Contents

S.NO TITLE PAGE

NO
1 INTRODUCTION TO LOGISTICS 6
2 MAXIMUM-MINIMUM INVENTORY 11
MANAGEMENT CONTOL SYSTEM
3 STORAGE SYSTEM 19
5 LOGISTIC SYSTEM DESIGN 22
6 MINCHY’S PROCESSING HALL LAYOUT 27
7 REFERENCE 29
 1• INTRODUCTION TO LOGISTICS 3

1• Introduction toLogistics

What Is Logistics
Overtime,theprofessionofsupplychainmanagementhasevolvedtomeetthechangingneedsofthe
globalsupplychain.AccordingtotheCouncilofSupplyChainManagementProfessionals(CSCMP)—
“Supply chain management encompasses the planning and management of all activities
involvedinsourcingandprocurement…andalllogisticsmanagementactivities.Importantly,
italsoincludescoordinationandcollaborationwithchannelpartners,whichcanbesuppliers,
intermediaries, third party service providers, and customers. In essence, supply chain
managementintegratessupplyanddemandmanagementwithinandacrosscompanies.”
The CSCMP also defines logistics management as—
Thepartofsupplychainmanagementthatplans,implements,andcontrolstheefficient,effective
forwardandreversesflowandstorageofgoods,servicesandrelatedinformationbetweenthe
pointoforiginandthepointofconsumptioninordertomeetcustomers’requirement…
Logisticsmanagementisanintegratingfunction,whichcoordinatesandoptimizesall logistics
activities, as well as integrates logistics activities with other functions including
marketing,salesmanufacturing,finance,andinformationtechnology.”
In other words, you can consider logistics activities as the operational component of supply chain
management, including quantification, procurement, inventory management, transportation and
fleetmanagement,anddatacollectionandreporting.Supplychainmanagementincludesthelogistics
activitiesplusthecoordinationandcollaborationofstaff,levels,andfunctions.ftesupplychain
includesglobalmanufacturersandsupplyanddemanddynamics,butlogisticstendstofocusmoreonspecif
ictaskswithinaparticularprogramhealthsystem.
.

Why LogisticsMatters
Inthepast,logisticswasconsideredacustodialactivity.Storekeeperswerethecustodiansofsuppliesstored
insmallstoreroomsandlargewarehouses.. Fortunately, as time passed, more and
moreprogrammanagershavecometounderstandhowimportantlogisticsistoaprogram’ssuccess.
Thegoalofahealthlogisticssystemismuchlargerthansimplymakingsureaproductgetswhereitneeds
togo.Ultimately,thegoalofeverypublichealthlogisticssystemistohelpensurethateverycustomer
hascommoditysecurity.Commoditysecurityexistswheneverypersonisabletoobtainandusequality essential health
supplies whenever he or she needs them. A properly functioning supply chain is a
criticalpartofensuringcommoditysecurity—financing,policies,andcommitmentarealsonecessary.
Effectivesupplychainsnotonlyhelpensurecommoditysecurity,theyalsohelpdeterminethesuccessor
failureofanypublichealthprogram.Bothinbusinessandinthepublicsector,decisionmakersincreasingly direct their attention to
improving supply chains, because logistics improvements bring important, quantifiablebenefits.Well-
functioningsupplychainsbenefitpublichealthprogramsinimportantwaysby—
• increasing program impact
• enhancing quality ofcare
• improving cost effectiveness andefficiency.

Logistics increases program impact

Ifalogisticssystemprovidesareliablesupplyofcommodities,morepeoplearelikelytousehealthservices.
Customersfeelmoreconfidentaboutthehealthprogramwhentheyhaveaconstantsupplyofcommodities—
itmotivatesthemtoseekanduseservices..
Noticethat,astheavailabilityofamixofcontraceptivemethodsimproves,thecontraceptiveprevalence rate (CPR) for the
public sector increases. Whenachoiceofcontraceptivemethodsisavailableinhealth
facilities,morewomenusecontraception.Whenmore womenusecontraception,itimpactsanumberofkey
publichealthindicators:maternalmortality,infant mortality,andtotalfertilityratesalldecrease.

Logistics enhances quality of care

Well-supplied health programs can provide superior service, while poorly supplied programs cannot. Likewise,well-
suppliedhealthworkerscanusetheirtrainingandexpertisefully,directlyimprovingthe
qualityofcareforclients.Customersarenottheonlyoneswhobenefitfromtheconsistentavailability
ofcommodities.Aneffectivelogisticssystemhelpsprovideadequate,appropriatesuppliestohealth providers, increasing
their professional satisfaction, motivation, and morale. Motivated staff are more likely to deliver a higher quality
ofservice.

Logistics improves cost efficiency and effectiveness

Aneffectivesupplychaincontributestoimprovedcosteffectivenessinallpartsofaprogram,anditcan
stretchlimitedresources.Strengtheningandmaintainingthelogisticssystemisaninvestmentthatpays
offinthreeways.(1)Itreduceslossesduetooverstock,waste,expiry,damage,pilferage,andinefficiency;
(2) it protects other major program investments; and (3) it maximizes the potential for cost recovery

Logistics System
During your lifetime, you will encounter hundreds of logistics systems—in restaurants, stores,
warehouses, and many other places. this handbook describes logistics systems for health programs;
 1• INTRODUCTION TO LOGISTICS 5

however,ifyouunderstandasimpleexampleofalogisticssystem,youwillbeabletounderstandalmost any
health logisticssystem.
A restaurant is one example of a simple logistics system.
• Thekitchenisastoragefacility;thefoodisheldthereuntilitisdeliveredtothecustomer.
• Waitersprovidethetransportation;theycarrythefoodfromthekitchentothecustomer.
• Thetablesaretheservicedeliverypoints,wherecustomerssittoorderandeatthefood.

Forcustomers,arestaurantisnotalogisticssystem;itisaplacetoeat.Youprobablyneverthoughtofa
restaurantasalogisticssystem.Yourexpectationsforarestaurant,however,aredirectlyrelatedtologistics.
What expectations do you have when you go out to a restaurant for a meal?
You may expect that the—
• restaurant will be attractive andpleasing
• serverwillprovideexcellentcustomerservice
The Six Rights • food you order will beavailable
of Logistics • food will be servedpromptly
• correctorderwillbedeliveredtoyourtable
The RIGHT goods • food will be of acceptablequality
in the RIGHT • food will be of acceptablequantity
• costofthemealwillcorrespondtothevalue.
quantities in the
RIGHT condition thesecustomerexpectationsdefinethepurposeofa
logisticssystem—itensuresthattherightgoods,inthe
delivered… rightquantities,intherightcondition,aredeliveredto
to the RIGHT place therightplace,attherighttime,fortherightcost.In
logistics,theserightsarecalledthesixrights.
at the RIGHT time
Whetherthesystemsuppliessoftdrinks,vehicles,or
for the RIGHT cost. pens;ormanagescontraceptives,essentialdrugs,or
othercommodities,thesesixrightsalwaysapply.
Logistics Cycle: Organizing LogisticsSystem
Activities
Logisticsmanagementincludesanumberofactivitiesthatsupportthesixrights.Overtheyears,logisticians
havedevelopedamodeltoillustratetherelationshipbetweentheactivitiesinalogisticssystem;theycall it the
logistics cycle
Figure 1-2:The Logistics Cycle

Youwillfirstnoticethatthecycleiscircular,whichindicatesthecyclicalorrepetitivenatureofthe
variouselementsinthecycle.Eachactivity—servingcustomers,productselection,quantificationand
procurement,andinventorymanagement—dependsonandisaffectedbytheotheractivities.
For example, product selection is based on serving customers. What would happen if, for a medical
reason,weselectaproductthatisnotauthorizedorregisteredforuseinacountryprogram?Wewould
needtorethinkourdecisionandorderaproductthatisauthorizedandregisteredforuse.thisdecision
would,inturn,affectourprocurementandstorage,twootheractivitiesinthelogisticscycle.
Theactivitiesinthecenterofthelogisticscyclerepresentthemanagementsupportfunctionsthatinform and
impact the other elements around the logisticscycle.
In the next few sections, you will look briefly at all the elements shown in the logistics cycle, including the—
• major activities in thecycle
• heart of the logisticscycle
• quality monitoring of theactivities
• logistics environment—policies and adaptability of thesystem.
 4 • MAxIMUM-MINIMUM INVENTORy CONTROL SySTEMS 7

Quality monitoring
Itisimportanttounderstandtheroleofqualitymonitoringinensuringanefficientandeffectivelogistics
system.Inthelogisticscycle,noticehowqualitymonitoringappearsbetweeneachactivityofthelogistics
cycle.Qualitymonitoringrefersnotonlytothequalityoftheproduct,butalsotothequalityofthework.
Quality monitoring appears four times in the logistics cycle:
Between Product Selection and Quantification & Procurement. Quality monitoring plays an
importantroleinquantifyingandprocuringtherightproducts,basedontheappropriateproduct
selectionanduse.Productsthatarequantifiedshouldbeonthenationalessentialmedicineslist
(EML),beapprovedandregisteredforuseinthecountry,andbeincludedinappropriatestandard
treatmentguidelines(STGs).Also,serviceprovidersmustbetrainedtocorrectlyusetheproducts
before they are procured and distributed tofacilities.
BetweenQuantification&ProcurementandInventoryManagement.Procurementdecisionsshouldbe
basedonthesupplyplanthatisdevelopedduringquantification.Toensureproductquality,procurement
documentsmustincludedetailedproductandpackagingspecifications,andtheexpectationsforqualityat
thetimeofreceipt.Afterprocurement,programmanagersmustcheckthequalityofhealthcommodities before
they enter the distribution system. Products that are procured should be quickly cleared through
customs,orotherinspections,beforebeingdistributedtofacilities.
BetweenInventoryManagementandServingCustomers.Whileproductsarereceived,stored,anddistributed
(andwhencustomersreceivethem),itisimportanttomonitortheirquality.Furthermore,thequalityofthestorage
conditionsandtransportationmechanismsshouldbemonitored.fteinventorycontrolsystemmustbedesignedso
that,iffollowed,customerswillreceivetheproductstheyneed,atthetimetheyneedthem.
Between Serving Customers and Product Selection. Even after customers receive the products, the
programmustcontinuetomonitorthequality.Programsmustdetermineifcustomersaresatisfiedwith
thequalityoftheproductsandwhetherthecustomersaresatisfiedwiththeservicetheyreceived.Health workers must adhere
to standard treatment guidelines when serving clients; they must also conduct
pharmacovigilance.Qualitymonitoringofboththeproductandtheserviceiscriticaltothesuccessof efforts to promote the
appropriate use of products. Customers should correctly use the products they
receiveandbesatisfiedwiththemandwiththeservicetheyreceived.fteresultsofmonitoringcustomer satisfaction can be
used to inform decisionmakers about changes in product selection and use for the
nextprocurementcycle.Remember,servingcustomersisatthetopofthelogisticscycleandthatmeans getting the right
goods to thosecustomers.
Qualitymonitoringisdiscussedinmoredetailthroughoutthishandbook.Tosatisfythesixrightsand
ensureyoureceivetherightgoods—intherightcondition—tocustomers,youneedtoinstitutequality assurance
mechanisms throughout the supplychain.

adaptability
In addition to the elements in the logistics cycle, two additional factors— adaptability— directly relate to the
logistics system.
adaptability. Adaptability is a characteristic of all successful logistics systems. Logistics systems must be
designedtobeflexibleandadapttoconstantlychangingcircumstances,suchaschangesindemandfor a product, or
changes in funding policies for logistics activities. You cannot redesign the logistics system
everytimeanewproductisintroduced,orwhenconsumptionincreases.Inonesense,adaptability
speakstothelogisticssystem’sabilitytosuccessfullyobtaintheresourcesthatarenecessarytoaddress
changesindemand.Forexample,asdemandincreases,thelogisticssystemneedstobeflexibleenough
torespondtotheincreaseinthequantitiesofproductsthatwillmovethroughthesystem.ftismay
meanbuildingmorewarehousesandpurchasingmorevehicles,orincreasingthefrequencyofresupply
toavoidtheneedforlargerstoragefacilities.ftesystem’sabilitytomeettheseneeds—itsadaptability—
willimpactcommodityavailability.Asgovernmentscontinuetoproposewaystoreformtheentire health sector—such as
8 THELOGISTICSHANDbOOK•APRACTICALGUIDEfORTHESUPPLyCHAINMANAGEMENTOfHEALTHCOMMODITIES

decentralization, integration, or cost recovery—the logistics system must

continuetofunctionwhenreformsareimplemented.Tofunction,alogisticssystemmustbeadaptable.
pipeline.fteentirechainofphysicalstoragefacilitiesandtransportationlinksthroughwhich
suppliesmovefromthemanufacturertotheuser,includingportfacilities,centralwarehouse,regional
warehouses, district warehouses, all SDPs, and transport vehicles, including community-based
distribution networks. See figure1-3.
Likeawaterpipeline,thelogisticssystemhastanksandphysicalpipes(thewarehousesand
meansoftransportation)thatstoreandmovewater(theproduct)tothehome.
Unlike a water pipeline, which is usually continuous, a health logistics pipeline requires
transportation to move supplies periodically from one warehouse to another. In geographically
diversecountries,suppliesaremovedinvariousways,includingsmallboats,buses,andevenbicycles.
leadtime.ftetimebetweenwhennewstockisorderedandwhenitisreceivedandavailableforuse.
Whenlogisticsmanagersevaluatehowwellalogisticssystemismeetingthesixrights,theymeasurethelead
timeandtrytoreduceit.Goodsshouldbeavailabletocustomersattherighttime—beforethecustomerasksfor
theproduct.Leadtimecanbecalculatedwithintheentirein-countrysystem,fromarrivalinporttotheenduser,
betweenspecificlevelsofthesystem,oreventheprocurementleadtimefromwhenaproductisorderedwiththe
manufactureruntilitarrivesinport.

4Maximum-MinimumInventoryControlSystems
Purpose of an Inventory ControlSystem
Yourhomeprobablyhasanumberofinventorycontrolsystems;forexample,themilkinyourkitchen. ftink
about the followingquestions:
• How much fresh milk do you keep in yourhouse?
• How often do you buymilk?
• Whatisthelowestquantityofmilkyouwanttohavebeforeyoubuymore?
• How much milk do you want to have at any onetime?
• Do you consume milk regularly, or does your usefluctuate?
• How many people in your house consume milk? Does this everchange?
• Doyouhaveanyfinancialorotherconstraintswhenyoupurchasemilk,suchaslimitedsupplyor transport?

Althoughyoucanuseanyotherhouseholditeminthisexample,milkisagoodonetocomparewith
healthproducts.Likemilk,healthproductsarestaplegoods—youdonotwanttorunoutofthem,and
eachmayhavemanyuses.Forexample,youcanusemilkatbreakfastwithcoffeeandthroughoutthe
daywhenyoucookandbake.Likewise,antibioticsareusedinavarietyoftreatments.Usingmilkas
anexamplealsodemonstratesthatsimplyhavingalargequantityofanitemdoesnotensurethatyou
willalwayshavesupplies;bothmilkandantibioticsmayspoil(orexpire)overtime.Althoughyoumay
notneedtohaveaformalinventorycontrolsystemformilk,whenyoudrive,youneedamoreformal
systemforensuringthecarhasfuel—inthiscase,afuelgauge.theworst—andmost preventable—
thing is for your car torunoutoffuel.Similarly,theworstthingthat
canhappeninahealthfacilityistohave astockout(i.e.,yourunoutofstock).the
bestwaytoensurethatyoudonotstock outinahealthfacilityistoestablishan inventory controlsystem.
A vehicle’s fuel gauge helps you maintain your stock level.
Figure 4-1: Fuel Gauge
 4 • MAxIMUM-MINIMUM INVENTORy CONTROL SySTEMS 9

While driving, you monitor your fuel consumption from time to time and decide when to purchase
moregas.Byassessingthesupplystatusofthetank,youcancalculatewhentorefuelandhowmuch,
dependingonyourdestination(andperhapsyourbudget).Driversoftenusetheredwarningareaasan
indicatorofwhentobuymorefuel.Inothercases,driversreplenishthetankonaspecificdayofthe
week,regardlessofthelevel,addingenoughfueltoreachfull.Indecidingonanapproach,driversare choosing a form of
inventory control.

Three Types of Max-Min InventoryControl

Systems
Threetypesofamax-mininventorycontrolsystemareapplicabletohealthcommoditylogisticssystems:
forced-ordering, continuous review, andstandard.
Asdiscussedearlier,aninventorycontrolsystemisusedtodeterminehowmuchtoorderorissueand
whentoorderorissue.Foreachofthesystems,thesameformulaisusedtodeterminehowmuchto
orderorissue.The basicdifferencebetweenthesystemsisthetriggerfororderingorissuing,i.e.,when the
order should be placed or an issuemade.
1. Inaforced-orderingsystem,thetriggerfororderingistheendofthereviewperiod.
2. Inacontinuousreviewsystem,thetriggerfororderingiswhenthefacilityreachestheminimumlevel.
3. Inastandardsystem,thetriggerfororderingistheendofthereviewperiodforthecommoditiesthat are at the
minimumlevel.
Inthefollowingsectionswewillreviewhowtocalculateorderorissuequantities,whentheorder/issue
shouldbemade,andthedesignformulasforeachofthethreesystems.
Inthissection,wewillusetheverbsetwhenreferringtothedesignofamax-minsystem,andcalculate
whenreferringtotheroutineimplementationofthesystem.Systemdesignerssetlevelsinamax-min
system,andstorekeeperscalculatethequantitiestoorderorissue.

Determining How Much to Order orIssue

Nomatterwhichinventorycontrolsystemisused,theformulaforcalculatingtheorder,orissue
quantity,isthesame.Thisistruewhetherthesystemisanallocation(push)systemorarequisition
(pull)system.Inanallocation(push)system,thequantitytoissueiscalculated;inarequisition(pull)
system, the quantity to order iscalculated.
Tocalculatetheorderorissuequantity,storekeepersmustbeabletoconvertestablishedstocklevels
(maxandminstocklevels)intotheactualquantitiesofproductneeded.Astorekeepercannot,for
example,sendanordertothecentralwarehousefortwomonthsofstockofanitem.Thecentral
warehousewouldnotknowwhattwomonthsofstockmeans.
Thestorekeeper should use the following formula to calculate the quantity to order or issue for each product—
10 THELOGISTICSHANDbOOK•APRACTICALGUIDEfORTHESUPPLyCHAINMANAGEMENTOfHEALTHCOMMODITIES

Calculating Order or Issue Quantities

Max stock quantity − stock on hand = order/issue quantity

Where…
• maxstockquantity=averagemonthlyconsumption×maxstocklevel
• averagemonthlyconsumption=averageofthequantitiesofproductdispensedtousersorpatientsin the most recent
three months, asappropriate.

Determining When to Place an Order orIssue

Thedifferencebetweenthethreeinventorycontrolsystemsisthetriggerforplacinganorderorissuing
resupply.ftissectionreviewstherulesforthethreetypesofmax-mininventorycontrolsystem:forced- ordering,
continuous review, andstandard.

Forced-ordering max-min system

Eventhoughthismax-mininventorycontrolsystemiscalledforced-ordering,thistypeofmax-min
systemcanbeusedineitherapull(requisition)orapush(allocation)system.Ineitherasystem,the forced-orderingmax-
minsystemactionisdoneattheendofeachandeveryreviewperiod—either
arequisitionismadebythefacility,orafacilitysendsareportwithdatatohelptheirsupplysource determine how much
to allocate to thatfacility.
Storekeeper decision rule
In a forced-ordering system, the facility is resupplied based on the following decision rule:

Forced-ordering max-min system storekeeper decision rule

At the end of each review period, review all stock levels and order or issue enough
stock to bring the levels up to the max.
Place an emergency order if the stock level for any item falls below the emergency
order point before the end of the review period.

Inaforced-orderingmax-minsystem,storekeepersdonotusethemin,becausetheyalwaystakeaction
attheendofthereviewperiod.thereviewperiod,then,isthetriggerforordering.
Storekeepersmustbecarefulnottorunoutofstock.therefore,inadditiontoapplyingthedecision
ruleforordering,theyaregivenanEOP.StorekeeperswillknowthattheyhavereachedtheEOPifthey
frequentlyassessstock.thisiswhy,insystemsthatplaceordersquarterly,stockstatusshouldbeassessedmoref
requently.theresultsofastockstatusassessmentalertthestorekeepertotheneedtoplacean emergency
order for any item that has reached theEOP.

Continuous review max-min system

Of the three types of inventory control, continuous review max-min inventory control is probably
the least appropriate for most health programs; but when it is appropriate, it can be very effective.
Comparing continuous review with forced-ordering max-min systems shows how small variations in
design can change the way an entire system functions.

Storekeeper decision rule

 4 • MAxIMUM-MINIMUM INVENTORy CONTROL SySTEMS 11

Inacontinuousreviewsystem,thestorekeeperistoldwhentoorderandhowmuchtoorderbasedon the
following decisionrule—

Continuous review max-min system storekeeper decision rule

Review the stock level of each item every time you make an issue. If the stock level
is at the min, or has fallen below the min, order enough stock to bring the level up
to the max.

In a continuous review system—

• thereviewperiodisnotfixed;adecisionaboutwhethertoorderismadeeachtimeaproductisissued.
• the storekeeper must know both the max and min stocklevels.
• thestorekeeperdoesnotneedanemergencyorderpoint,becauseanordercanbeplacedanytime stock
isneeded.
• thestorekeepermustassessstockstatuseachtimeanissueismade.Inasystemwithmanyitems,
thismeansthatthestorekeeper’sworkloadincreases;inaforced-orderingsystem,thestorekeeper
needstoassessstockstatusonlywhenlevelsappearlowenoughtowarrantanemergencyorder.
• thestorekeepermustbeabletoorder(pull)stockfromthehigherlevel,becausethestorekeeper
istheonlyonewhocandeterminewhethertheminstocklevelhasbeenreached.Acontinuous review system
must be a pullsystem.

Continuous review system variation: two bin

Onevariationofcontinuousreviewmax-minsystemsisthetwobinsystem.
Inthiscase,therulesforthestorekeeperandconsiderationsforthe
designerarethesameasforanyothercontinuousreviewsystem.
Thedifferencebetweenaregularcontinuousreviewsystemandatwobinsystemisthewaythestorekeeper
determineswhentheminhasbeenreached.Inthetwobinsystem,thestorekeeperhastwoequal-sized
bins(containers,boxes,cartons,sacks,orotherreceptacles)ofeachindividualproduct(i.e.,notakit
ofproducts).Whenthefirstbinisempty,theminhasbeenreached.Anorderisplacedforanotherbin
(i.e.,abin’sworthofstock),andthestorekeeperbeginsissuingfromtheremainingbin.Thearrivalofa
newbinbringsthestockleveluptothemax.Thetwobinsystemisdesignedtobeextremelysimplefor
theprovider.theproviderdoesnotneedtomakecalculationsandpaperworkisminimal.Inaneven
simplerversionofthetwobinsystem,anorderformisincludedatthebottomofeachbin;theprovider only needs to sign and
date the form before postingit.
Atwobinsystemdesigner’smostchallengingtaskistochooseanappropriatebinsize.Theminisequal
toonebin,andthemaxisequaltotwobins;butbecausethebinsizeisfixed,binsmayneedtobe
replacedmorefrequently,ifdemandincreases.Thebinsmustallowforsomeexpansionintheprogram without risking
product expiration.
Ifthestocklevelforanyitemfallsbelowtheemergencyorderpointbeforetheendofthereviewperiod, place an
emergencyorder.
Standard max-min system
Theoretically,thestandardversionofthemax-minsystemisthemosteffectivebecauseitcombinesthe
decisionrulesofbothforced-orderingandcontinuousreviewand,therefore,sharestheadvantagesofboth.
However,italsohasdisadvantages.Undersomecircumstances,thestandardversionmaybetheonlychoice.
Tounderstandwhy,weneedtodiscussboththeimplementationanddesignofstandardmax-minsystems.

Storekeeper decision rule

Inastandardsystem,thestorekeeperisinstructedwhentoorder.orwhensuppliesshouldbeissuedand
howmuchtoorder/issue,basedonthefollowingdecisionrules—

Review all stock levels at the end of each review period. for products that
12 THELOGISTICSHANDbOOK•APRACTICALGUIDEfORTHESUPPLyCHAINMANAGEMENTOfHEALTHCOMMODITIES

are at or have fallen below the min, order/issue stock quantities up to their
max levels.

In a standard system—
• Whentomakeanorderorissuenewstockisbasedontheminstocklevelandthereviewperiod.this
meansthatthestorekeepermustknowthemin,max,andreviewperiod.
• thestorekeeperwillneedanemergencyorderpointtoensurethatastockoutdoesnotoccurbetween reviewperiods.
• thestorekeepermustassessthestockstatusattheendofeachreviewperiodandatanytimelevels appear to be
low enough to warrant an emergencyorder.

Setting Max-Min Levels

Foranymax-minsystem,youshouldsetthemaxandminlevelshighenoughtoavoidstockouts,yetlow
enoughsoyoudonotincreasetheriskofexpirationordamage.Itispossible,andactuallylikely,that
thestockbalancewill,attimes,gobelowthemin;but,ideally,itshouldnevergobelowtheemergency
point.Toachievethis,youmustsetaminlevelhighenoughtoensurethatthefacilitynevercompletely
runsoutofstock.Atthesametime,youmuststillsetthemaxlowenoughtoensurethatspaceinthe
storeroomisadequateandthatthestockdoesnotexpirebeforeitcanbeused.
thegoalistoavoidstockoutsofessentialhealthproducts.Moreover,thesystemshouldensurethatemergency
ordersarerarelyplaced,becausesuchordersaretime-consumingand,generally,expensivetofill.
Youbegintheprocessbysettingyourminstocklevel.Tosetyourmin,youmustdeterminethreekey
components:leadtime,reviewperiod,andsafetystock.

Step 1. Determine your lead time

Leadtimeisoneofthemostimportantdeterminationsforasystemdesignertocalculate;itisthetime
betweenwhenstockisorderedorissuedandwhenitisdeliveredandavailableforuse.theleadtimestock
level,therefore,isthenumberofmonthsofstockusedafteranorderisplaced,oranissuedetermined,
andbeforeyoureceivetheneworder.theminclearlymustincludetheleadtimestocklevel,because
youwillneedstocktodistributeafteryouplaceanorder,orsendareportthatwillbeusedtocalculate
anissue,andarewaitingforittocomein.Ifittakesamonthfromthetimeyouplaceanorderuntilyou
receiveandunpackyournewstock,theminmustbeatleastonemonth.
Becauseleadtimesarevariable,accuratelycalculatingtheleadtimestocklevelcanbedifficult.Asadesigner,
youcouldcalculatetheleadtimestockleveltoequaltheaverageoftheleadtimelevelsforthepasttwo
orthreereviewperiods,fortheaveragefacility.Determiningtheaveragecanbetricky.Ifyouusedthe
leadtimeforurbanhealthfacilitieslastmonth,forexample,tosettheleadtimestocklevelfordistrict- to-
facilitydeliveries,thelevelmaynotbeappropriateforruralfacilities.Instead,youshoulduseanaverage
forallfacilitiesatthesamelevel,ifleadtimesarenotsubstantiallydifferentamongfacilities.Whenin
doubt,assumeyourleadtimeislonger.Leadtimesshouldbedeterminedforeachlevelinthepipeline.
Consider,however,asystemforwhichtransportisnotroutinelyavailable,orwhereweatherconditions
(e.g.,arainyseason)makeselectedroadsimpassable.Insuchsituations,thedesignermustusethelongest
leadtimeobservedbetweenthetwoleast-reliablefacilities,orsomefacilitieswillstockout.ftiswill
ensurethat,underalmosteveryconceivablesituation,astockoutwillnotoccur.But,increasingthelead
timestocklevelincreasestheminand,ultimately,thelengthofthepipeline.

Step 2. Set the review period

thishandbookdefinesareviewperiodastheroutineintervaloftimebetweenassessmentsofstocklevelsto determine
if an order should be placed or an issue of resupply made.
Insomeprograms,thesystemdesignercannotsetthereviewperiod.Itmaybebasedonexisting
governmentreviewperiods,oritmaycoincidewiththereportingperiod,usuallymonthlyorquarterly.
Gatheringdataforaroutinereportisusuallyanexcellentopportunitytoassessthestatusofsuppliesand order
 4 • MAxIMUM-MINIMUM INVENTORy CONTROL SySTEMS 13

or issuesupplies.
Reportingperiodsmaybemorefrequentthanreviewperiods.Forexample,aclinicmaysendreports
inmonthly,butonlyplaceordersquarterly.thisisthecasewhenitisdifficulttoresupplyclinicsmore often—
forexample,whentransportationandroadconditiondifficultiesoccur.
Indesigningamax-minsystem,itisrecommendedthatyouusereportingperiodsasthereviewperiods.
Bylinkingreportingandordering,logisticsmanagersaremorelikelytoreceivetheinformationneeded
forcentral-leveldecisionmaking.SDPsaremorelikelytosendintheirreportswhentheygetsomething
inreturn(i.e.,resupplycommodities).ftevalueforreportingisseenwhencommoditiesaresupplied.
Remember,inacontinuousreviewsystem,thetriggerfororderingiswhenproductsreachtheirminstock
level(nottheendofthereviewperiod).So,eventhoughfromthestorekeeper’spointofview,thereisno
fixedreviewperiod;asasystemdesigner,youwanttosetareviewperiodaboutasoftenasyouwouldlike
tohaveordersprocessed.Forexample,ordersshouldnotbeplacedasoftenasweekly,norasinfrequently
asonceayear.Asthedesigner,youshouldchooseadesiredreviewperiodtofactorintothemin.the
desiredreviewperiodisalsousedtohelpsetthesafetystock,ifnobetterinformationisavailable.
14 THELOGISTICSHANDbOOK•APRACTICALGUIDEfORTHESUPPLyCHAINMANAGEMENTOfHEALTHCOMMODITIES

Step 3. Set the safety stock

Safety stock helps protect against any unplanned situations, such as delays in deliveries, increased
consumption,orproductlosses,includingtheftorexpiry.Othertermsforsafetystockincludesecurity
stockorbufferstock.thesafetystocklevelisoneofthemostimportantdecisionsthesystemdesigner
mustmake.Howshouldthesafetystocklevelbeset?

Safety stock is the buffer, cushion, or reserve stock kept on hand to protect against
stockouts that are caused by delay in deliveries, increased consumption, or product
losses.
As a general guideline, the safety stock level should equal at least half of the review period.
Safety stock ≥ ½ review period

Howhighshouldthesafetystockbe?Onlythedesignerandpersonnelinthesystemassessingconfidence
inthesystemcandeterminethis.Personnelmustbelievethatthesafetystockissufficienttoprevent
astockout,ortheymaybegintoordermorestockthantheyactuallyneed.Whendemandisstable,
andthelogisticssystemfunctionswell,thesafetystockcanbelowerbecausethereislessuncertainty.
Whendemandisunstable,orthelogisticssystemdoesnotfunctionwell,thesafetystocklevelshould
besethigher.Inanewsystem,thedesignershouldsetthesafetystockhigher,monitorthesystem’sperformance,andlowerth
esafetystock,ifpossible,asdataonactualfluctuationsindemandandsupply
becomeavailable.Remember,however,thatsettingahighersafetystockincreasesthequantitieskeptinstock,which,insm
allwarehouses,mayresultinexpiredordamagedproducts.Havinghighersafety
stockalsomeansthatmorefinancialresourcesarebeingheldininventory.

Step 4. Set the minimum

Afterdeterminingtheleadtime,settingthereviewperiod,andsettingthesafetystock,youcannow
settheminstocklevel.Remember,theminstocklevelshouldapproximatelyequalthestocklevelyou
wantthefacilitytohaveattheendofanormalreviewperiod.Settheminhighenoughtoaccountfor
thenormalleadtimeneededtoreplenishstockandtocoverunexpecteddelaysanduncertaintiesinthe
logisticssystem.Takeintoaccountthefollowingfactors:
• Lead time may bevariable.
• Consumptionmaybehigherthanexpected,thereforeyoumayneedadditionalstock.
• Deliveries may belate.

theformulaforsettingtheminstocklevelforforced-orderingandcontinuousreviewisthesame.there
isaspecialconsiderationforstandardsystems,whichisdiscussedbelow.
Forforced-orderingandcontinuousreviewmax-minsystems,theformulaforsettingtheminstocklevel is asfollows:

Min level formula (forced ordering and continuous review) Min

stock level = lead time stock level + safety stock level

Forastandardsystem,theformulaforsettingtheminisalittledifferent.Inthestandardsystem,orders
areplacedattheendofthereviewperiod,butonlyforproductsthathavereachedthemin.Ifastoreis
justabovemin,youwouldnotplaceanorderattheendofthereviewperiod,andyouwouldnothave
anotherchancetoorderuntiltheendofthefollowingreviewperiod.Consequently,theminmustbeset
higher.Forthestandardsystem,theformulaforsettingtheminstocklevelisasfollows:
 8 • STOrageanDDiSTribuTiOn 15

Min Level Formula (standard)

Min stock level = lead time stock level + safety stock level + review period
stock level

Dostorekeepersneedtoknowthemin?Toanswerthis,thinkaboutthetriggersforordering/issuingin each of
thesystems.
• Inaforced-orderingsystem,storekeepersdonotneedtoknowthemin,noraretheyconcernedabout
whatitistheonlyneedtobringthestockleveluptothemaxattheendofthereviewperiod.Why, then,establishamininaforced-
orderingsystem?First,you,asthedesigner,determinethemaxbasedon
themin,asdescribedbelow.Also,theministhestocklevelyouwouldlikethefacilitytohaveonhandat
theendofanormalreviewperiod—thatis,areviewperiodwhennothingunexpectedhasoccurred.
Itmustbehighenoughtopreventstockoutswhenunexpectedconsumptionorothereventsoccur.
• Inacontinuousreviewsystem,thetriggerfororderingiswhenproductshittheminstocklevel,so the storekeeper
definitely needs to know themin.
• Similarly,inastandardsystem,thetriggerfororderingorissuingisattheendofthereviewperiod,
butonlyfortheproductsthathavereachedmin.therefore,thestorekeepermustknowthemin.

Step 5. Set the maximum

After the min has been set, setting the max is relatively easy. the formula for setting the max is—

Max Level Formula

Max stock level ≥ min stock level + review period stock level

Yousetyourminpreviously,andyourreviewperiodisfixed(probablymonthly,bimonthly,orquarterly).
Simplyaddthetwotofindthemax.thegreaterthanorequaltosymbol(>)indicatesthatyoumaywant
tosetthemaxlevelhigherthanthesumoftheminandreviewperiodstocklevel,whenitislogicallyand
economicallysensibletostorealargerquantityataspecificlevelinthesystem.
Step 6. Set the emergency order point
Asasystemdesigner,youshouldsetmaxandminlevelshighenoughtoavoidstockoutsyetlowenoughthat
youdonotincreasetheriskofexpirationordamage(ifthewarehouseistoofull,theriskofdamageincreases).
Onrareoccasions,however,afacilitymayfinditselfverylowonstockbeforeitistimetoplacearoutineorder.
Whenstocksreachtheemergencyorderpoint,thestorekeepershouldplaceanemergencyorder.
theEOPshouldnotbesettoequalthemin,becausetheminincludesthebufferstock.theEOPcouldbeashigh
astheleadtimestocklevelifurgentorderstakeaslongtoprocessasaroutineorder.Inmostcases,however,itshould
bepossibletoissuestockfasterthannormalinurgentoremergencysituations.thisiscalledtheemergencyleadtime.
the EOP is defined as—

Emergency order point >longest emergency lead time

Toavoidamistakeintimingthedeliveryofanemergencyorder,thedesignershouldsettheEOPequal to or greater than the

longest emergency leadtime.
16 TheLOgiSTicShanDbOOk•aPracTicaLguiDefOrTheSuPPLychainManageMenTOfheaLThcOMMODiTieS

Decimal dilemma: Safety stock and lead time

When setting the lead time or safety stock, your answer may include half, or some other portion, of a
month. for example, when review periods are quarterly (every three months), the safety stock level is
set to at least one and a half months of stock. Therefore, if the lead time is one month, the min will be
two and one-half months. It is difficult to work with partial months, however, and difficult to teach
storekeepers decision rules based on partial months.
The best solution is to add lead time and safety stock and then round up to the next full month.

8 • Storage

Figure 8-1: The Logistics Cycle

Storage
Productsarestoredateveryfacilityinthepipeline;almosteveryoneworkinginthesupplychainisresponsible
forproductstorage.Storageensuresthephysicalintegrityandsafetyofproductsandtheirpackaging,
throughoutthevariousstoragefacilities,untiltheyaredispensedtoclients.Animportantgoalinstorage
ofhealthproductsisthecorrectstagingofhealthproductstoensurethatorderscanbefilledanddistributed.
Regardlessofstoragefacilitysize—fromasmallhealthcentertoacentralwarehouse—themainoperational
activitiesforstorageareverysimilar.Howcomplextheseactivitiesbecomewillvarybasedonthevolume
ofproductstobemanagedandstoragefacilitysize;aswellasparticularrequirements,suchascoldstorage.
 8 • STOrageanDDiSTribuTiOn 17

Key storage activities

Materialreceivingandincominginspection:thisactivityoccursduringtheunloadingofvehiclesand
includesthevisualinspectionofdeliveredpackagestoensurethatproductswerenotdamagedduring
transport.Itisalsoimportantduringthisactivitythatyouverifythequantitiesofproductsreceived
againstthepackingsliporshippinginvoice.Reportanydiscrepancy.
Putaway:thisprocessincludesmovingproductsfromtheunloadingdock,orreceivingarea,afterthey
arereleasedforstorage;andassigningthemtotheirdesignatedstoragearea.Itisimportantthateveryproductmovedintoorou
toftheracks,shelves,oranystorageareaiscorrectly
recordedonthestockkeepingrecords;aninventorycontrolsystemhelpsyoumanagethem.Whetherthe
processismanualorautomated,thebestpracticeistoputawayproductsthesamedaytheyarereceived.
Pickingandpacking.Tofillshippingrequests,productsmustbelocated,pulledfrom
inventory,andpreparedforshipment.Insomecases,productsneedtobepackedintoshipmentcontainers or palletized; and,
sometimes, bundled with other products into kits before being shipped. When any
packingorrepackingactivitytakesplace,thenewpackagemustbelabeledcorrectly.
Shipping:Toguaranteegoodshippingaccuracy,thelistofproductsandtheirquantitiesmustbechecked
againstshippingorders,orrequests,priortopreparingtherequiredshippingdocumentsandloadingof
thecargofortransport.Toavoiddamageduringtransit,productsmustbearrangedandsecuredwithinthe
vehicleusingtherequirementsandconditionsforadequateloadingandtransport.

Shelf life
Tomaximizetheproducts’shelflifeandmakethemreadilyavailablefor
distribution,youmusthaveproceduresforsafestorageforallproducts.

Storage Spacerequirements
Properstorageincludestheeffectiveuseofstoragespace.Iftoomuchspaceisunused,astoreroom
isunderusedandmoneyiswasted.But,ifproductsarecrammedintotoosmallaspace,theymaybe
damagedbecausegoodstorageproceduresarehardertofollow. thus,warehousemanagersmustlearn
howtocalculatethespaceneededtostoreincomingshipmentsandhowtocalculateoverallstorage
requirementsforthewarehouse,aswellasanideallayout.
Todevelopaworkablelayoutandtocalculatestoragerequirementsatalargewarehouse,whichmay
servemultiplepurposes;itisimportanttoidentifythevariouswarehouseactivitiesthatwouldinfluence
layoutplanning,determinethespacerequirementsandideallayoutforeachactivity,andthenreconcile space requirements
with any constraints. To optimize storage space, larger warehouses may require
pallets,racking,shelving,and/ormaterial-handlingequipment,suchasforklifts.
To determine space requirements, you need to consider—
• totalstoredpalletequivalents,bycommodity,basedonapeakmonth
• stored palletorientation
• required space for receiving, inspection, andquarantine
• required space for picking, packing, andshipping
• typeofstoragemedia,percommodity(i.e.,palletrack,gravityflowrack,shelving)
• required operation aisle distances
• type of material handling equipmentrequired.

Some issues to consider before purchasing racking or shelving include—

• product volume (size and weight ofloads)
18 TheLOgiSTicShanDbOOk•aPracTicaLguiDefOrTheSuPPLychainManageMenTOfheaLThcOMMODiTieS

• pallets/containers (type, condition, dimensions, andweight)

• equipmentclearance(standardheightofequipmentandheightofequipmentextensions,suchasforklifts and
loadheights)
• building dimensionswarehouse floors (stress and strengthrequirements).

Forsmallerstorerooms,youwillprobablynotusepalletsbutwilluseshelvingratherthanracks;youstill need toconsider—

• total product volume, by commodity, based on a peakmonth
• required space for receiving, picking/packing, andshipping
• organizationandlabelingofcartonstoensureaccessibilityandfirst-to-expire,first-out(FEFO)
• required operation aisle distances.

Yourcalculationsbeginwiththetotalnumberofunitsfortheproductyouneedtostore.Ifyouare
calculatingspaceforasingleshipment,usethenumberofunitsinthatshipment.Ifyouarecalculating
spacerequirementsfortheentirequantityofaproductthatyouneedtobeabletokeepinyourstore,
usethemaximumquantity,ascalculatedinchapter4(maxstocklevel×AMC).Ifyouaremakinga long-
termplanforyourstorageneeds,youmustusethelargestquantityyoumightneedtostoreduring theperiodofyourplan—
i.e.,themaxleveltimesthelargestAMCprogramplannershaveforecast.
In addition to knowing the total number of units to be stored, you or the storeroom manager needs to know—
• number of units in a carton (exteriorpackaging)
• size of thecarton.
If you do not have this information, you should request it from the supplier.
Tocalculatetheamountoffloorspaceneededtostoreanyproduct,followthestepsbelow

Table 8-3. How to Calculate Floor Space

step
1. begin with the
number of units
expected in a single
shipment.
Or
begin with the
maximum quantity of a
product you expect to
store if calculating
overall storage
requirements for the
warehouse.
2. Divide the number of units
to be stored by the number of
units in a carton.
3. Multiply the number of
cartons by the volume of a
carton.
4. Divide the total volume by
2.5 m or 8 ft.
5. Multiply the floor space
needed to store the product
by two.
what this tells you
Most shipments are expressed in units.youneed the number of
units expected to tell you the total amount you should place
in a stack.
Thistellsyouthenumberofcartons.Sometimes,theshippingdoc
uments
listthenumberofcartonsintheshipment.insuchcases,justskipthiss
tep.
you need to know the volume per carton.Obtain this
information from the supplier or donor.Theanswer is the total
volume of space needed to store
theproduct,butitdoesnottellyoutheamountoffloorspaceneeded.
Whatever the volume of the cartons, you do not want to
stack them
higherthan2.5mor8fthigh.Dividethevolumebythemaximumh
eight todeterminethefloorspaceneededtostoretheproduct.
Double the amount of floor space to allow for handling space,
aisles, and other variables.Thisis the total amount of floor space
needed.youcan multiply by a number larger than 2 to allow
more space in which to create a handling area for new or
outgoing shipments. in very small facilities, where smaller
quantities of product are kept, you may not need as much
handling space, so you would multiply by a number smaller
than 2.
 8 • STOrageanDDiSTribuTiOn 19

6. calculate the square Theansweristhedimensionsoftheneededspace,assumingthesp

root to get aceis
thedimensionsofthetotal square.Ofcourse,maystoreroomsarenotsquare,forexample,36s
amount of floor space q.m isasquareof6mx6m.itcouldalsobeanareaof9mx4m.
needed.youcan also
estimatethedimensionsu
singyour knowledge
ofmathematics.
7. repeat these calculations you can calculate steps 1–6 for each product separately to
for all products to determine estimate the floor space needed for each product separately. if
the total amount of storage you only need to know the total space requirements for the
space you will need. store, follow steps 1–3 above for each product, then total all
the volume requirements and perform steps 4–6 on this total.

Bycalculatingspacerequirementsforfutureshipments,youorthewarehousemanagerscandetermine
whethertheyhaveadequatespacetoreceivetheshipment.Ifsufficientspaceisnotavailable,youshould
asktoreceivetheorderinseveralsmallshipments,insteadofonelargeone.However,largeshipments
areusuallylessexpensive,andsomedonorsmayprefertoprovidetheentireforecastedneedinasingle
shipment.Youcanconsideralternatives,suchasrentingadditionalspace,whenspaceisnotavailable.
Whenprocurementcontractsareset,itwouldbeadvisabletosetthesizeofallowableshipmentsand
includeashippingscheduleinthecontract.Knowinghowtocalculatestoragespacebeforeshipmentsarrive can save a
program time andmoney.
Tousetheformulatocalculatethespaceneededinanentirewarehouse,beginwiththemaximum
quantityofproductexpectedtobestored,insteadofthenumberofunitsexpected.Youwillusually
wanttoaddextraroomforloadingandunloadingdocks;qualityinspectionandquarantine;packing,
preparingshipments;andofficesforadministrativestaff.
 10 • Logistics Systemdesign

Logistics System designProcess

Invirtuallyallhealthprograms,productsmovefromoneplacetoanother.thewaytheproductsmove
maynotberational,thequantitiesofproductsthatmovemaynotbebasedonactualdata,orthe
methodsusedtomovetheproductsmaynotbestandard.thepurposeofdesigningalogisticssystemis
tostandardizetheflowofcommoditiesandinformation.
thetechnicaldesignofalogisticssystemisonepartofalargerprocess.theoverallprocess
beginswithanassessmenttodeterminewhetherthesixrightsarebeingmetandifthelogisticssystem
needstobedesigned/redesigned.Afteryoumakeyourdecision,thenyouplanandconductthedesign
activity.Systemmanagersshoulddevelopstandardoperatingprocedures(SOPs)todocumentdesign
decisionsandtouseasajobreference.Aspartoftheimplementation,curriculumisdevelopedbased
ontheSOPs,andthesystemisrolledout,usuallyusingatraining-of-trainers(TOT)approach.
Afterthesystemisimplemented,youwillneedtocontinuallymonitorthesystemtoensurethatthe
improvements are having the intendedimpact.
Figure 10-1: Logistics System Design Process

Steps in designing the logistics system

Eachstepintheprocessisdescribedbelow,includingkeyquestionsthatmustbeaddressedateachstep.
Additionalguidanceandtipsrelatedtothetechnicalaspectsofthelogisticssystemdesignarealsoprovided.

Complete an assessment and determine the need fordesign.

Yourfirststepshouldbetoconductaformalorinformalassessmenttoidentifysystemstrengthsandweaknesses
andtodeterminewhetheryouneedtodesignalogisticssystem,orredesigncertainaspectsofanexisting
system.Inmostcases,alackoflogisticsproceduresandtoolsandpoorfunctionalityisobvious;however,
anassessmentisstillnecessarytoinformthedesignofthenewsystem.Designing(andimplementing)a
systemrequiressignificantresources,bothtimeandfinancial;therefore,ifit’snotbroken,don’tfixit.
Beforebeginningasystemdesign,youneedtounderstandthecontextinwhichthesystemoperates/willoperate.thisenabl
esyoutounderstandwhatyoucanandcannotincludeinyoursystem.
Afteryoudeterminethatthelogisticssystem(orlackofalogisticssystem)isthecauseofanexistingproblem,
thenitistimetodesignasystem.
Important questions at this stage include—
• Howdidyouarriveatthedecisiontobeginasystemdesign(orredesign)?
 10•LOgiSTiCSSySTEMdESign 21

• What system are you being asked todesign?

1. Plan and conduct the system designactivity.
Youshouldconductthesystemdesigninanorganizedandparticipatorymanner,preferablyduringa
workshop. Perhaps most critical to the success of the design is identifying the appropriate people
to participateinthedesignprocess.thesystemshouldbedesigned,atleastinpart,bythecustomersofthe
system—everyoneinvolvedinimplementingthesystem,aswellasthosewhowillcontributeresources
tooperatingthesystem.Designersshouldcomefromeverylevelofthesystem:ministryofficialsand other
partners at the central level, as well as personnel from intermediary levels (region, district) and
healthcenters.Toachievethegoalofimplementingthesystem,youmustengagetheusersofthesystem
inthedesignprocess.Typically,asystemdesignrequiresabout15to20participants;theworkshop
should last approximately fivedays.
Insomecases,itcanbeappropriateforasmallgroupofpeopletodoapreliminarydesign,andthen
presentoptionsforthedesigntoalargergroupofstakeholders.

During a typical system design workshop, you will make decisions about all the major technical
componentsofthesystem,specificallytheLMIS,ICS,andstorageanddistribution.Basicelementscovered in the
design activity include thefollowing:
Reviewbasiclogisticsprinciples.Startwithareviewofbasiclogisticsprinciples;thiswillensurethat
allmembersofthedesignteamhaveacommonunderstandingofthelogisticsprinciplestheywill
applyduringthedesignactivity,andtheywillhaveacommonvocabulary.Afterlogisticsbasics,give
participantstimetoapplytheirnewknowledgeindescribingtheirownsystem.
Agreeonsystemparametersandboundaries.thisincludesreachinganunderstandingonanyalready
existingelementsthatcouldbeopportunitiesfortheneworredesignedsystem,parametersthatcanor
cannotbechanged,andanyotherparametersthatneedtobeconsideredduringthedesignprocess.
Designthepipeline.Ensurethatthepipelineshowsthelevelsinthesystemandtheflowofinformation and
commodities.
DesigntheLMIS.EnsurethattheLMISincludesdraftsofallrecordsandreports,includingfeedback
reportsalreadyinthesystem.thedesignoftheLMISisintegrallylinkedtothedesignoftheICS.Afterdecidingonthe
ICS,itisimportantforyoutogobacktotheLMISthatwasdesignedandensurethat
thetwoaspectsofthesystemstillworkwelltogether.
DesigntheICS.theICSshouldincludemax-minstocklevels,emergencyorderpoints,andreviewperiods
foreachlevelinthesystem.Youshoulddecideonwhichlevelsinthepipelinewillrequisition(pull)and
whichwillallocate(push)products.Toassistinthisdesign,youshoulddosomeanalysisoftypicallead
timeinadvanceusingkeyinformantinterviewsandareviewofstockcardsandtransactionrecords.
Identifystorageanddistributionrequirements.Ensurethatthestorageanddistributionrecommendations conform to the
suggested LMIS andICS.
Identifyrolesandresponsibilities.Ensurethateveryoneinvolvedinthehealthsystemhasclearlydefined roles and
responsibilities.
Developanimplementationplan.thisworkshopdesignteamshouldprovideinputabouttheappropriate
timingforimplementation,aswellastherequiredpreparations.thisimplementationplanshould consider the
points noted in step 3below.
Undoubtedly,outstandingissueswillnotberesolvedduringtheworkshop.Documenttheseandfollowup,as
appropriate.Ifanyissuesmightpreventthesystemfromworking,youmusthighlightandaddressthem.
Aspartofthedesignstep,youshoulddevelopanSOPmanualthatdocumentsallthestepsinthesystem. It should be drafted
immediately after the system has been designed. After the SOPs are developed,
theyarereviewedbystakeholders,changesaremade,andfinalapprovalissought.ftisapprovalprocess involves
convening stakeholder meetings to ensure the approval of all stakeholders; the ministry of health should own
and endorse thisdocument.
2. implement the system.
Implementingalogisticssystemisadynamicprocessthatrequiresongoingtraining,monitoring,
andevaluation.ftesuccessofasystemdesignisdefinedbyhoweffectiveandefficientthesystem
isinpractice.Nomatterhowwellitisdesigned,thesystemwillfailwithoutawell-planned,
properly resourced implementation plan. To maintain the momentum created in the
workshop,
theimplementationphaseshouldbeginimmediatelyafterthesystemdesigniscomplete.An
implementationplanincludeskeyactivities,timelines,androlesandresponsibilities.Itshouldalso
include answers for the followingquestions:
• What model of training will beused.
• Howmanysitesneedtobetrained.Howmanyindividualsneedtobetrained.
• How many trainings, in total, areneeded.
• Howwillthetrainingsbescheduled(i.e.,whatregion/district/state/provinceshouldyoustartwith).
• Who will conduct thetrainings.
• Willthesystembeimplementedallatonceorthroughapilot/phase-inperiod.
• Whatresourcesareneededtoimplementthesystem(newLMISforms,computers,trainingofstaff,etc.).

Pipeline: Flow of commodities and information

Oneofthefirststepsinthedesignprocessistodraftanoverallpipeline,i.e.,thesystemthroughwhichthe
commoditieswillflowdownfromtheupperlevelstotheclientsandtheinformationwillflowthroughout
thesystem.Ingeneral,thefewerthenumberofstepsintheresupplyprocessandthefewerlevelsinthe
pipeline,thebetter.themovementofcommoditiesdownthroughthesystemshouldbebasedongood
commoditymanagementpractices,notpoliticalorotherconsiderations.However,ifyouareworkinginthe
contextofanexistingsystem,theflowofcommoditiesmusttakeintoaccountanyelementsthatyoucannot
change;evenif,fromacommoditymanagementperspective,theresultingflowisnotthemostefficient.

Logistics Management Information System (LMIS)

Whenyoudesignalogisticssystem,youmustcollecttherightdatathatareneededtomakelogisticsdecisions
andyoumustgetthatdatatothepeoplemakingthosedecisions.Furthermore,youdonotwantpeople
spendingtheirvaluabletimecollectingandreportinginformationthatwillnotbeusedformakingdecisions.
The system will require the following types of records:
 Stockkeepingrecordskeepinformationaboutproductsinstorage(collectstockonhandandlossesand
adjustments data).
 Transactionrecordskeepinformationaboutproductsbeingmovedthroughthesystem.
 Consumptionrecordskeepinformationaboutproductsbeingconsumedorused(collectconsumption
data).Ifconsumptionrecordswillnotbeused,systemdesignersmustensurethatconsumptiondata is collected and reported up
thesystem.
Inadditiontotherecordsusedtocollectlogisticsdata,theLMISmustalsoreceivesummaryreportsto
reportconsumption,stockonhand,andlossesdatatothehigherlevelsofthesystem.theLMISshould
alsoproduceoneormorefeedbackreports,whichwillcommunicateinformationupanddownthe
supplychain—fromfacilitiesthroughtocentral-levelstakeholders.
Someoftheserecordsandformsmayalreadybeavailable;ifso,youneedtoverifythattheycanbeused
asis.Otherrecordsandformsmayexistbuttheymayneedtoberevised.And,youmayneedtocreate new
records or forms for the firsttime.

Inventory control system (ICS)

Whendesigningalogisticssystem,thetypeofmax-mininventorycontrolsystemthatyouchoose
willdictatehowandwhencommoditieswillberesuppliedthroughoutthesystem.theICSandthe
relatedmax-minstocklevelsforthecommoditieswillalsohaveadirectimpactontheresourcesneeded
toimplementthesystem,includingwhatresourceswillbeneeded(storagecapacity,vehicles,human
resources,time),aswellaswhenandwheretheseresourceswillbeneededandhowtheyareused.the
typeofmax-minsystemyouchoosewillalsodictatesomeoftheLMISrequirements.

 Basedontheexpectedleadtimes,reviewperiods,andsafetystocklevels,isthetotallengthofthein-country
pipelinetoolongfortheproductwiththeshortestshelflife.Canitbeshortened.
 Whoshoulddeterminetheresupplyquantitiesateachlevelofthepipeline.
 10•LOgiSTiCSSySTEMdESign 23

 CanoneICSserveallproducts,oraredifferentsystemsneeded,dependingonthecharacteristicsof the products or

geographical diversity of thecountry.
 Canthebudgetsupportthequantitiesofcommoditiesthatarerequiredtomaintaintheestablished max-min
stocklevels.

AfteryoudesigntheinitialICS,maptheflowofcommoditiesthroughoutyourpipeline,includingthe max-
minstocklevels.Ensurethattheoveralllengthofthetotalpipelinedoesnotexceedtheshelflifeof
theproductsmanagedbythesystem.Youshouldalsoverifythattheleadtime,safetystock,andreview
periodstocklevelsarecorrectlycalculatedforthemax-minstocklevels.

Storage and distribution

theinventorycontrolsystemthatyouchooseforyoursystemwilldictatethevolumeofcommoditiesthat
willbestoredanddistributedthroughyoursupplychain.Ifyouhaveshorterreviewperiods,thenthe
storagespaceneedswilldecrease,butthetransportationneedswillincreasebecauseyouwillbemoving
smallerquantitiesofproductsthroughthesystemmoreoften.Ifyouhavelongerreviewperiods,then
thestoragecapacityrequirementswillincrease,aswilltheamountofmoneybeingtiedupininventory;
youwillneedlargervehiclestomovelargervolumesofstock,althoughdeliverieswillnotoccurasoften.

Storagespacerequirementsmustbedeterminedforeachfacility,ateachlevel,ofthesystem;facilities
musthavethestoragecapacitytostoreuptothemaximumstocklevelsetforthatlevel.Transportation
resourcesmustbeavailableatwhicheverlevelisresponsibleforphysicallymovingtheproducts:thus, higher-
levelfacilitieswillneedvehiclesiftheyaretodelivercommoditiestothelowerlevels;lower-level
facilitieswillneedvehiclesiftheyaretopickupcommoditiesfromtheresupplyfacilityatthehigherlevel.
Roles and Responsibilities
Afteraninitialsystemdesignisdrafted,makealistofeachpositionthatwillbeinvolvedinthelogisticssystem;
identifythevariousrolesandresponsibilitiesforeachperson,bylevel,ifpossible(i.e.,startwithallstaffatthe
facilitylevelthathavelogisticsresponsibilities,thenmoveupthesystem,levelbylevel,tothecentrallevel).
Youwillneedtoclarifytheskillsetneededtofulfillthoseresponsibilitiesandtoensurethatallrolesand
responsibilitiesneededtooperatethelogisticssystemareassignedtoaspecificjobtitleorjobfunction.
For the LMIS, specifically, roles and responsibilities will include those related to—
• collecting logisticsdata
• reporting logisticsdata
• aggregating logistics data, if applicable
• analyzing logistics data, including qualitycheck
• managing computerized data management system, ifapplicable
• generating and disseminating feedbackreports.

For ICS, specifically, roles and responsibilities will include those related to—
• determining resupply quantities
• approving resupply quantities
• conducting physical inventories
• monitoring stocklevels.

For storage and distribution, specifically, roles and responsibilities will include those related to—
• receiving orders from the lower level
• physically receiving the products at the storagefacility
• processing commodity orders (picking,packing)
• maintaining adequate storage conditions
• maintaining cold chain equipment, ifapplicable
• processing emergency orders, ifapplicable
• scheduling commodity deliveries, ifapplicable
• monitoring storagecapacity
• maintaining vehicles in working order.

In addition to the specific areas mentioned above, roles and responsibilities should also be defined in other areas:
• monitoringlogisticssystemperformance(forexample,stockoutratesandreportingrates)
• supervision and on-the-jobtraining
• production and distribution of logistics tools (forms, records,reports)
• roleofprogramstaffinmonitoringcommodity availability and supporting the logisticssystem.

Afteryouassigntherolesandresponsibilities,double-checkyourliststoensurethattherolesand
responsibilitiesareassignedlogically,allfunctionswithinthelogisticssystemhavebeenassigned
appropriately, and there is noredundancy.

Other designConsiderations
Thereareafewgeneralconsiderationsthatyou
shouldthinkaboutwhenpreparingforandundertakingasystemdesignactivity.Discussingtheseconcerns
withkeystakeholderscanhelpyouselectthemostappropriatedesignoptions,basedonthecountry’s
characteristics,theproductsbeingmanaged,andthetypeofhealthprogramsservedbythesystem.

System design is a process

thesystemdesignprocessoutlinedaboveisiterative:youwillneedtoverifyeachtechnicaldecision,
madeatanypointduringthedesignactivity,withtheotherelementsthathavealreadybeenproposed.
Forexample,ifyoudecideearlyintheprocesstohaveapushsystem,andlaterdecidetoaddanother
leveltothepipeline,youwillneedtoreassessthedecisiontouseapushsysteminordertoensurethat
thepushsystemcanstillfunctionwiththeadditionallevelinthepipeline.IfyoudesigntheLMIS
forms,andthenlaterchangethemax-minstocklevels,youwillneedtorevisittheLMISformstoensure that the forms
reflect the new max-min stocklevels.
thelaststepinthedesignprocessistolookatthesystemasawholeandverifythatallpartsofthe
systemwillworkandinteract,asdesigned.Anypotentialproblemswillneedtobeaddressedthrough
additionalredesignandbeforethesystemis(fully)implemented.

System design is based on assumptions

Everytimeyoumakeadecisionaboutanelementofthelogisticssystem,thedecisionisbasedoncertain
assumptions.Ifyoudesignapullsystem,thenyourassumptionisthatpeopleatthelowerlevelscanbe
trainedtocalculatetheirorderquantitiescorrectly.therefore,ifyouimplementapullsystemwhenyou
knowthatpeoplecannotbetrained,thenthesystemwillnotworkasdesigned.Similarly,ifyoudesigna
systembasedonaleadtimeoftwoweeks;butyouknowthat,inthepast,orderswererarelyprocessedinless
thanamonth,thenthesystemwillnotworkbecauseyouarebasingtheleadtimeonafalseassumption.
Asyougothroughthesystemdesignprocess,itiscriticaltodocumenttheassumptionsthatyoumake
andtoverifythattheassumptionsarereasonable;inotherwords,thedesignelementhasagoodchance
ofsucceedingwhenthesystemisimplemented.Youcanincreaseyourlikelihoodofsuccessbyverifying
yourassumptionsanddesigningthesystembasedonhowyouknowthesystemwillactuallybeputinto
practice,andnotbasedonwhatyouthink(orhope)willhappen.

In-house resources or outsourcing

Anotherconsiderationintheoveralldesignofthelogisticssystemisthechoicetodirectlymanage
logisticsfunctions,ortooutsourcethemtoathirdpartythroughacontractmechanism.Forexample,
ratherthanoperateandmaintainafleetofvehiclesanddrivers,atransportationcompanycanbehired
totransportthecommoditiesfromthesuppliertotherecipient(e.g.,fromtheregionalwarehouseto
thedistrictwarehousesintheregion).Oneadvantagetooutsourcingisthatfunctionsareassignedtocomp
aniesthatspecializeinthatparticularfunction.Aperceiveddisadvantagetooutsourcingisthatyou have
less direct control over that logisticsfunction.
Ifoutsourcingisused,
thecontractmustspecifyperformancecriteriaandbenchmarks.Evenifcertainfunctionsofthesupplychainareoutsourc
edtoprivateorotherthird-partyorganization,oversightisstillrequiredtoensurethat
theorganizationisperformingitsroleadequately,managingperformance-basedcontracts,andfulfilling its
designated function(s) within the overallsystem.
 10•LOgiSTiCSSySTEMdESign 25

Effective and efficient logistics system

Youknowthatthepurposeofyourlogisticssystemistoprovidegoodcustomerservicebyensuringthe
sixrightsandensuringthatcommoditiesareavailable.Youshoulddesignyourlogisticssystemtoachieve
thesegoals.Whenyoudesignyourlogisticssystem,youwanttoensurethatthesystemisaseffective
andasefficientaspossible.Ifyourlogisticssystemiseffective,itwillproducetheresultsthatyouwant:
productswillbeavailablewhenandwhereyourcustomersneedthem.Ifyourlogisticssystemisefficient,
thenyoucanachieveyourpurposewithaminimumuseofresources;includingmoney,time,andeffort.
Forexample,alogisticssystemcanbeveryeffective,butitisinefficientifproductsreachtheirdestination
atahighcost,orthroughagreatdealofeffort.Ontheotherhand,alogisticssystemmaybeefficient,
butitisnoteffectiveifwarehousestaffprocessalargenumberofordersinashorttime,butmakemany
mistakes.Yourgoalistodesignaneffectivesystemthatisasefficientaspossible.
Onechallengeindesigningalogisticssystemistodeterminetheresourcesthatwillberequiredatwhichlevels
ofthesystemandtoachievewhatpurpose.Imagineasituationwherethesystemdesignersdecidethatdistrict pharmacies will
pick up their commodities from the region because the regional warehouses do not have
enoughvehiclesordriversavailabletomanagedeliveryroutes.However,ifdistrictsdonothavethevehicleand
manpowerneededtopickuptheircommodityorders,thentheproductswillnotmovefromtheregiontothe
district.Someonemustprovidetheresourcesfortheproductstomovebetweenthelevelsofthesystem.
Whendesigningandimplementingalogisticssystemthatwillachievethesixrightsandensurecustomer
service,anultimategoalshouldbetominimizetheoverallcostofcommoditymanagement,nottopush
financialresponsibilityfurtherdownthesystem—unlessthelower-levelfacilitieshavetheresourcesneeded.
summarizessomeoftheimplicationsrelatedtovariousdesigndecisions.Whendesigningthelogistics
system,thesystemdesignersshouldselecttheoptionsthatarebestforthecountry,basedonthecharacteristicsof
thecountry,thecommoditiesbeingmanaged,andthetypeofhealthprogramsservedbythesystem.

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references

Council of Supply Chain Management Professionals (CSMP). 2011. CSCMP Supply Chain Management
Definitions.
To access the definitions, go to—http://cscmp.org/aboutcscmp/definitions.asp (accessed 02-07-2011)

DELIVER.2007.DELIVER:FinalProjectReport.Arlington,Va.:DELIVER,fortheU.S.Agencyfor
InternationalDevelopment.
Rao, Raja, Peter Mellon, David Sarley. 2006. Procurement Strategies for Health Commodities: An Examination
ofOptionsandMechanismswithintheCommoditySecurityContext.Arlington,Va.:DELIVER,forthe
U.S. Agency for International Development.
Transparency International. 2002. Corruption Fighter’s Toolkit: Civil Society Experiences and Emerging
Strategies. Berlin: Transparency International.