Risk

• Example: Supply Risk– An order for 1m units is placed but only 0.5m units are

delivered.– Goods are not of the quality desired

• How many units should be ordered– Perhaps 2 million units

• Example: Funding Risk– Donors promise to provide the funding to purchase a certain

quantity of a drug and they renege on their promise.

What are the effects of risks?

• Who suffers from risks?– The patients– The donors– The countries– The pharmaceuticals

What can be done?

• Risk is part of life.• There are methods to reduce risk.• There are methods to reduce the outcome of risk.• Reduce risk

– Better data to better forecast the demand• What is a good forecast?• Partial shipments reduce wastage of drugs

– Example: Country makes a commitment to an annual purchase of a drug.

– Drug is delivered every three month for a total of the annual order.– What are the advantages of such an approach?

» Expiration date is delayed and wastage is eliminated

What can be done?

– Make long term commitments with some flexibility– Example:

– Safety stock• How to calculate safety stock?

– Safety time• Order early enough

Thank You