The Logistics Handbook- A Practical Guide for Supply Chain Managers in Family Planning and Health Programs

Publication date: 2006

THE LOGISTICS HANDBOOK A PRACTICAL GUIDE FOR SUPPLY CHAIN MANAGERS IN FAMILY PLANNING AND HEALTH PROGRAMS June 2006 This publication was produced for review by the United States Agency for International Development. It was prepared by the DELIVER project. THE LOGISTICS HANDBOOK A PRACTICAL GUIDE FOR SUPPLY CHAIN MANAGERS IN FAMILY PLANNING AND HEALTH PROGRAMS The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. DELIVER DELIVER, a five-year, worldwide technical assistance support contract, is funded by the Commodities Security and Logistics Division (CSL) of the Office of Population and Reproductive Health of the Bureau for Global Health (GH) of the U.S. Agency for International Development (USAID). Implemented by John Snow, Inc. (JSI), (contract no. HRN-C-00-00-00010-00), and subcontractors (Manoff Group, Program for Appropriate Technology in Health [PATH], Social Sectors Development Strategies, Inc., and Synaxis, Inc.), DELIVER strengthens the supply chains of health and family planning programs in developing countries to ensure the availability of critical health products for customers. DELIVER also provides technical support to USAID’s central contraceptive procurement and management and analysis of USAID’s central commodity management information system (NEWVERN). This document does not necessarily represent the views or opinions of USAID. It may be reproduced if credit is given to DELIVER/John Snow, Inc. Recommended Citation John Snow Inc./DELIVER, 2004. The Logistics Handbook: A Practical Guide for Supply Chain Managers in Family Planning and Health Programs. Arlington, Va.: John Snow Inc./DELIVER, for the U.S. Agency for International Development (USAID). Abstract The Logistics Handbook includes the major aspects of logistics management with an emphasis on contraceptive supplies. The text should be helpful to managers who work with supplies every day as well as managers who assess and design logistics systems for entire programs. Policymakers may find the text useful in exploring the inputs needed to create an effective logistics system. Key terms and concepts are clearly defined and explained, and the design and implementation of management information systems and inventory control are discussed in detail. Storage and quality control practices are also discussed, and overviews of forecasting and procurement processes are included. DELIVER John Snow, Inc. 1616 N. Fort Myer Drive, 11th Floor | Arlington, VA 22209 USA Phone: 703-528-7474 | Fax: 703-528-7480 E-mail: deliver_project@jsi.com | Internet: deliver.jsi.com Contents Contents Acronyms . vii Preface . ix Introduction to Logistics. 1 1.1 The Logistics System.3 1.2 The Logistics Cycle: Organizing Logistics System Activities.5 1.2.1 Major Activities in the Logistics Cycle .6 1.2.2 Logistics Management Information Systems .8 1.2.3 Quality Monitoring.9 1.2.4 The Logistics Environment: Policies and Adaptability. 10 1.3 Key Logistics Terms . 11 1.4 Logistics Comparisons . 14 1.4.1 Push versus Pull?. 14 1.4.2 Dispensed versus Issued?. 17 1.4.3 Vertical versus Integrated?. 18 1.5 An Introduction to Key Concepts . 19 1.6 Chapter Summary. 21 Logistics Management Information Systems.23 2.1 Logistics Management Information Systems . 25 2.2 Essential Data for Decision Making . 25 2.3 Three Types of Records . 27 2.3.1 Stockkeeping Records. 27 2.3.2 Transaction Records . 31 2.3.3 Consumption Records . 39 2.3.4 Relationships among Data Found in Records . 43 2.4 Summary Reporting and Reporting Systems. 43 2.4.1 The Six Rights for LMIS Data . 43 2.4.2 Summary Reports. 44 2.4.3 Feedback Reports . 51 2.5 Key Concept: Data for Decision Making. 54 2.6 Chapter Summary. 55 Assessing Stock Status .57 3.1 Purpose of Assessing Stock Status . 59 3.2 How to Assess Stock Status . 60 3.2.1 Stock on Hand . 60 3.2.2 Average Monthly Consumption . 61 3.2.3 Putting the Formula to Use . 62 3.3 Analyzing Data for Trends. 63 3.4 When to Assess Stock Status. 65 The Logistics Handbook 3.5 Stock Status Assessment at a Higher Level in the System. 67 3.5.1 Why You Might Want to Assess Stock Status at Any Level of the System. 68 3.5.2 Gathering Consumption Data . 68 3.5.3 Gathering Stock on Hand Data . 70 3.5.4 Understanding Your Assessment of Stock Status at Higher Levels . 72 3.6 Key Concepts: Data for Decision Making and the Systems Approach . 73 3.7 Chapter Summary. 74 Maximum-Minimum Inventory Control Systems.75 4.1 Purpose of an Inventory Control System . 77 4.2 Key Inventory Control Terms . 78 4.3 Three Types of Maximum-Minimum Inventory Control. 79 4.3.1 Forced-Ordering Max-Min Systems . 80 4.3.2 Continuous Review Max-Min System. 92 4.3.3 Standard Max-Min System . 97 4.4 Issues in Selecting and Using an Inventory Control System . 101 4.4.1 Analyzing Overall Pipeline Length . 101 4.4.2 Varying Max-Min Levels or Systems. 102 4.5 Selecting an Appropriate Max-Min System. 104 4.6 Key Concept: Continuous Improvement . 110 4.7 Chapter Summary . 110 Contraceptive Storage .113 5.1 Purpose of Storing Products . 115 5.2 Storage Procedures . 117 5.3 Visual Inspection. 117 5.3.1 When to Conduct a Visual Inspection . 120 5.3.2 What to Look for in a Visual Inspection. 120 5.4 Storage Space Requirements . 120 5.5 Physical Inventory of Stock on Hand. 125 5.6 Key Concept: Continuous Improvement. 126 5.7 Chapter Summary . 127 Contraceptive Forecasting .129 6.1 Purpose of Forecasting . 131 6.2 Sources of Data for Contraceptive Forecasts . 132 6.2.1 Strengths in Forecasting Data Sources. 133 6.2.2 Weaknesses in Forecasting Data Sources . 134 6.3 Forecasting for Contraceptive versus Noncontraceptive Products. 136 6.4 Forecasting for HIV/AIDS Prevention . 137 6.5 Forecasting Process Outline. 138 6.6 Key Concept: Data for Decision Making. 140 6.7 Chapter Summary. 140 iv Contents Logistics System Assessment .143 7.1 Steps in Conducting a Logistics System Assessment. 145 7.1.1 Purpose of a Logistics System Assessment . 145 7.1.2 Planning a Logistics System Assessment. 145 7.1.3 Site Selection in a Logistics System Assessment . 148 7.2 Designing an Evaluation Instrument with Appropriate Indicators. 150 7.2.1 Individual Indicators for Assessing a Logistics System’s Performance . 151 7.2.2 Assessment Tools. 153 7.2.3 Using an Assessment Instrument with Multiple Teams. 155 7.3 Making Site Visits and Collecting and Analyzing Data . 155 7.3.1 Interview Local Staff . 156 7.3.2 Visit the Storeroom and Count the Stock . 158 7.3.3 Review Local Records and Reports . 158 7.3.4 Additional Considerations for Interviewing and Data Collection at the Central Level . 161 7.3.5 Analyzing Strengths and Weaknesses of the System. 163 7.4 Writing and Presenting Findings, Recommendations, and Implementation Plans . 164 7.4.1 Writing Recommendations. 164 7.4.2 Common Logistics Problems, Causes, and Possible Solutions . 167 7.4.3 Presenting Recommendations . 167 7.5 Writing an Implementation Plan . 167 7.5.1 Implementation Involving Training. 168 7.6 The Logistics Advisor’s Role in Assessing and Improving a Logistics System . 170 7.7 Key Concepts: Five Concepts in an Assessment . 171 7.8 Chapter Summary . 172 Glossary.175 Suggested Reading List .181 v The Logistics Handbook Figures 1-1. Logistics Cycle.5 1-2. Basic In-Country Supply Pipeline. 13 2-1. Three Record Types. 27 2-2. Bin Card . 29 2-3. Inventory Control Card. 30 2-4. Packing Slip . 33 2-5. Receiving Report . 34 2-6. Issue Voucher. 35 2-7. Issue Voucher Flow. 36 2-8. Requisition and Issue Voucher . 37 2-9. Requisition and Issue Voucher Flow . 38 2-10. Daily Activity Register . 41 2-11. Tick Sheet. 42 2-12. ConsumptionWorksheet . 49 2-13. Quarterly Report and Request for Contraceptives . 50 2-14. Feedback Report . 52 2-15. Decision-Making Process . 54 3-1. Trend Analysis . 63 3-2. Assessment Graph . 73 4-1. Clinic Locations May Vary Greatly in Distance from Issuer . 85 4-2. Lead Time Longer than Review Period. 86 Tables 1-1. Advantages and Disadvantages of Push and Pull Systems. 16 2-1. Advantages and Disadvantages of the Three Methods of Aggregating Data. 47 3-1. Hypothetical Clinic Report. 64 3-2. Six-Month and Three-Month AMCs. 65 3-3. Calculating Months of Supply . 66 4-1. Determining Reorder Quantities. 82 4-2. Sample Max-Min Levels . 102 4-3. Factors Involved in Selecting Max-Min Systems. 107 5-1. Storage Procedures. 118 5-2. Common Contraceptive Quality Problems. 121 5-3. How to Calculate Floor Space. 124 7-1. Five Key Indicators for Logistics. 152 7-2. Common Logistics Problems, Causes, and Examples of Possible Solutions . 166 7-3. Examples of Interactions between Advisors and Staff. 171 vi Acronyms AIDS acquired immune deficiency syndrome AMC average monthly consumption ARI acute respiratory infection CBD community-based distributor or distribution CPR contraceptive prevalence rate CSW commercial sex worker CYP couple-years of protection DAR daily activity register DHS Demographic and Health Survey EDL essential drug list EOP emergency order point FDA U.S. Food and Drug Administration FEFO first-to-expire, first-out FIFO first-in, first-out FP family planning FPLM Family Planning Logistics Management GSMF Ghana Social Marketing Foundation HIS health information system HIV human immunodeficiency virus HMIS health management information system ICC inventory control card IEC information, education, and communications IPPF International Planned Parenthood Federation IUD intrauterine device IV issue voucher JSI John Snow, Inc. LIAT Logistics Indicators Assessment Tool LMIS logistics management information system LSAT Logistics System Assessment Tool MIS management information system MOH Ministry of Health ORS oral rehydration salts PATH Program for Appropriate Technology in Health PPD Population, Health, and Nutrition Projects Database RHU rural health unit RIV requisition and issue voucher SDP service delivery point SMART specific, measurable, attainable, realistic, and timely STD sexually transmitted disease STI sexually transmitted infection TFR total fertility rate UNFPA United Nations Population Fund USAID U.S. Agency for International Development VEN vital, essential, and nonessential WBD workplace-based distribution WHO World Health Organization WRA women of reproductive age vii The Logistics Handbook viii Preface Preface The Logistics Handbook: A Practical Guide for Supply Chain Managers in Family Planning and Health Programs was written for anyone involved in the day-to-day management of contraceptive supplies in developing countries. Many of the suggested techniques also apply to the management of essential drugs, including medications used for human immunodeficiency virus/ acquired immune deficiency syndrome (HIV/AIDS) control programs, acute respiratory infection (ARI), tuberculosis control, and vaccination programs. A number of techniques described in this handbook will be helpful to readers who are responsible for improving, revising, or designing all or part of a logistics system—including the design of data collection forms and inventory control systems. Additional techniques are described—how to assess the functioning of an entire logistics system and how to monitor such a system continually. This book is modeled on the U.S.-based logistics management course originally provided by the Family Planning Logistics Management (FPLM) project, now the DELIVER project, of John Snow, Inc. Although the handbook does not contain everything participants learn in the course, we hope that, by capturing aspects of the key topics presented, the project will be able to reach thousands of people involved in supply management. Supply managers and others reading the handbook from cover to cover will find a wide range of logistics principles and techniques. By reviewing the objectives that appear at the beginning of each chapter, the reader may select chapters of particular interest. One may learn the basic principles of logistics management by reading only the main body text. To make the material more understandable, selected text boxes have a magnifying glass icon placed in the upper-left corner. The text boxes provide (1) hypotheti­ cal examples that illustrate the concept being discussed, (2) additional information that explains how to apply a particular technique, or (3) more in-depth information about the topic being discussed. To place the technique in a real setting, text boxes labeled Case Study describe how the technique was used in a sample country. Summaries at the end of each chapter reflect how the chapter’s objectives were met and may be used as a quick reference. The Logistics Workbook: A Companion to the Logistics Handbook can be used in conjunction with The Logistics Handbook to further the reader’s understanding of fundamental logisitics principles. ix The Logistics Handbook x Chapter � | Introduction to Logistics � | Introduction to Logistics Objectives In this chapter, you will learn the following:  The purpose of a logistics system  The components of a logistics system and how they fit together  Definitions of key terms in logistics  How different concepts in logistics compare. � The Logistics Handbook � Chapter � | Introduction to Logistics �.� The Logistics System During your lifetime, you will encounter hundreds of logistics systems: in restaurants, stores, warehouses, and so on. This handbook describes logistics systems for health programs; however, if you understand a simple example of a logistics system, you will be able to understand almost any health logistics system. One example of a simple logistics system is a restaurant. The storage facility in a restaurant is the kitchen; the food is held there until it is delivered to the customer. Waiters provide the transportation; they carry the food from the kitchen to the customer. The service delivery points are the tables, places where customers sit to order and eat the food. For customers, a restaurant is not a logistics system; it is a place to eat. You, too, probably never thought of a restaurant as a logistics system. Your expectations of a restaurant, however, are directly related to logistics. What expectations do you have when you go out to a restaurant for a meal? You may expect that the—  Restaurant will be attractive and pleasing.  Server will provide excellent customer service.  Food you order will be available.  Food will be served promptly.  Correct order will be delivered to your table.  Food will be of acceptable quality.  Food will be of acceptable quantity.  Cost of the meal will correspond with the value. Customer expectations like those above define the purpose of a logistics system: A logistics system provides excellent customer service: by fulfilling the six rights, ensuring that the right goods, in the right quantities, in the right condition, are delivered to the right place, at the right time, for the right cost. � The Logistics Handbook The Six “Rights” The right goods in the right quantities in the right condition delivered . . . to the right place at the right time for the right cost. Whether the system supplies soft drinks, vehicles, or pens or manages contraceptives, essential drugs, or other commodities, these six rights always apply. Two expectations mentioned earlier are not considered part of the logistics system: (a) that the atmosphere in which products are delivered will be pleasing and attractive, and (b) that customers will always receive excellent customer service. These expectations are related to quality of care issues, which are not discussed in this handbook. Quality of care issues, which include a number of other expectations and outcomes, however, do greatly influence the logistics system and vice versa. In many family planning programs, contraceptives are a donated item. If an item is donated, does at the right cost still apply? Yes. Even though the product is donated, the program is responsible for paying the cost of storing and transporting contraceptives. Why Do Logistics Systems Fail? Businesses often fail due to logistics problems that affect their ability to fulfill one or more of the six rights. A business that offers an excellent atmosphere and excellent customer service, but cannot meet the customer’s need by fulfilling all six rights, will ultimately fail. Most store owners understand that they must fulfill the six rights. They make every effort to ensure that their customers receive the products they expect when they want them at the price they are willing to pay. Satisfied customers in turn will want to return to the same store. Think of a store where you shop frequently. Does the store always meet the six rights? Does it offer the goods you want at the right price when you want or need them? If not, why do you shop there? � Chapter � | Introduction to Logistics �.� The Logistics Cycle: Organizing Logistics System Activities Logistics management includes a number of activities that support the six rights. Over the years, logisticians have developed a systematic approach to describing the activities of a logistics system. They call it the logistics cycle (see figure 1-1). FigUrE 1-1. Logistics Cycle The first thing you will notice about the cycle is its circular shape, which indicates the interdependence of the various elements in the cycle. Each activity—serving customers, product selection, forecasting and procurement, and inventory management—depends on the others. For example, product selection is based on serving customers. What would happen if, for medical reasons, we select a product that customers refuse to use? We would need to rethink our decision and order a product more acceptable to the customer. We would have to look for one that tastes better, is a different color, or is packaged differently. This decision would, in turn, affect our procurement and storage, two other activities in the logistics cycle. � The Logistics Handbook In the next few sections, we look at all the elements shown in the logistics cycle:  The major activities in the cycle.  Logistics management information systems (LMISs) at the heart of logistics.  Quality monitoring among the activities.  The logistics environment—policies and adaptability. �.�.� Major Activities in the Logistics Cycle Let’s briefly review the major activities in the logistics cycle:  SERVING CUSTOMERS. Each person who works in logistics must remember that he or she selects, procures, stores, or distributes products to meet customer needs. For example, a storekeeper does not store drugs simply for the purpose of storing; he or she stores products for use in preventing or curing illnesses. The logistics system ensures customer service by fulfilling the six rights. Each activity in the logistics cycle, therefore, contributes to providing excellent customer service. Substitution? For some items, you may be willing to accept a substitute when your first choice is not available. For example, if you need ballpoint pens, although you may want blue ink pens, you may be willing to accept black ink. What if, however, you urgently need a blue pen? Would you accept a low-quality blue pen or pay a higher price for a blue pen somewhere else? Although substitution of one product for another may work for ballpoint pens, it does not work often for health commodities. A family planning client may not want to switch to pills if an injectable contraceptive is not available. The difference between a pen and a person’s health is obvious. A business selling pens may fulfill most but not all of the six rights and still provide acceptable customer service. A health system has no choice; it must fulfill all six rights. � Chapter � | Introduction to Logistics  PRODUCT SELECTION. In any logistics system, products must be selected. In a health logistics system, product selection may be the responsibility of a national formulary and therapeutics committee, pharmaceutical board, board of physicians, or other government-appointed group. Most countries have developed essential drug lists patterned on the World Health Organization (WHO) Model List. The committee’s ability to select from among products is influenced by other elements of the logistics cycle. Perhaps the most important of these is the budget available to purchase the chosen products. For example, boards often choose generic drugs over name brands that may be more expensive. Many programs supplement the development of essential drug lists (which focus on those products deemed most cost-effective in treating priority health problems) with programs to promote rational drug use. Rational drug use efforts aim to help prescribers choose the right product for each health problem and the correct quantity to dispense. Good dispensing practices and patient education on using drugs correctly are other elements of rational use programs. Although this handbook does not deal directly with drug product selection or promoting rational drug use, it is important to be aware of these topics. (See the suggested reading list at the end of the book.)  FORECASTING AND PROCUREMENT. After products are selected, the quantity required of each product must be determined and procured. The forecasting process—estimating the quantities of the various commodities that will be needed for a specified time period—is described in chapter 6. The procurement process, which can be complex, is not presented in this handbook. (See the suggested reading list at the end of the handbook for sources of additional information about forecasting and procurement.)  INVENTORY MANAGEMENT: STORAGE AND DISTRIBUTION. After an item has been procured and received, it must be stored until the customer needs it. Almost all businesses store a quantity of stock for future customer needs. Determining how much stock should be stored is an important decision. We discuss distribution in chapter 4 and storage in chapter 5. � The Logistics Handbook �.�.� Logistics Management Information Systems Information is the motor that drives the logistics cycle. Without information, the logistics system would not be able to run smoothly. Managers gather information about each activity in the system and analyze that information to coordinate future actions. For example, information about inventory levels and consumption must be gathered to ensure that a manager knows how much more of a product to procure. Logisticians added the word logistics to management information system (MIS) to create logistics management information system (LMIS). They wanted to make it clear that the collection of data for logistics is a separate activity from the collection of data for other information systems, including health management information systems (HMISs). Logisticians emphasize the use of logistics data for making decisions about activities within the logistics cycle. LMISs are discussed in chapter 2. Other activities help drive the logistics cycle and are also at the heart of logistics:  ORGANIZATION AND STAFFING. A logistics system can only work if well-trained and efficient staff place orders, move boxes, and provide goods to clients. Health programs must be organized to provide the appropriate resources (for example, supervision authority and technical knowledge) to complete logistics activities. Organization and staffing, therefore, are an important part of the cycle. Logistics staff must make the six rights a top priority for a logistics system to work properly.  BUDGET. Budgeting affects product selection, the quantity of products procured, the amount of storage space available, and the number of staff working in logistics. Logistics activities must receive sufficient funding in the budget if the whole system is to operate effectively.  SUPERVISION. Supervision of the logistics system keeps it running smoothly and helps anticipate needed changes. Effective supervision helps avoid problems or resolves them quickly before they grow into crises.  EVALUATION. Evaluation of the logistics system can help demonstrate the impact of the system on other elements. Although these elements are not discussed separately in the handbook, nearly every chapter has more information about each. � Chapter � | Introduction to Logistics �.�.� Quality Monitoring In the logistics cycle, notice how quality monitoring appears between each activity of the logistics cycle. This refers not only to the quality of the prod­ uct, but also to the quality of the work. Quality monitoring is listed four times in the cycle, and understanding each notation is important.  BETWEEN PRODUCT SELECTION AND FORECASTING. You should ensure that you carefully monitor the quality of your procurement decisions. For example, you select Noristerat, an injectable contraceptive, as the most medically appropriate product for your system. During forecasting and procurement, you learn a donor cannot supply Noristerat, but will supply the injectable contraceptive Depo-Provera®. When you review the assumptions made about the medical appropriateness of Noristerat, you realize that Depo-Provera is equally appropriate and decide to offer that product instead. Quality monitoring plays an important role in forecasting and procuring the right products based on appropriate product selection.  BETWEEN PROCUREMENT AND STORAGE. After selecting and forecasting needs, products are procured. A program’s request for procurement should include specifications for manufacturers to follow (for example, a specification may note that the date of expiration must be printed on each cycle of oral contraceptives). After procuring items, you must monitor their quality before they enter the distribution system. Often, the manufacturer carries out quality monitoring, but the family planning program or pharma­ ceutical board may also require independent testing. At this stage, some programs also conduct compliance testing—a quality-monitoring procedure to ensure that procurement specifications (such as potency tests for drugs) are being followed. One simpler quality assurance technique you can implement at this stage is to check labeling and packaging for arriving shipments. Make sure that labels and packaging match your specifications.  BETWEEN INVENTORY AND SERVING CUSTOMERS. While products are being stored and distributed (but before they are given to customers), it is important to monitor their quality. Because this element of quality monitoring happens within a program’s logistics system, we discuss this in further detail in chapter 5, which deals with storage. Remember, you want products in the right condition to be available for customers. � The Logistics Handbook  BETWEEN SERVING CUSTOMERS AND PRODUCT SELECTION. Even after products have been distributed to customers, you need to continue to monitor quality. You need to know how customers feel about the quality of the products and whether the customers are satisfied with the service they received. Quality monitoring of both the product and the service is critical to the success of your effort to promote the use of your products—contraceptives, vaccines, or other essential drugs. You want customers to use the products they receive and be satisfied with them and with the service they received. The results of monitoring customer satisfaction can be used to inform decision makers about what products to select in the next procurement cycle. Remember, it is up to you to get the right goods to the customers. �.�.� The Logistics Environment: Policies and Adaptability In addition to logistics cycle elements, two outside forces—policies and adaptability—have a strong influence on the logistics system.  POLICIES. Government regulations and procedures affect all elements of the logistics system. Many governments have established policies on the selection of medical products, how items are procured, when items are distributed, where and how items are stored, and the quantities customers receive (often called dispensing protocols). Logistics managers can influence these policies, but may not be able to change them. Logistics managers should keep up-to-date on current policies and carry them out as specified.  ADAPTABILITY. This is the logistics system’s ability to successfully obtain the resources (either internal or external) that are necessary to address changes in demand. Logistics managers often depend on a larger system, such as the government, to provide inputs. Where managers do not control the inputs, adaptability becomes more challenging. Money is one of the most important resources in logistics. For example, as demand increases, the logistics system needs more money to pay for fuel for extra deliveries, hire new warehouse workers, and train clinic personnel. The program’s ability to meet these needs—its adaptability—will have an impact on the logistics system. �0 Chapter � | Introduction to Logistics What about Manufacturing? Manufacturing is not included in this version of the logistics cycle because we wanted to focus on the management of health programs. Most pharmaceuticals and contra­ ceptives are not manufactured by the program. Often, products are supplied from international sources apart from the country’s logistics system. If, however, you want to include manufacturing in the logistics cycle, it would fall under forecasting and procurement. Many governments are proposing ways to reform the entire health sector, such as decentralization, cost recovery, and integrating different aspects of health care, such as family planning with sexually transmitted disease (STD) control or primary health care. These reforms require a direct response from the logis­ tics system. A good example is cost recovery. How will recovered funds move up the pipeline to be used to pay for the next shipment? The logistics system must continue to function when reforms, such as cost recovery, are imple­ mented. To be able to function, a logistics system must be adaptable. �.� Key Logistics Terms Many logistics terms mentioned in this handbook have special meanings, so definitions in a dictionary may not be the same as the definitions below. Although many more terms could be defined, the basic terms listed here are used throughout the handbook.  SUPPLIES, COMMODITIES, GOODS, PRODUCTS, AND STOCK. All the items that flow through a logistics system. The terms are used interchangeably throughout this handbook.  USERS, CLIENTS, AND CUSTOMERS. The people who receive supplies. The terms are used inter-changeably throughout this handbook. Users is a term familiar to those who collect information about “new” or continuing users. Clients is a term often associated with clinic patients. However, we want to emphasize thinking of the people served as customers, in the same way that a commercial business thinks of its customers. The concept of customer service can also be applied within a logistics system—the customer of the central warehouse is the regional or provincial warehouse. �� The Logistics Handbook  SERVICE DELIVERY POINTS. Any facility where customers (users) receive supplies. Service delivery points (SDP) are frequently clinics and hospitals, but an SDP may even be a district-level facility. They are called SDPs, because all of these locations serve customers directly.  PIPELINE. The entire chain of storage facilities and transportation links through which supplies move from the manufacturer to the consumer, including port facilities, central warehouse, regional warehouses, district warehouses, all SDPs, and transport vehicles. In a logistics setting, the logistics system is often called a pipeline (see figure 1-2). This term was coined because a logistics system is in many ways similar to the pipeline that brings water into homes. Like a water pipeline, the logistics system has tanks—that is, warehouses—for storing water—that is, products—until they are needed. Transportation links, like pipes, are also part of a pipeline. 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 diverse countries, supplies may move by various means, including small boats, buses, and even bicycles.  LEAD TIME. The time between when new stock is ordered and when it is received and available for use. When logistics managers evaluate how well a logistics system is meeting the six rights, they measure lead time and try to reduce it. Goods should reach customers at the right time—in the shortest time possible. When you calculate lead time, it is especially important to include all the time up to when the stock is available for use. Stock that has been received but not recorded and put on the shelf is not ready to be issued and certainly is not available to be used. To satisfy the client’s need, stock must be available to be put in the hands of the user right away. �� Chapter � | Introduction to Logistics FigUrE 1-2. Basic in-Country Supply Pipeline �� The Logistics Handbook What Is Lead Time? A breakdown of lead time includes the following activities:  The ordering facility (lower-level) manager decides that more stock is needed.  An ordering form is completed and sent to the upper level.  The upper level receives the order, and a manager ap­ proves the order (usually by signing the form).  The manager then sends the form to the storekeeper.  The storekeeper packs the order and gives it to a driver.  The driver takes the order, and often several others, and transports them to the ordering facility.  The ordering facility receives the order, conducts a visual inspection, places the order on the shelf, and records the transaction.  The product is then ready for distribution, and the lead time clock stops. Lead time can be a few hours or several months, depending on your system. It also varies with the speed of deliveries, availability of transport, and, sometimes, weather. No matter what factors affect your system, remember to take them into consideration when calculating lead time. �.� Logistics Comparisons Several common logistics terms can best be defined by comparing them with an opposing term. These are push and pull ordering, dispensed and issues data, and vertical and integrated distribution. The following sections compare each of these paired terms. Although many more concepts could be defined, these basic comparisons are referred to throughout the handbook. �.�.� Push versus Pull? Placing orders is a routine activity in logistics. In most logistics systems, an order is placed for new supplies every month or every quarter. In some logis­ tics systems, the quantity to be ordered is determined by the person placing the order. This is called a pull or requisition system. In other systems, the quantity to be ordered is determined by the person who fulfills the order. This is called a push or allocation system. �� Chapter � | Introduction to Logistics  In a pull system, the personnel who receive the supplies determine the quantities to be issued.  In a push system, the personnel who issue the supplies determine the quantities to be issued. In the earlier restaurant example, customers give their orders to the server, who then fills the order. No one expects the server to tell the customer what to eat. Restaurants are usually a pull system. In contrast, in the home, the cook decides what to serve, based on the family’s taste and the available ingredients—this is a push system. The advantages and disadvantages of push and pull systems are shown in table 1-1. Push or Pull for Limited Supplies? If supplies of products are limited, a pull system is not appropriate, because not enough supplies are available to fill all orders. In this case, a push system is the only choice. In a push system, the higher level tracks the needs of all lower levels and determines the best way to distrib­ ute the limited quantity of supplies. Push and pull approaches may both be used in one system; however, it is usually inefficient to combine the two among facilities at the same level. For example, a pull system may be used from the central level to the regional level and a push system from the regional level to SDPs. But only one sys­ tem should be used within each level. Imagine the frustration and confu­ sion at the regional warehouse if some clinics are pulling supplies while other clinics need supplies pushed to them. For the pipeline to work, the proper quantities must be ordered and shipped in the shortest time possible. Using two systems at one level only adds to confusion and delays. It is also important that, when a logistics system is designed, the lower level and the higher level understand who decides what quantities are to be ordered. If staff at the higher level think it is a push system, and staff at the lower level think it is a pull system, lower-level staff may become confused when the quantity they receive is not the same as the quantity they ordered. If this hap­ pens often enough, lower-level staff may assume that they will never receive what they order and stop ordering. �� The Logistics Handbook tABLE 1-1. Advantages and Disadvantages of Push and Pull Systems Category Push Pull Calculations Advantage: The higher level is confident of its own calculations and the quantities it issues. Disadvantage: The higher level must calculate all orders. Disadvantage: The lower level must be able to do calculations, and the upper level may still need to verify them. Information used Note: Neither system works when information is not available to decision makers! Disadvantage: The informa­ tion that the higher level uses to make calculations may be less current. Advantage: The lower level has the most current information. Waste Disadvantage: If the higher level does not understand the situation or does not use the available information appropriately, it may not issue the right quantity. Advantage: Can be less wasteful because the lower level knows its customers and their needs best. Responsiveness Disadvantage: The higher level cannot respond quickly to changes. Advantage: The lower level is more up­to­date. Training Advantage: Fewer people need to be trained to make calculations. Disadvantage: Lower levels may not be equipped with the skills needed to make the calculations. Sense of ownership Advantage: Managers feel they have more control over the system. Advantage: Lower level owns its decisions about orders and, therefore, feels it has more control over the system. Workload Disadvantage: In large systems, the higher level may need to make large numbers of calculations. Disadvantage: The lower level must allocate time to make calculations instead of serving customers. �� Chapter � | Introduction to Logistics If the higher level believes it is a pull system and staff at the lower level think it is a push system, the higher level may assume that no supplies are needed because no order was received. The lower level may assume that no supplies were sent because they were unavailable. The design of the system must eliminate such misunderstandings. �.�.� Dispensed versus Issued? Logistics systems exist to fulfill the six rights for the customer; therefore, all decisions in logistics should be based on information about the customer. Logistics systems need to track information about the quantities of a product actually put in the hands of customers. After a product is received by a customer, it is considered used; even if it is wasted or discarded, the logistics system will still need to be able to resupply the item, regardless of its ultimate use. (Outside the field of logistics, of course, knowing how customers use or dis­ card the supplies they receive is of great interest.) Information about the quantity of products given to customers is called dispensed-to-user data, often abbreviated as dispensed data or consumption data. Because SDPs are the only places that give supplies to customers, this is the only level at which we can collect dispensed-to-user data. Dispensed-to-user data provide information about the quantity of goods actually given to customers. The pipeline, however, also includes all intermediate storage facilities. The term for information on the movement of products between any two facilities is called issues data. For example, when the regional level gives supplies to the district level, this is issues data. Issues data provide information about the quantity of goods shipped from one level of the system to another. Whenever possible, decisions for planning should be based on dispensed to user data. If the regional warehouse issued 50,000 condoms to the district warehouse last quarter, should it issue the same number this quarter? The answer is not necessarily, because condoms may be piling up in the district warehouse. The order will be more accurate if information is available on the number of condoms dispensed to users during that time period. Throughout this handbook, we emphasize the importance of using dispensed-to-user data for decision making. �� The Logistics Handbook In systems in which dispensed-to-user data are not available, issues data can be substituted. Always use issues data from the lowest level possible. For example, issues data from districts to clinics are preferred to data from the central warehouse to districts, because district issues better reflect customer demand. Because the relationship between issues data and customer demand is not direct, collection of the actual dispensed to user data should be a priority for logistics systems that do not have dispensed-to-user data available. �.�.� Vertical versus Integrated? Many countries have several logistics systems for selecting, procuring, and distributing supplies to clients. Often programs, such as family planning, maternal and child health, malaria control, tuberculosis control, or nutrition, all manage and distribute supplies for their own programs. Such programs are called vertical programs, because they historically have been managed by separate management units at the central level. A vertical system is a logistics system that supplies and manages products for only one program. Recently, however, many countries have been moving away from having several vertical logistics systems toward having just one system that distributes supplies for all programs. For example, a system that manages contraceptives for the family planning program might also manage oral rehydration salts (ORS), vitamin A, and other products for the maternal and child health program. An integrated system is a logistics system that supplies and manages products for more than one program. Vertical and integrated systems each have their own advantages and disadvan­ tages. In reality, it is often the case that within a given country some logistics functions remain vertical, whereas others are integrated. For example, contracep­ tives, ORS, and vitamin A capsules may be procured by separate programs, but they may also be subsequently stored and transported together. Procurement, in this example, is said to be vertical, whereas storage and transport are integrated. There is ongoing debate about the advantages and disadvantages of vertical and integrated logistics management. This debate is not, however, a major focus of this handbook. (See the suggested reading list at the end of the book for sources of additional information about how integration can affect logistics.) �� Chapter � | Introduction to Logistics CASE STUDY Vertical Compared with Integrated Distribution in Ghana and Nepal Until 2000, the family planning program in Ghana was separate from all other Ministry of Health programs. It had its own managers who were in charge of the LMIS for family planning (FP) products. These same managers worked with donors to forecast and procure needed supplies; however, they did not have a separate budget for FP product logistics, nor did they manage personnel dedicated solely to FP logistics. Within their storage facilities, they maintained a separate area for FP products and had an inventory control system based only on the needs of FP customers. But warehouse personnel did not just work in this area of the warehouse. The Ghana FP logistics system was primarily a vertical system. In contrast, the Nepal system has always been integrated. The LMIS manages more than 300 medical products (everything from scalpel blades to Depo- Provera). A central Ministry of Health procurement unit forecasts and orders supplies and works with donors to ensure continual supply. Storage spaces are organized according to space requirements rather than by pro­ gram, and all products are distributed at the same time. The FP program has its own managers, separate from other programs, but below the central level. Logistics personnel have responsibility for all 300-plus products. The Nepal FP logistics system is primarily an integrated system. �.� An Introduction to Key Concepts In the past, logistics was considered a custodial activity. Storekeepers were the custodians of stored supplies. Consequently, the science (and art) of logistics and the people who make the system work were not considered important factors in family planning, HIV/AIDS control, essential drug, or vaccination programs. Now that program managers realize how important the six rights of logistics are to a program’s success, this view has been changing rapidly. The growing importance of logistics has led logisticians to broaden their thinking beyond warehouse walls. This handbook promotes five key concepts that help place logistics in the framework of the larger health program. One or more of the following key concepts are discussed at the end of each chapter: �� The Logistics Handbook  CUSTOMER SERVICE. Logistics exists to ensure that customers get the products they need and want.  DATA FOR DECISION MAKING. Identify the logistics decisions you need to make; then collect the data to inform or guide the decisions. Do not collect information you do not plan to use.  SYSTEMS APPROACH. Remember that logistics is only one component of a successful program, and all of the components need to work together for a program to be successful. Logistics advisors should work with managers who are responsible for other activities and functions (e.g., information, education, and communication campaigns).  POLICY-LEVEL VISIBILITY. Although the profile of logistics continues to rise, you should continue to advocate for appropriate resources to ensure the flow of products through the pipeline.  CONTINUOUS IMPROVEMENT. No logistics system is perfect. Do not change the logistics system just for the sake of change, but look at how to improve the system to ensure it can adapt to changes in the programs it supports. This chapter highlights the key concept of customer service. No matter where in the logistics system you work, you serve various kinds of customers. Usually people think of customers as the end users—the clients who enter a health facility to get a product they need. When you work at a district or regional health facility, do you have customers? Yes—your customers are the people who receive products from you. In this case, they are referred to as internal customers, in contrast to external custom­ ers, the end users. The district warehouse expects good customer service from the regional warehouse. The district warehouse expects to receive the right quantity of the right good, at the right place (its warehouse), at the right time, in the right condition, and at the right cost. The six rights apply to both internal and external customers. Everyone working in logistics should remember he or she is serving customers, whether internal or external. And everyone should remember that he or she is a customer, too—of the level above him or her. Look at the logistics cycle on page 5 and note the position of the label, ”Serving Customers.“ Serving customers is placed at the top of the cycle to emphasize the importance of our ultimate goal—getting products to end users. Everyone working in logistics should keep this in mind. The customer is the most important reason for our work. �0 Chapter � | Introduction to Logistics �.� Chapter Summary In this chapter you learned the following: 1. The purpose of a logistics system— To supply the right goods, in the right quantities, in the right condition, to the right place, at the right time, and at the right cost. 2. How the components of a logistics system fit together in the logistics cycle. 3. Definitions of key logistics terms—  SUPPLIES, COMMODITIES, GOODS, PRODUCTS, AND STOCK. All items that flow through the logistics system.  USERS, CLIENTS, AND CUSTOMERS. The people who receive supplies.  SERVICE DELIVERY POINT. Any facility where clients receive supplies.  PIPELINE. The entire chain of storage facilities and transportation links through which supplies move from the manufacturer to the consumer, including port facilities, central warehouse, regional warehouses, district warehouses, all service delivery points, and transport vehicles.  LEAD TIME. Time between when new stock is ordered and when it is received and available for use.  PULL SYSTEM. Quantities to be issued determined by the personnel who receive the supplies.  PUSH SYSTEM. Quantities to be issued determined by the personnel who issue the supplies.  DISPENSED-TO-USER DATA. Information about the quantity of goods given to clients (but dispensed to user).  ISSUES DATA. Information about the quantity of goods shipped from one level of the system to another.  VERTICAL SYSTEM. Logistics system used to supply and manage stock for only one program.  INTEGRATED SYSTEM. Logistics system used to supply and manage stock for more than one program. �� The Logistics Handbook �� Chapter 2 | Logistics Management Information Systems 2 | Logistics Management Information Systems Objectives In this chapter, you will learn the following:  The purpose of a logistics management information system  The essential data needed for logistics management  The purpose of the three types of logistics records and the data they must contain  The purpose of reporting  The types of reports and the data they must contain  The purpose of feedback reports. 23 The Logistics Handbook 24 Chapter 2 | Logistics Management Information Systems 2.1 Logistics Management Information Systems The purpose of a logistics management information system is to collect, organize, and report data that will be used to make decisions. We collect information to make decisions. The information we gather is used to improve customer service by improving the quality of management decisions. LMISs enable logisticians to collect the information needed to make informed choices. If information is not going to be used to make decisions, it should not be collected. 2.2 Essential Data for Decision Making If data are to be collected for decision making, you need to know how much data and what data to collect. To decide what data to collect, look at the decisions you will need to make. Think about the questions a logistics manager might ask. What information would he or she need to answer those questions and make informed decisions? The questions might include the following:  How long will current supplies last? Do we need to order more supplies now?  Where are our supplies in the pipeline? Do we need to move supplies from higher to lower levels?  Where is consumption the highest? Do those facilities need more resources?  Are we experiencing losses from the system that require us to take action?  Are supplies flowing regularly through the pipeline? Do we need to adjust our pipeline to account for bottlenecks in the system?  Are any products about to expire? Should we take them out of the pipeline? Can we distribute them before they expire? 25 The Logistics Handbook Hundreds of decisions can be made using the appropriate data. To make logistics decisions, a logistics manager needs three essential data items: (a) stock on hand, (b) rate of consumption, and (c) losses and adjustments. Although we may make good use of other data items in logistics, these three data items are absolutely required to run a logistics system:  STOCK ON HAND. The quantities of usable stock available at all levels of the system. (Items that are unusable are not considered part of stock on hand. They are considered losses to the system.)  RATE OF CONSUMPTION. The average quantity of stock dispensed to users during a particular time period.  LOSSES AND ADJUSTMENTS. Losses are the quantity of stock removed from the pipeline for any reason other than consumption by clients (due to expiration, theft, damage, and so on). Adjustments are made when quantities are issued to or received from other facilities at the same level of the pipeline. Also, adjustments may be used to explain administrative changes—for example, when you count stock and find a different amount from the quantity listed on the bin cards. For this reason, adjustments may involve either positive or negative changes to stock. Service Statistics Data Many information systems collect more than just the essential data items. They may include a number of items we call service statistics. Service statistics for family planning may include the total number of clients seen, the number of referrals made, the number of clients counseled but not receiving supplies, the num- ber of new or continuing users, and demographic information (for example, age or parity). Family planning program managers use this information to evaluate the success of their programs in bringing in new clients, planning for resource allocation based on workload, and conducting research. Thus, such data are es­ sential for these broader types of management decisions. Our emphasis, however, is on logistics decisions, and, for these, the essential data are stock on hand, rate of consumption, and losses and adjustments. 26 Chapter 2 | Logistics Management Information Systems 2.3 Three Types of Records From a logistics point of view, only three things can happen to supplies in a pipeline—they are stored, moved (in transit), or consumed (used). Because we want to be able to monitor supplies at all times in the pipeline, we need three types of records to track the supplies (see figure 2-1).  STOCKKEEPING RECORDS. These keep information about products in storage.  TRANSACTION RECORDS. These keep information about products being moved.  CONSUMPTION RECORDS. These keep information about products being consumed. Each record type has a distinct form and use. FIGURE 2-1. Three Record Types 2.3.1 Stockkeeping Records The answers to the most common questions on stockkeeping records are as follows:  What is the primary purpose of stockkeeping records? Stockkeeping records are used to record information about items in storage.  What essential data items do stockkeeping records contain? They must contain the quantity of stock on hand and the quantity of losses and adjustments. 27 The Logistics Handbook  What about the third essential data item, consumption data? Products are stored in a storeroom and generally are not distributed (dispensed) directly from the storeroom to the customer. Consumption data, therefore, are not found on stockkeeping records.  Who completes the stockkeeping record? It is completed by anyone who receives or issues stock from storage. It is also completed by anyone who takes a physical inventory of the stock. This includes the warehouse manager and other warehouse staff, as well as service delivery point staff. Pharmacies store stock and should also use stockkeeping records. The pharmacist and other pharmacy staff are responsible for completing these stockkeeping records.  When are entries to stockkeeping records made? Entries are recorded on the stockkeeping record whenever products are received or issued. Entries are also recorded when stock is counted during a physical inventory. When the stockkeeping record is full, a new record is started using the ending balance from the previous record.  How are the data on a stockkeeping record organized? Stockkeeping records are organized by date. They record receipts, issues, losses and adjustments, and the balance on hand. They also record the results of physical inventories (when items are counted to verify the quantity in storage).  In what formats are stockkeeping records printed? The most common formats for stockkeeping records are individual stock cards and ledgers. A stock card is a generic name for either an inventory control card or bin card.  What is a bin card? A bin card is an individual stockkeeping card that keeps information about a single lot of a product by brand (see figure 2-2). For example, one bin card would contain information about a single lot of Lo-Femenal at a storage facility. It should note the stock on hand of Lo-Femenal for that lot only, as well as any losses and adjustments for that lot. Bin cards are usually displayed at the bins (or shelf) where the lot is found. 28 Chapter 2 | Logistics Management Information Systems FIGURE 2-2. Bin Card Bin Card Commodity Number Description Unit Expiry Date Date From whom received or To whom issued Transaction Reference Quantity Received Quantity Issued Losses/ Adjust- ments Quantity on Hand Initials  What is an inventory control card? An inventory control card is an individual stockkeeping card that keeps information about all lots of a product. One inventory control card should be kept for each product. The inventory control card is a summary of the bin cards for a product. For example, one inventory control card would contain information about all of the Lo-Femenal at a storage facility. It should note the total stock on hand of Lo-Femenal in the warehouse, as well as the total losses and adjustments without regard to lot number or where the product is located in the warehouse. Inventory control cards generally are kept in the office of the warehouse manager (see figure 2-3). In larger warehouses, which may have many lots of each product stored in different places, it is usually desirable to maintain both inventory control cards and bin cards, to ensure that each lot is managed properly. In smaller storerooms, a bin card may be the only stockkeeping record kept. 29 The Logistics Handbook FIGURE 2-3. Inventory Control Card  What is a stores ledger? A stores ledger is a stockkeeping record that contains the same information as the inventory control card described above. Unlike inventory control cards, a stores ledger is bound like a book. It is used instead of the individual card format. Government rules in some countries require the use of stores ledgers. (Managers may believe that binding the pages increases accountability, because missing pages are obvious.) The ledger format is less desirable than individual cards, because it is easy to run out of space for an individual product. It is also hard to add new products—you can alphabetize a set of individual inventory control cards, but you cannot alphabetize pages within a bound book.  What information other than essential data can be included on an inventory control card or stores ledger? 30 Chapter 2 | Logistics Management Information Systems Because information is recorded by date, inventory control cards or stores ledgers include information about when shipments are received and when issues are made, along with the shipment quantity. They also include the results of a physical inventory. For tracking the movement of stock, inventory control cards or stores ledgers may also include a reference number for the shipment or shipping document. It is useful to include the quantity on order, which tells the warehouse manager how much has been ordered and when the order was placed. The quantity on order is especially useful for calculating the lead time. In facilities with more than one storekeeper, a column for the initials of the person receiving, issuing, or counting stock is helpful for tracking these activities. It is frequently desirable to include identifying information (formulations, brand names, and identification codes) and stock location information. The standard reorder quantity amount (stated in months of supply) is also useful. (See chapter 3 for more information about months of supply and chapter 4 for more information about reordering.)  How do stockkeeping records move? Stockkeeping records do not usually move; they stay where products are stored (e.g., the warehouse, pharmacy, or stockroom). 2.3.2 Transaction Records  What is the primary purpose of a transaction record? Transaction records are used to record information about the movement of stock from one storage facility to another.  What essential data items are included on a transaction record? Although transaction records are essential in recording the movement of stock, they do not have to include any of the essential data items mentioned earlier. It is frequently desirable to include the current stock on hand and, depending on the system design, losses and adjustments, and consumption data, as well. The issuing facility may use the additional data to evaluate the reasonableness of the quantities requested or to ration the quantities to deliver if supplies are limited.  Who completes the transaction records? Warehouse personnel at both issuing and receiving facilities complete transaction records. In pharmacies or service delivery points, pharmacy personnel or nurses complete transaction records. 31 The Logistics Handbook  When are transaction records filled in? Transaction records are initiated any time a facility requests or issues supplies. They are completed when the receiving facility confirms receipt of the items shipped.  How are the data on a transaction record organized? Transaction records are organized by date, which helps identify the transaction. Transaction records can then serve as ticklers, reminders that a request was made and not yet received or that an item was issued, but confirmation of receipt is still pending. We recommend that transaction records include a reference number that identifies each transaction. Data on the transaction record are organized by the product requested or issued. One transaction record is usually used to request or issue any number of products. On some transaction records, the product names are preprinted; on others, the name of the product is written by hand.  In what formats are transaction records printed? The most common formats are packing slips, receiving records, issue vouchers, and requisition and issue vouchers. The format of the transaction record depends on whether the system is pull or push. In all cases, a preprinted voucher number on each transaction record helps track individual shipments.  What is a packing slip? Facilities issuing supplies send packing slips with the supplies (see figure 2-4). They list the name of the facility where supplies are being sent and the names and quantities of each item shipped. A packing slip is usually paired with a receiving record. Some logistics systems are required by government regulations to use packing slips. If possible, issue vouchers or requisition and issue vouchers should be used instead of packing slips. (Descriptions of issue vouchers and requisition and issue vouchers are found in the following text.) 32 Chapter 2 | Logistics Management Information Systems FIGURE 2-4. Packing Slip  What is a receiving report? A receiving report lists the names and quantities of items received (see figure 2-5). It is usually paired with a packing slip. The facility receiving the supplies completes the receiving report. Some logistics systems are required by government regulations to use receiving reports, but such forms only duplicate data recorded on the inventory control card. If possible, issue vouchers or requisition and issue vouchers should be used instead of receiving reports. 33 The Logistics Handbook FIGURE 2-5. Receiving Report  What is an issue voucher? An issue voucher (IV) lists the items and quantity issued to a facility (see figure 2-6). It also includes a separate column for the quantities received in case any items are lost or damaged en route. IVs are used in a push system; the higher level determines the quantity to be sent and issues the supplies to the lower level. A correctly designed IV is used instead of a packing slip and receiving report, thus reducing the number of forms to be completed (and the chance of errors). An IV should be completed in triplicate (three copies). The issuing facility completes the date and quantities issued, signs the record, and sends the top two (1 and 2) copies to the receiving facility (see figure 2-7), along with the supplies. The bottom copy (3) is often called the tickler because the issuing facility keeps the bottom copy reminder (or as a tickle) that it is waiting for verification of a shipment. The receiving facility verifies the quantity received, signs the form, and sends the top copy (1) back and keeps 34 Chapter 2 | Logistics Management Information Systems the middle copy (2) for its files. The top copy (1) arrives at the issuing facility, which then disposes of the tickler (3) and keeps the top copy for its files. Each of the facilities ends up with a completed copy of the IV for its permanent file. Because the transaction has only one IV number at both facilities, there is no confusion when either facility manager needs to talk to the other about a problem with the shipment. FIGURE 2-6. Issue Voucher 35 The Logistics Handbook FIGURE 2-7. Issue Voucher Flow ISSUING FACILITY RECEIVING FACILITY S T E P 1 S T E P 3 S T E P 2 S T E P 1 S T E P 2 Keep Discard Keep Keep  What is a requisition and issue voucher? A requisition and issue voucher (RIV) is similar to an IV, except that the RIV is used in a pull system (see figure 2-8). An RIV lists the items and quantities requested by a facility. It also includes a column for the quantity actually issued. This is important in situations in which it is impossible to supply the full amount requested. Like an IV, the RIV includes a column for the quantity received to account for any losses or damage in route. RIVs should be completed in quadruplicate (four copies) (see figure 2-9). The requesting facility completes the date and quantities requested for each item, signs the record, and sends the top three copies (1, 2, and 3) to the issuing facility, keeping the bottom copy (4) as a tickler to remind it that it has placed an order and is awaiting its arrival. The issuing facility fills the order, signs the form, and sends the top two copies (1 and 2) to the receiving facility, along with the supplies, keeping the bottom copy (3) as a tickler. The receiving facility signs the form, verifies the quantity received, and sends back the top copy (1). The receiving facility keeps the second copy (2) for its files and disposes of the tickler copy (4). The top copy (1) arrives at the issuing facility, which then disposes of the tickler (3) and keeps the top copy for its files. Each of the facilities ends up with a completed copy of the RIV for its permanent file. Because the 36 Chapter 2 | Logistics Management Information Systems transaction has only one RIV number at both facilities, there is no confusion when either facility manager needs to talk to the other about a problem with the shipment. FIGURE 2-8. Requisition and Issue Voucher 37 The Logistics Handbook FIGURE 2-9. Requisition and Issue Voucher Flow ISSUING FACILITY REQUESTING FACILITY S T E P 2 S T E P 4 S T E P 3S T E P 1 Keep Keep Discard Keep Discard Keep  What information other than the essential data items can be included on a transaction record? All transaction records should include dates, signatures, and a space for comments. The date enables you to calculate lead times. The signatures indicate authorization of a transaction (by, perhaps, an accounting department or program manager). Try to limit the number of required signatures on a transaction record to reduce the administrative burden and time spent collecting signatures. A space for comments should be available for recording reasons why the quantities shipped are different from the quantities received.  How do transaction records move? Transaction records move with the product from the issuing facility to the receiving facility. In a pull system, the transaction record may be brought in person by the facility requesting supplies, such as during a monthly meeting. Otherwise, transaction records move by regular mail or are hand-delivered from the requesting facility to the higher-level facility. 38 Chapter 2 | Logistics Management Information Systems 2.3.3 Consumption Records  What is the primary purpose of a consumption record? To record the quantity of each item dispensed to a customer.  Which of the essential data items do consumption records contain? As the name of the record implies, consumption records contain dispensed to user data.  What about the other essential data items—stock on hand and losses and adjustments? Consumption records do not record stock on hand or losses and adjustments.  Who completes consumption records? Service personnel at service delivery points complete consumption records.  When are consumption records filled out? Consumption records are filled out whenever supplies are dispensed to customers. They are totaled at the end of the reporting period, usually monthly.  How are the data on a consumption record organized? Consumption records are usually organized by the date of visit. They record the quantity of a specific product dispensed to users.  How are consumption records organized? Consumption records are usually bound in a book or are printed on oversized paper. This allows room for non-logistics information, such as client service data, to be recorded. One record (perhaps consisting of several pages) is usually used per month; however, in a bound book, a new page is started each month.  In what formats are consumption records printed? The most common formats are daily activity registers (DARs) and tick sheets. 39 The Logistics Handbook  What is a daily activity register? Daily activity registers (DAR) record the quantity of each product received by a customer (by name or client number) and by date (see figure 2-10). They work best when the brands of each contraceptive are preprinted on the form. Handwritten brand information is sometimes used, but this makes it difficult to tally the data for reporting. On the bottom of the DAR, totals are taken for each product for reporting.  What is a tick sheet? A tick sheet records the quantity of each brand of product dispensed to users (see figure 2-11). A tick or mark (often an X) is made for each unit dispensed. In some cases, each box represents a client, and the number of each item dispensed is written in the box. A tick sheet does not record this information by day or by client. In some cases, a tick sheet may be made from an ordinary spiral-bound notebook. Tick sheets work well at small service delivery points that do not collect general patient data or when used by community-based distributors.  What information other than the essential data items can be included on a consumption record? Consumption records often include service statistics, such as whether the patient is a new or continuing user. But, because the personnel who complete these records serve customers, the collection of data other than essential data should be kept to a minimum. Serving the customer should always be the first priority.  How do consumption records move? Consumption records generally do not move. They usually remain at the service delivery facility. 40 Chapter 2 | Logistics Management Information Systems FIGURE 2-10. Daily Activity Register 41 The Logistics Handbook FIGURE 2-11. Tick Sheet 42 Chapter 2 | Logistics Management Information Systems 2.3.4 Relationships among Data Found in Records In a well-functioning LMIS, the relationships among data found in records are clear. For example, at the service delivery level, the consumption figures recorded on the DAR should be close to the issue quantities recorded on the inventory control card (ICC). Also, the transaction numbers on an RIV or IV should match the numbers recorded on the ICC. Periodically, logistics managers should verify the quality of the data. Maintaining accurate records is crucial to good supply management. At any level of the system, managers should be able to report the stock on hand for any item quickly and easily. In a small warehouse, this may mean walking to the storage area and reading the numbers off an easily located bin card. In a large warehouse, this may mean being able to find the ICC file quickly. The entire transaction should be clear—who placed the order and when, when the order was filled and shipped, and when the order was received. If ques­ tions arise, you should be able to trace a transaction by using the reference number from the stockkeeping records to locate the transaction records. 2.4 Summary Reporting and Reporting Systems Stockkeeping, transaction, and consumption records record data. To make the collected data useful, it must be made available to managers in a form suitable for decision making. In this section, we discuss the movement of information on reports. 2.4.1 The Six Rights for LMIS Data If customers expect to find the right goods, in the right quantity, at the right place, at the right time, in the right condition, and for the right cost (see section 1.1 on the six rights), is it reasonable for logistics managers to expect the same to be true of information they need? We think the answer is definitely yes! The six rights also apply to data. We need the right data (the essential data items), at the right time (in time to take action), at the right place (the information must be where the decisions are made), and in the right quantity (having all essential data from all facilities). The data must be of the right quality (we have to believe that the data are correct) and at the right cost (we should not spend more to collect informa­ tion than we spend on supplies!). 43 The Logistics Handbook How do data get to decision makers? As you learned already, stockkeeping records and consumption records are kept at storage and service delivery facilities, yet they contain all the essential data needed to make decisions. And, although transaction records move from one facility to another, they do not necessarily contain essential data. Data must be given to decision makers for them to make informed decisions. Therefore, reports are used to move the essential data to decision makers. Record Compared with Report Up to this point, we have referred only to records. In this text, records are forms on which data are collected. Reports are forms on which all essential data items for a specific facility and for a specific time are moved from one level in a logistics system to another, usually in sum- marized or aggregated form. 2.4.2 Summary Reports  What is the primary purpose of a summary report? To report all essential data items for a specific facility and for a specific time period (usually monthly or quarterly).  What essential data items do summary reports contain? They must contain all three essential data items—stock on hand, consumption, and losses and adjustments.  Who completes the summary report? The manager responsible for collecting the three essential data items usually completes the summary report.  When are summary reports completed? Summary reports are completed at the end of the reporting period (usually monthly or quarterly). Lower-level facilities are usually given a reporting deadline, and each successive level is given another deadline for reporting to the next level. For example, clinics may be given until the tenth day of the following month to report to districts, districts may have until the 20th day to report to the region, and the region may have until the last day of the month to report to the central level. 44 Chapter 2 | Logistics Management Information Systems CASE STUDY Malawi Summary Reporting In the Malawi system, community-based distributors (CBD) report to SDPs by the fifth day of the month. SDP reports are due at the dis- trict level by the tenth day of the month. District reports are due at the regional level by the 15th day of the month, and regional reports are due at the central level by the 20th day of the month. By defin- ing reporting deadlines, the Malawi Ministry of Health (MOH) hopes to minimize the time it takes to receive essential information. The system design for reporting deadlines must take the following into account:  How soon data are needed for decision making.  How quickly reports can be received at the next level.  The quantity of data to be gathered at each level.  How are the data on a summary report organized? Summary reports are usually organized by date—monthly or quarterly, depending on the reporting cycle. They report the beginning stock on hand, receipts, the quantity issued or dispensed, losses and adjustments, and the end stock on hand for a certain time period.  How are summary reports organized? Usually one summary report is made for each facility reporting for the period.  In what format are summary reports printed? The most common formats include simple reports, aggregate reports, and report and request reports.  What is a simple report? A simple report is a summary report that lists the name of the facility, the reporting period, the beginning stock on hand, receipts, quantities issued or dispensed, losses and adjustments, and the ending stock on hand. Well-designed reports are self-balancing, which means that by adding and subtracting the data on the report, as appropriate, the reader can determine whether the report is mathematically correct. 45 The Logistics Handbook Why Use Self-Balancing Reports? Consider the following report of a district warehouse report- ing to a regional warehouse: Opening Balance + Receipts – Issues/Dispensed ± Loss/Adj. = Closing Balance 100 + 35 – 65 – 0 = 70 The supervisor at the regional level can clearly see that the calculations are correct. Self-balancing reports are helpful because supervisors can verify the calculations. Unfortunately, self-balancing reports may not reflect actual quantities on hand if districts complete the report without comparing the closing balance with the actual quantity on hand. Opening balances should equal the closing balance of the previous report. A physical inventory conducted at the beginning or end of the month, however, may reveal a discrepancy in the beginning or ending stock on hand. How should such a dis- crepancy be handled? The discrepancy should be reported as a loss/adjustment for the reporting period. It is critical that the reported closing balance equal the actual stock on hand, so the quantity to be ordered will be determined directly by the actual stock on hand and not by a calculated number.  What is an aggregate summary report? One of the most important decisions logistics managers face in collecting data on summary reports is determining when and at what level data can be aggregated. Consider a pipeline of three regions, each with two districts, and each district with four clinics. The clinics forward their reports monthly to the district. The district can report to the region in one of three ways: 46 Chapter 2 | Logistics Management Information Systems  Include information for the district storeroom only on the report, and then include a copy of each clinic’s report separately.  Include information for the district storeroom only on the report, and then add all of the clinic data together on a second report.  Add data for the district and clinics together, but, under the column issued/dispensed, report only the aggregate dispensed-to-user data from the clinic (ignoring the issues data from the district to the clinic). With any of these three methods, the regional level will receive all of the essential data items for the district. Each method has advantages and disadvantages, however. These are described in the following section in order of preference, the first method being the most preferable (see table 2-1). Method Advantages Disadvantages n One report for the district n One copy of each clinic report n Each report can be self­ balancing. n The region can analyze each facility separately. n The district still needs to add all of the clinic consumption together to make decisions, and the region has to make this calculation as well. n It involves large numbers of forms and copies. n One report for the district n One aggregate clinic report n Each report can be self­ balancing. n The region can analyze each level separately. n The region cannot pinpoint problems at individual clinics. n One aggregate report for both n The region only gets one report. n The form is not self- balancing. n The district may make an error in selecting the data item to report. n The region cannot pin­ point problems within the district. TABLE 2-1. Advantages and Disadvantages of the Three Methods of Aggregating Data 47 The Logistics Handbook Worksheets for Aggregation At intermediate facilities with large numbers of lower-level facilities reporting to them, tracking consumption data for decision making is easier when data-tracking worksheets are introduced. The worksheet is organized to collect consumption data by facility for each month. For example, where clinics report monthly to districts, but districts report only quarterly to regions, worksheets can be used to aggregate data for a three-month period. Worksheets also provide a quick overview of the rates of consumption (increasing, decreasing, or stable) at each facility over time. Worksheets are usually kept at the facility making the ag- gregation, and no duplicates are made (see figure 2-12).  What is a report and request report? A report and request report in a pull system is a summary report that presents the data to the next higher level and requests new supplies. The advantage of this report is that the higher level can verify the need, and the lower level sends up only one form. A report and request report is combined with an IV that represents the other steps in the transaction (see figure 2-13). Unfortunately, it is more difficult (but not much more) to calculate lead time when two forms are used to record a transaction. We often recommend the use of a report and request format when designing a logistics system, because reporting is clearly linked to placing the next order. This linkage encourages timely submission of reports. 48 Chapter 2 | Logistics Management Information Systems FIGURE 2-12. Consumption Worksheet 49 The Logistics Handbook FIGURE 2-13. Quarterly Report and Request for Contraceptives  What information other than the essential data items can be included in a summary report? Information in a summary report can also include service statistics data. Summary reports should also include a place for comments, particularly explanations for any losses and adjustments. The person completing the report should sign the report and date it. At higher levels in the system, the summary report could also indicate the completeness of the report. For example, the report may indicate that 100 reports were expected, but only 92 were received. Knowing this, a manager at the next higher level can determine how well facilities are reporting and make mathematical adjustments for missing data. 50 Chapter 2 | Logistics Management Information Systems  How do summary reports move? They move up the pipeline from the service delivery points (SDPs) to the central level. Depending on where reports are aggregated, reports from SDPs may move all the way to the central level or may be kept at the level at which they were aggregated. Where appropriate, it is possible to skip reporting to intermediate levels and report directly to higher levels. This has the effect of shortening the lead time for reporting. Errors in Aggregation When aggregating data, you can easily report the wrong information, unless the procedures for aggregation are clear. It is important that staff at all levels understand which “stock on hand” should be reported (that of the reporting facility only, that of the reporting facility and all lower-level facilities, or the aggregation of the lower levels only). If the wrong data are reported (such as is­ sues instead of dispensed to user), the decisions made using that data will also be incorrect. 2.4.3 Feedback Reports As we have discussed, program and logistics managers collect data to make decisions. When they receive data they know are incorrect, they need to communicate with the facility that sent the data. Managers can also use data they receive to congratulate facilities for moving toward program goals. To do this, managers can use feedback reports (see figure 2-14). Feedback reports inform lower levels about their performance and, in some cases, provide information about reporting from other facilities. Feedback reports also inform managers at higher levels about how the system is functioning. Feedback reports may help solve many problems. For example, when summary reports are self-balancing, it is easy to pinpoint errors in the individual reports. Feedback reports can include information about these errors and how to cor­ rect them. In addition, feedback reports let the person sending the report know his or her work has been received (and when it was received). Also, feedback reports may be used to motivate lower levels to turn in complete, error-free reports on time by reporting which sites are producing quality re­ ports and which are not. 51 The Logistics Handbook FIGURE 2-14. Feedback Report SAMPLE DATA 52 Chapter 2 | Logistics Management Information Systems Higher-level managers can use feedback reports to gauge how well the system is functioning. For example, a feedback report might list the locations that are stocked out or overstocked, percentages of those reporting at each level, or quantities of losses and adjustments by level. Feedback reports can also focus on a single facility or product. Having this information enables a manager to make informed logistics decisions. Preparing feedback reports is easiest when the LMIS is automated. Computers quickly calculate mathematical errors and highlight missed deadlines; list the percentage of expected reports received; and search for data averages, highs, and lows. Feedback reports are essential for manual systems, too, but the time and effort needed to process and prepare reports by hand may be great. All logistics systems should be designed with feedback mechanisms. What If Data Are Missing? One of the most difficult problems logistics managers face is deciding what to do when facilities do not report. Should you send the report in late? Should you send in your report with only available data? Should you substitute other data for the missing information? Any of these responses may be appropriate. Each program may have a different procedure for handling missing data. Most important, all managers must know what procedure to follow, and they should follow the same procedure consistently. Well-designed summary reports include the number of expected reports and the number of reports received, enabling higher-level managers to calculate the percentage reporting. All managers should, of course, en- courage the reporting facilities to report all data on time. The supervisor should contact any facility that does not comply as soon as possible and offer assistance. 53 The Logistics Handbook FIGURE 2-15. Decision-Making Process 2.5 Key Concept: Data for Decision Making Now that we have discussed LMISs, it is appropriate to discuss the key concept of using data for decision making. At the most fundamental level, the decision-making process can be viewed as a black box into which information flows and out of which decisions emerge. Although figure 2-15 is a simplistic view of what logistics managers actually do, it illustrates some important points that are frequently over­ looked in LMIS development.  If you are interested in decisions of any type, you must understand the decision-making process.  To improve decisions, you could improve the information flowing into the box or improve the process within the box. These are two different types of activities; in most cases, to have any effect on decisions, the two must be done at the same time.  It is not possible to define better information without understanding both the decisions being made and the decision- making process. This is the most important principle of LMIS development: to design a relevant, useful system, you must first consider what decisions are being made and, second, how they are made. Only with this understanding can you say what information is needed and how to collect it. Information systems fail most frequently because the information they collect is not useful in decision making. Information DecisionsDecision-Making Process 54 Chapter 2 | Logistics Management Information Systems 2.6 Chapter Summary In this chapter you learned the following: 1. The purpose of a logistics management information system is to collect data on which to base decisions. 2. The essential data needed for logistics management are—  STOCK ON HAND. Quantities of usable stock available at all levels of the system. Do not count any items that are unusable. These should be considered losses to the system.  RATE OF CONSUMPTION. The average quantity of a particular item dispensed to users during a particular time period.  LOSSES AND ADJUSTMENTS. Losses are the quantity of stock removed from the pipeline for any reason other than consumption by clients (e.g., losses, expiration, theft, damage, etc.). Adjustments include quantities issued to or received from other facilities at the same level. Adjustments may also be administrative changes, such as a physical count that discovers a different amount from the quantity listed on the bin cards. Remember: Adjustments may be either positive or negative changes to stock. 3. The three types of logistics records and the data they must contain are—  STOCKKEEPING RECORDS. Used to record information about items in storage. At a minimum, stockkeeping records must contain the quantity of stock on hand and the quantity of losses and adjustments.  TRANSACTION RECORDS. Used to record information about the movement of stock from one storage facility to another. Transaction records need not include any essential data items.  CONSUMPTION RECORDS. Used to record the quantity of each item dispensed to clients. 4. Reporting processes the essential data into a format useful for decision making. 5. Summary reports must contain all essential data items—stock on hand, consumption, and losses and adjustments. Report types include simple reports, aggregate reports, and report and request reports. 6. Feedback reports inform lower levels about their performance and, sometimes, provide additional information about reporting from other facilities. Feedback reports also inform higher level managers about how well the system is functioning. 55 The Logistics Handbook 56 Chapter 3 | Assessing Stock Status 3 | Assessing Stock Status Objectives In this chapter, you will learn the following: ❐ The purpose of assessing stock status ❐ The data needed to assess stock status ❐ The general formula for assessing stock status ❐ How to analyze consumption data for trends ❐ How to determine the months of stock available at any level, if given inventory and dispensed-to-user data. 57 The Logistics Handbook 58 Chapter 3 | Assessing Stock Status 3.1 Purpose of Assessing Stock Status You probably already understand the principles of assessing stock status. A simple example from daily life will demonstrate that you probably assess stock status regularly. How often have you prepared rice and looked at the rice container to see how much rice remains? When you conclude that you have enough rice, too little rice, or more rice than you need, you have assessed the stock status. Suppose you were asked to assess the stock status of a supply of aspirin in a clinic. Assume you found 100 aspirin tablets. With this information, can you tell if the clinic has too much aspirin? Too little? Just enough? What you really want to know is not, “How much aspirin does the nurse have?” but, “How long will the nurse’s supply of aspirin last?” When you answer this question, you are describing why you assess stock status. The purpose of assessing stock status is to determine how long supplies will last. If you know that the clinic dispenses about 25 aspirin tablets a month, it is possible to determine that the aspirin supply will last about four months from the following simple formula: How much we have of a certain product ÷ How much we use during a given period = How long that product will last or, in this case, 100 tablets on hand ÷ 25 tablets used per month = 4-month supply of tablets You have just assessed stock status. Assessing stock status is a management function. Stock status assessments are usually not written in reports, nor are the number of months of stock on hand recorded on a stock card. Stock is assessed to make a decision on how long stock will last. To assess stock status, you need to know how much of each item is on hand, but you also need to determine how long the supply of each item will last. Depending on your inventory control system, your assess­ ment will cause you to place an order or, in some cases, place an emergency order. If your assessment tells you that no order is needed, you can return to your other duties confident that your supplies will last until your next order. 59 The Logistics Handbook 3.2 How to Assess Stock Status Our formula for assessing stock status can be expressed in terms more familiar to logisticians. The amount we have is the same as stock on hand. The amount we use is the same as rate of consumption. Because stock assessment is measured in terms of months of supply (a convenient measure because data are often collected on a monthly basis at the SDP level), the average monthly consumption (AMC) is a more accurate way of describing the rate of consumption. By substituting more familiar terms, the equation becomes— Stock on hand ÷ average monthly consumption = months of stock on hand Stock on hand and average monthly consumption, therefore, are the data items we need to assess stock status. Why Is Assessing Stock Status Imperative? When you assess stock status, time is an essential fac­ tor. In the aspirin example above, it would have been an entirely different situation if the nurse had dispensed 100 aspirin tablets per week and would not have been resupplied for another month. You may think that 100 aspirin tablets seems like a lot for a clinic or hospital. On the other hand, if you work with or in a large warehouse, 100 aspirin tablets seems like very few, making the supply extremely understocked. It is important, therefore, to ask how long supplies will last. In logistics management, your job is to turn data and numbers into information that can be used to determine if you have enough stock to last until the next order is received and available for dispensing or issuing. 3.2.1 Stock on Hand To calculate the months of stock on hand, you need to know the quantity of stock on hand. You can find stock on hand data in your stockkeeping records (inventory control card, bin card, or stores ledger). The most accurate source is a physical inventory. 60 Chapter 3 | Assessing Stock Status A physical inventory is the process of counting by hand the total number of units of each commodity in your store or health facility at any given time. Physical inventories are discussed in chapter 5. 3.2.2 Average Monthly Consumption In addition to knowing the stock on hand, you also need to know the average monthly consumption (AMC). The AMC can be determined from consumption data. It can only be found in one place—consumption records (daily activity registers or tick sheets). Because usage rates fluctuate—sometimes greately—from month to month, you should use an average of several months’ consumption, rather than data from one month only. To calculate the average monthly consumption, you should derive a simple average by finding the sum of a set of monthly consumption numbers and dividing the total by the number of months used. When determining the AMC, you should analyze data for the most Decimal Dilemma recent six months. For example, When you calculate the AMC, there will imagine that during the last six months the number of cycles of Lo- probably be a decimal in your answer. Femenal dispensed each month in a Because you cannot distribute a portion of a clinic was as follows: cycle, you should round off the number us­ ing normal math rules. For 0.4 or less, round January 1,184 down to the nearest whole unit, and for February 1,210 0.5 or more, round up to the nearest whole March 1,060 unit. Because you are rounding for individ- April 1,250 ual units (not boxes or cartons), a difference May 1,361 of one unit will not affect your calculations June 1,252 for supplies significantly. Total 7,317 The average monthly consumption, then, is— 7,317 (total number of cycles) ÷ 6 (six months of data) = 1,219.5 or 1,220 (cycles per month AMC) 61 The Logistics Handbook 3.2.3 Putting the Formula to Use Using the data from above, if the stock on hand for pills is 3,000, and we have calculated the AMC for pills to be 1,220 cycles/month, we have the data to assess stock status. Our formula is— Stock on hand ÷ AMC = months of supply and the calculation is— 3,000 cycles ÷ 1,220 cycles/month = 2.46 or 2.5 months of stock on hand The answer you obtained means that, based on past usage, you should have enough pills on hand for the next 2.5 months. If you think back to why we assess supply status, you will remember why this calculation is important. If you received a report that stated that 3,000 pills were in a warehouse, you might assume that this quantity is more than enough for several months. The reality is that, given the current rate of consumption, the stock will last only for 2.5 months. If new stock is not received before 2.5 months have passed, the facility is at risk of a stockout and, ultimately, customers will not be served. Decimal Dilemma When you calculate months of supply, you will usually have a decimal. If one month is 1.0, 0.25 months is equal to approximately one week. Depending on the lead time, a one-week difference could be crucial to obtaining sup­ plies and avoiding a potential stockout. Therefore, we do not want to round to the nearest whole month. Teaching staff to round to 0.25, 0.50, or 0.75 may be too confus­ ing, so when assessing stock status, round to the nearest tenth of a month, or one decimal place. For example, 3.36 months becomes 3.4 months. 62 Chapter 3 | Assessing Stock Status 3.3 Analyzing Data for Trends Now that you have seen the calculations for assessing stock status, your next step is a more detailed analysis of the numbers used in the formula. As you analyze six months of usage data, you may notice that a product’s usage is increasing or decreasing steadily (see figure 3-1). What does this mean for your stock assessment? FIGURE 3-1. Trend Analysis As usage steadily increases or decreases, the months of supply you calculate (based on six months of data) will begin to last for more or less time than you calculated. To respond to this situation, you could use sophisticated mathematical equations in data analysis—linear trends, exponential smooth­ ing, and computer aids—to help project usage. Unfortunately, not all store­ keepers have the tools or the time to spend calculating linear trends. The simplest alternative is to calculate the AMC using the average of the last three months of data. These data are sufficient to make calculations and take into account a rising or falling trend. Use a three-month average only when—  You notice a consistent trend, either rising or falling.  The trend continues for the most recent six months or more. 63 The Logistics Handbook TABLE 3-1. Hypothetical Clinic Report To use three months of data, you must analyze six months of data before deciding how much data to use. A dip in consumption in only one month of the six is enough to suggest that the trend is not consistent and, therefore, all six months of data should be used in your calculations. Where a consistently increasing or decreasing trend occurs, however, using the last three months of data is better, because it reflects more accurately how your consumption is changing. Perhaps the best way to understand using trends is to look at a hypothetical example. Suppose you have the following data from clinic reports (see table 3-1)— If you look carefully, you will see that pill consumption shows no particular trend. You can conclude that, in future months, pill consumption will also vary. When you look at condom consumption, however, you can see a definite growth trend. You can conclude that, in the future, usage is likely to continue to increase. For pills, therefore, calculate the AMC using all six months of data, and only the most recent three months of data (April–June) for condoms. Why is this recommended? Table 3-2 shows what happens when both six-month and three-month AMCs are used. If you assume that 3,000 pills and 6,000 condoms are on hand, you would calculate the following, using six-month averages— 3,000 ÷ 1,473= 2.0 months of pills on hand 6,000 ÷ 1,266 = 4.7 months of condoms on hand and, using three-month averages— 3,000 ÷ 1,262 = 2.4 months of pills on hand 6,000 ÷ 1,544 = 3.9 months of condoms on hand 64 Chapter 3 | Assessing Stock Status The calculations for 6-month and 3-month averages for pills show different results. The difference between 2 months of stock and 2.4 months of stock is 0.4 months of stock. If you had used only three months of data, you might believe that you have more than sufficient stock. If you use six months of data, you get a lower, more conservative estimate. To ensure that sufficient stock is available, you should use six months of data when no trend is present. When we look at condoms and compare the difference between 4.7 months of stock and 3.9 months of stock, there is nearly a one-month difference between the three-month and six-month assessments. If you use a six-month average, the rapidly increasing demand means you will run out of condoms almost a month earlier than expected. The effects of this can be devastating, especially if you will not be resupplied for the next two or three months. By using the last three months of data for condoms (because a clear trend exists), you are addressing the trend better. Table 3.3 summarizes how to calculate stock status. TABLE 3-2. Six-Month and Three-Month AMCs 3.4 When to Assess Stock Status You should regularly assess the stock status of each item in your store­ room. As a supplies manager, how often you do this is your decision. We recom­ mend that you consider assessing the stock status monthly for all items you store. Even if you only report or order quarterly, you should assess stock status more often to ensure that you are not at risk of a stockout. If the number of items you store is large, you may not be able to assess the stock status for each item monthly. In such cases, consider a VEN (vital, essential, nonessential), which categorizes products by medical need, and/ or an ABC analysis, which categorizes products by cost. These techniques are described in chapter 5, which discusses storage. 65 The Logistics Handbook TABLE 3-3. Calculating Months of Supply Ca lc ul at in g M on th s of S up pl y ST EP S A CT IO N S N O TE S 1 O rg an iz e m on th ly d isp en se d- to -u se r d at a f or th e p ro du ct in ch ro no lo gi ca l G at he r o nl y th e m os t r ec en t 6 m on th s d at a f ro m co ns um pt io n re co rd s o r r ep or ts of co ns um pt io n. If fe w er th an 6 m on th s d at a a re av ai la bl e, us e a ll th e d at a a va ila bl e. se qu en ce . 2 Re vi ew th e m os t r ec en t 6 m on th s d at a t o de te rm in e i f t he re is an in cr ea sin g or D isp en se d- to -u se r d at a m us t b e i nc re as in g or de cr ea sin g co ns ist en tly o ve r t he m os t r ec en t 6 ­ m on th p er io d to b e c on sid er ed a tre nd . de cr ea sin g tre nd . IF TH EN Th er e i s n o tre nd 2. d iv id in g th e s um b y 6. D et er m in e t he a ve ra ge m on th ly co ns um pt io n by 1. a dd in g th e 6 m on th s o f d at a, an d Th er e i s a n in cr ea sin g or de cr ea sin g tre nd D et er m in e t he by av er ag e m on th ly co ns um pt io n 1. a dd in g th e m os t r ec en t 3 m on th s o f d at a, an d 2. d iv id in g th e s um b y 3. 3 4 D iv id e t he st oc k on h an d fo r t he p ro du ct b y th e a ve ra ge m on th ly Th e s to ck o n ha nd m ay b e f ou nd o n in ve nt or y re co rd s o r r ep or ts of in ve nt or y or d et er m in ed b y ph ys ic al co un t. Ro un d nu m be rs .0 5 an d ab ov e t o th e n ex t h ig he st nu m be r o ne p la ce af te r t he d ec im al . D ro p nu m be rs .0 4 an d be lo w. co ns um pt io n ca lc ul at ed in st ep 2 ab ov e. ru le s. Ro un d th e f ig ur e t o on e p la ce af te r t he d ec im al p oi nt u sin g sta nd ar d ro un di ng 66 Chapter 3 | Assessing Stock Status Frequent assessments of stock status are the best way to ensure that you are aware of the potential for stockouts. Simply looking up at a shelf and making a decision not based on consumption data could lead to stockouts and, consequently, the inability of service providers to provide good customer service. Should You Adjust Data for Stockouts? In gathering your stock on hand or consumption data, you may find that a stockout has occurred. In some cases, you may discover that facilities have been rationing sup­ plies to avoid a stockout or have been hoarding supplies (gathering large quantities) to avoid future problems. It is tempting, in such cases, to try to adjust the consump­ tion data for “what would have been” if stock had been available and dispensed normally. We do not recommend that you attempt to adjust these data. If you know that a stockout, hoarding and rationing, or incorrect data reporting occurred in a particular month, disregard the data for that month and include data from earlier months when these events did not occur, until you have six months of data without such problems. You have a better chance of assessing stock correctly if you go back through the records than if you try to guess what might have happened in the incorrect months. Keep notes on how you made your calculations. It is im­ portant to be able to repeat your stock status assessment and get the same answers if you are called on to demon­ strate your decision-making process. 3.5 Stock Status Assessment at a Higher Level in the System As a logistics or health program manager, you probably work in the capital city or a regional center, with various district, provincial, and clinic storerooms and warehouses spread out across the country. Despite the distances to these outlying facilities, it is important that you are able to assess the supply status at any level of your system. 67 The Logistics Handbook 3.5.1 Why You Might Want to Assess Stock Status at Any Level of the System Assessing supply status at any level or even all levels can give you more than just a glimpse of stock status in your own warehouse. You could also know whether—  The levels you supervise are overstocked.  The levels you supervise are understocked, and additional shipments are needed.  Any products will expire in storage before they reach the user.  Some facilities have too much stock and others not enough.  Supplies are reaching customers instead of sitting in warehouses. Knowing the supply status at various levels of your pipeline can prevent such problems. You should assess stock status at different levels as often as you receive reports on dispensed to user data. Typically, all reports do not come in at once. A district level may report monthly, whereas the central level may only have new data quarterly. 3.5.2 Gathering Consumption Substituting Issues Data for Data Consumption Data When you assess stock status from higher You can substitute issues data for levels, you should base average monthly dispensed-to-user data when you assess consumption on actual dispensed-to-user stock status at higher levels, but that can data from the dispensing level (consump­ be problematic. In a pull system, issues tion data). These data can only come from data should closely match dispensed- SDPs. When complete dispensed-to-user data are not available, use one of the to-user data if the facilities are stocked following techniques: properly (not too much or too little—see chapter 4 for more discussion of inven­  Take dispensed-to-user data tory control). Otherwise, issues data from previous reports. might reflect such practices as hoarding or rationing. Issues data in a push system  Adjust incomplete data to may be less accurate, because the data estimate complete reporting. frequently are compiled without the  Substitute issues data from most current information; stock could the lowest possible level for have been issued without sufficient dispensed data. knowledge of actual consumption. The last two techniques are discussed in the box on the next page. 68 Chapter 3 | Assessing Stock Status Adjusting Consumption Data for Incomplete Reporting At higher levels, getting complete (i.e., 100 percent) reports of consumption from SDPs may be challenging. Although many systems do collect all reports, it is unusual to have all SDPs reporting on time. When this is the case and you want to assess stock status, you can use the consumption data that are available and adjust it to account for the missing data. To adjust the data, use the following formula— Sum of all consumption reported ÷ percent of reports received = estimated total consumption For example, if you receive 8 of 10 reports, you have 80 percent of the expected reports. If the sum of the consump­ tion from those reports equals 100, the estimated total consumption would be— 100 ÷ 0.80 = 125 As in any stock status assessment, divide the estimated total consumption by the number of months of data used (follow­ ing the guidelines discussed in section 3.3). This will give you an estimated AMC to use in the general formula for assessing stock status. If you use this technique to estimate consumption, remember the following:  Document how you made your adjustment.  If reporting is very low, (for example, below 70 per­ cent), substitute issues data for consumption data (as described in the box on page 68).  Not all clinics are equal. This basic technique assumes that consumption rates for the missing clinic is about the same as for the clinics that have reported. If clinics that have not reported are not like those that have reported (i.e., they are known to dispense much larger or smaller quantities to users), substitute issues data for consumption data (as described in the box on page 68). 69 The Logistics Handbook 3.5.3 Gathering Stock on Hand Data When assessing stock on hand at the level above the SDP—for example, at the district level—you can use stock on hand data from one or more of the following three sources:  District warehouse stock on hand  Aggregate (sum) of the stock on hand at all SDPs reporting to the district  Aggregate of the stock on hand for the district warehouse plus the SDPs reporting to the district. The source you use depends on the question you want to answer. If you use the stock on hand for the district warehouse only, you will assess only the supply status of the district warehouse. This tells you nothing about the SDP level, but does indicate how long the district warehouse stock will last. If you use the SDP data only, you will know how long stocks will last at the service delivery level as a whole, but you will know nothing about the district warehouse, or about individual SDP stock levels. If you aggregate the stock on hand of both SDPs and the district warehouse, you will assess the stock status of the entire district, but will not be able to distinguish between stock in the district warehouse and stock in SDPs. Whenever possible, you should try to use all three methods so you can review all three of the results—the district as a whole, the SDP level as a whole and separately, and the district warehouse itself. Some countries undertake special studies to assess stock status for every facility in the system at approximately the same time. Such a study produces a “snapshot” of stock status that can inform decision makers of changes that may need to be planned for the upcoming year. Regardless of how often you assess stock status or what data sources you use, be sure to document how you calculated the months of supply. This may prove important when you review your decisions. 70 Chapter 3 | Assessing Stock Status Using Stock on Hand Data to Assess Stock at Higher Levels The following example demonstrates four methods for assess­ ing stock status at higher levels. Imagine you are the warehouse manager for a district with two clinics reporting to you. At the end of the month, you conduct a physical inventory of your warehouse and receive reports from both clinics. You find— Facility Stock on Hand AMC Months of Supply Clinic 1 100 200 0.5 Clinic 2 600 300 2.0 District 3,000 700 (issued) 4.3 (based on issues) Method 1: District Warehouse Only Because the district has dispensed-to-user data, it can assess its stock status best by using the AMC data from both clinics. The calculation would be— Facility Stock on Hand AMC Months of Supply District 3,000 500 6.0 If the regional supervisor assesses stock status using only these data, the potential stockout at the clinic level would be missed. The region would feel safe knowing that the district warehouse had enough stock to supply its clinics for another six months. Method 2: Aggregate of Clinics Only If the district reports only the aggregated clinic stock on hand to the region, the calculation would be— Facility Stock on Hand AMC Months of Supply All Clinics 700 500 1.4 If the regional supervisor assesses stock status using only these data, the potential stockout at the clinic would be missed. The region, however, would feel somewhat concerned, knowing that, overall, the clinic level has sufficient stock to meet its needs, but will need to be restocked soon. (continued on next page) 71 The Logistics Handbook (continued from previous page) Method 3: Aggregate of the District and Clinic If the district reports all data aggregated, the calculation would be— Facility Stock on Hand AMC Months of Supply All 3,700 500 7.4 If the regional supervisor assesses stock status using only this data, the potential stockout at the clinic would be missed. The region would know that sufficient supplies existed in the entire district, but could not tell how they were distributed between the district and clinic levels. Method 4: Disaggregated Data In an ideal setting, the regional supervisor would receive all of the data for all facilities. This information could be used to pinpoint problems at all facilities at all levels. It may, however, be difficult to process the numerous monthly reports needed for so many facilities. Managers must understand what each method tells them and the strengths and weaknesses of each, and choose the method most appropriate to their program. 3.5.4 Understanding Your Assessment of Stock Status at Higher Levels Figure 3.2 illustrates the reason for assessing stock status at higher levels. Stock on hand nationwide (the months of supply at all levels) appears relatively steady and high. However, if you assess the supply status of the central warehouse only, you might believe the stocks are depleting rapidly and more stock is urgently needed. The graph shows that this is not true; rather, stock is gradually being redistributed to lower levels in the pipeline. Understanding stock status at all levels, therefore, is important to managing a logistics pipeline. 72 Chapter 3 | Assessing Stock Status FIGURE 3-2. Assessment Graph 3.6 Key Concepts: Data for Decision Making and the Systems Approach Assessing stock status is one example of the key concept of using data for decision making; an assessment is made, and appropriate action is taken. At higher levels, assessing stock status tells managers how stocks are moving through the system. Bottlenecks in the system are more readily identified, and action can be taken. Managers can also review stock status to see how well storekeepers are complying with keeping their appropriate levels of inventory. Stock status assessment is also a good example of looking at data using a systems approach—that is, looking at how all elements of the logistics cycle work together. The quantity and quality of your data tell you how your LMIS is functioning. The stock balance at each level tells you where stock is in the pipeline and can identify potential expiration problems. The stock level tells you whether facilities are keeping the appropriate quantities on hand. Problems with stock levels may also indicate transportation problems, management problems due to hoarding or rationing practices, and a variety of other logistics difficulties. Thus, stock status assessment can tell you how your system is functioning. 73 The Logistics Handbook 3.7 Chapter Summary In this chapter you learned the following: 1. You assess stock status to determine how long supplies will last. 2. Specific data—that is, stock on hand and rate of consumption— are needed to assess stock status. 3. The general formula for assessing stock status is as follows: Stock on hand ÷ average monthly consumption = months of supply on hand 4. To analyze consumption data for trends, use six months of data when calculating the average monthly consumption. 5. When you have at least six months of data, and a consistently increasing or decreasing trend emerges, use the last three months of data when calculating the AMC. 6. To determine the months of stock available at any level, given inventory and dispensed to user data, do the following:  Apply the general formula using the stock on hand for the level you want to assess.  For the AMC, use actual consumption data when possible and use the lowest level of issues data available when consumption data are not available. 74 Chapter 4 | Maximum-Minimum Inventory Control Systems Objectives In this chapter, you will learn the following: 4 | Maximum-Minimum Inventory Control Systems  The purpose of an inventory control system  Key terms in inventory control  Details of three types of maximum-minimum inventory control systems and rules for store­ keepers for each system  How to determine order/issue quantities  How to set maximum and minimum stock levels  The advantages of using maximum-minimum inventory control  How to select among the three system types. 75 The Logistics Handbook 76 Chapter 4 | Maximum-Minimum Inventory Control Systems 4.1 Purpose of an Inventory Control System Your home probably contains a number of inventory control systems. Con­ sider the milk in your kitchen, for example, and think about the following questions:  How much fresh milk do you keep in your house?  How often do you buy milk?  What is the lowest quantity of milk you want to have before you buy more?  How much milk do you want to have at any one time?  Do you consume milk on a regular, steady basis, or does your use fluctuate?  How many people in your house consume milk? Does this change?  Are there any financial or other constraints to your purchases of milk, such as limited available supply or limited transport? Although you can use any other household item in this example, milk is a good one to compare with health products. Like milk, health products are staple goods—you do not want to run out of them, and each may have many uses. For example, milk may be used at breakfast time with coffee and throughout the day in cooking and baking. Likewise, antibiotics are used in a variety of treatments. Using milk as an example also demon­ strates that simply having a great quantity of an item does not ensure that you will always have supplies; both milk and antibiotics spoil (or expire) after a time. Expiration is a major concern of inventory control. Although you may not have a formal inventory control system for milk, when it comes to fuel in a vehicle, you do need a more formal system—in this case, a fuel gauge. The worst thing that can happen to a vehicle, and that you can prevent, is running out of fuel. Similarly, the worst thing that can happen in a clinic is to have a stockout (running out of stock). The best way to ensure that you do not run out of stock in a clinic is to establish an inventory control system. An inventory control system informs the storekeeper when to order or issue, how much to order or issue, and how to maintain an appropriate stock level of all products to avoid shortages and oversupply. 77 The Logistics Handbook A vehicle’s fuel gauge helps you maintain your stock level. The maximum stock you can have is when the gauge reads full, and the minimum stock is when the gauge reads empty. While driving, you monitor your fuel consumption from time to time and decide when to purchase (order) more gas. By assessing the supply status of the tank, you can calculate when to order and how much, depending on your destination (and perhaps your budget). Some fuel gauges show a red zone that indicates that the gas tank is low. Drivers often use the red zone as an indicator of when to buy more fuel. In other cases, drivers replenish the tank on a specific day of the week, regardless of the level, adding enough fuel to reach full. In deciding on an approach, drivers are choosing a form of inventory control. 4.2 Key Inventory Control Terms As we discuss inventory control systems, the following key terms are important:  MAXIMUM-MINIMUM INVENTORY CONTROL SYSTEM. A maximum- minimum inventory control system is a system that ensures quantities in stock fall within an established range. Throughout this handbook, we use the term max-min system as an abbreviation for maximum- minimum inventory control system. Most successful inventory control systems are max-min systems of one type or another.  MAXIMUM STOCK LEVEL/MAXIMUM QUANTITY. The maximum is the level of stock above which inventory levels should not rise under normal conditions. The maximum level is set as a number of months of stock (for example, the maximum level may be set at four months of stock). The maximum level can be converted to the maximum quantity (for example, the maximum quantity is 120,000 units), but the maximum level is a more useful term because it indicates how long supplies will last. The maximum stock level is fixed, whereas the quantity varies as consumption changes. In this handbook, max is the abbreviation for maximum level.  MINIMUM STOCK LEVEL/MINIMUM QUANTITY. The minimum stock level is the level of stock at which actions to replenish inventory should occur under normal conditions. As with the maximum, the minimum can be expressed as a level (for example, the minimum level is one month of stock) or as a quantity (for example, the minimum quantity is 30,000 units). The minimum stock level is fixed, whereas the quantity varies as consumption changes. For this handbook, min is the abbreviation for minimum stock level. Depending on the design of the max-min system, reaching the min may be a trigger for placing an order (often called the reorder level or reorder point). In some systems, reaching the min may be an indicator to monitor stocks carefully until the next order is placed or the emergency order point, defined below, is reached. 78 Chapter 4 | Maximum-Minimum Inventory Control Systems  REVIEW PERIOD/REVIEW PERIOD STOCK. The review period is the routine interval of time between assessments of stock levels to determine if an order should be placed. This term is also called an order interval or resupply interval, but review period is preferred, because, in some max-min systems, a review does not always result in an order being placed. Review period stock is the quantity of stock dispensed during the review period.  SAFETY STOCK LEVEL. The safety stock level is the buffer, cushion, or reserve stock kept on hand to protect against stockouts caused by delayed deliveries, markedly increased demand, or other unexpected events. The safety stock level is expressed in number of months of supply. It may also be expressed as a quantity.  LEAD-TIME STOCK LEVEL. The lead-time stock level is the level of stock used between the time new stock is ordered and when it is received and available for use. The lead-time stock level is expressed in number of months of supply. It may also be expressed as a quantity.  EMERGENCY ORDER POINT. The emergency order point (EOP) is the level of stock that triggers an emergency order, regardless of the timing within the review period. The EOP is always lower than the min. 4.3 Three Types of Maximum-Minimum Inventory Control Three forms or variations of max-min inventory control are applicable to health system logistics: forced ordering, continuous review, and standard max-min. This section includes information needed to design an inventory control system (theoretical concepts) and how to use that system (operational concepts). We use the verb set to mean designing a max-min system, and calculate to mean routine implementation of the system. System designers set levels in a max-min system, and storekeepers calculate the quantities to be ordered. 79 The Logistics Handbook 4.3.1 Forced-Ordering Max-Min Systems A very common max-min variation for health logistics systems that manage a relatively small number of products is the forced-ordering max-min system. To understand why it is used so commonly, we need to discuss the implemen­ tation and design of forced ordering. After gaining an understanding of how the system operates on a day-to-day basis, we move to how the system is designed. Implementation Good inventory control procedures are characterized by specific, unambigu­ ous decision rules that storekeepers can follow in making orders. Rules for ordering In a forced-ordering system, the storekeeper decides when to order and how much to order based on the following decision rule: In a forced-ordering max-min system, the storekeeper does not use the min at all, because he or she always takes action at the end of the review period. The review period, then, is the trigger for ordering. The storekeeper must be careful not to run out of stock entirely; so, in ad­ dition to applying the decision rule for ordering, he or she is given an EOP (discussed later). The decision rules for a forced-ordering max-min should, also include the following: At the end of each review period, review all stock levels and order enough stock to bring the levels up to the max. Place an emergency order if the stock level for any item falls below the EOP before the end of the review period. Storekeepers know they have reached the EOP when they assess stock frequently. This is why, in systems that place orders quarterly, stock status should be assessed monthly. The results of a stock status assessment alert the storekeeper to the need to place an emergency order for any item that has reached the EOP. 80 Chapter 4 | Maximum-Minimum Inventory Control Systems HOW TO CALCULATE THE ORDER QUANTITY To calculate the quantity to order, storekeepers must be able to convert stock levels (number of months of stock) into the actual quantities needed. A storekeeper cannot, for example, send an order to the central warehouse that asks for two months of stock of an item. The central warehouse would not know what two months of stock means. Forced-Ordering System Imagine a clinic in which the storekeeper is given a max of three months and an EOP of one month. The review period is monthly. If the average monthly consumption is 100 condoms/month, the max quantity would be 300 con­ doms, and the EOP would be 100 condoms. If the stock on hand at the end of the review period is 200 condoms, the order quantity is 100 condoms. The storekeeper should use the following formula to calculate the quantity to order for each product— Maximum stock quantity – Stock on hand – Quantity on order = Order quantity where Maximum stock quantity = Average monthly consumption x Maximum number of months of stock to be kept It might be helpful to review two elements already defined in previous sections that appear in the above formula—  AVERAGE MONTHLY CONSUMPTION. The average of the quantities used in either the most recent three or six months, as appropriate (see chapter 3 for a discussion of how to decide between three or six months of data).  QUANTITY ON ORDER. This is the quantity of stock previously ordered but not yet received. In a well-functioning logistics system, this number is zero, because you should receive your previous order well before the end of the review period. Table 4-1, a job aid, includes all the steps you need to determine reorder quantities using a forced-ordering max-min system. 81 - - The Logistics Handbook TABLE 4-1. Determining Reorder Quantities D et er m in in g R eo rd er Q ua nt iti es U si ng F or ce d- O rd er in g M ax im um -M in im um In ve nt or y C on tr ol P ro ce du re s 82 Chapter 4 | Maximum-Minimum Inventory Control Systems Designing a Forced-Ordering System To design a forced-ordering max-min system, you should set the max and min levels high enough to avoid stockouts, yet low enough so as not to increase the risk of expiration or damage. The balance will go below the min, but, ideally, it should never go below the emergency point. To achieve this performance, you must set a minimum level high enough to ensure that the facility never runs out of stock completely. The goal is to avoid stockouts of essential products. Moreover, the sys­ tem should ensure that emergency orders are rarely placed, because such orders are time-consuming and possibly expensive. However, you must still set the max low enough to ensure that space in the storeroom is adequate, and that the stock does not expire before it can be used. How to set the min Emergency Orders To begin your design, set the minimum level, which should An emergency order should be just that—an order approximately equal the stock placed only when a realistic possibility of stocking out level you want the facility to exists. Emergency situations are not normal; rather, have at the end of a normal review period. Set the min they are the exception. When a max-min system high enough to account for the experiences frequent emergency orders, the system normal time needed to replenish design and stock levels should be reviewed and prob­ stock and all other uncertainties ably reset. in a system’s operation. Take into account the following: A small number of emergency orders may occur, par­ ticularly in places where disease patterns vary widely,  Lead time is variable. or when the onset of an epidemic cannot be pre­  You may see more dicted. A lack of communication between program customers than you managers and storekeepers can also result in emer­ expect, so you may gency ordering. For example, a condom promotion need additional stock. campaign that is scheduled without notifying the storekeeper that additional supplies may be needed  Deliveries may be late. could result in an emergency order.  You may not receive everything you ordered. When an emergency order is placed, storekeepers usually should order a quantity adequate to reach the maximum level, not just enough to last until the next review period. This may not be possible in some situations. For example, if the emergency order is de­ livered by motorcycle, the quantity cannot be as large as for a regular delivery by truck. 83 The Logistics Handbook Setting Review Periods in Forced- Ordering Max-Min Systems This handbook has defined a review period as the normal interval of time between assessments of stock levels to determine if an order should be placed. In many programs, the system designer cannot set the review period. It may be based on existing government re­ view periods, or it may coincide with the reporting period, usually monthly or quarterly. Gathering data for a routine report is usually an excellent opportunity to assess the status of supplies and place an order. Reporting periods may sometimes be more frequent than review periods. For example, a clinic may send reports in monthly, but only place orders quarterly. This is the case when it is difficult to resupply clinics more often, for exam­ ple, due to transportation and road condition difficulties. In designing a max-min system, it is often easiest to use re­ porting periods as the review periods. By linking reporting and ordering, logistics managers are more likely to receive the information needed for central-level decision making. The formula for setting the min in a forced-ordering system is— Min stock level = Lead-time stock level + Safety stock level We discuss both the lead-time stock level and safety stock level in the following section. SETTING THE LEAD-TIME STOCK LEVEL. Lead time is the time between when stock is ordered and when it is delivered and available for use. The lead-time stock level, therefore, is the number of months of stock used after an order is placed and before you receive the new order. The min clearly has to include the lead-time stock level, because you will need stock to distribute after you place an order and are waiting for it to come in. If it takes a month from the time you place an order until you receive and unpack your new stock, the min must be at least one month. 84 Chapter 4 | Maximum-Minimum Inventory Control Systems Because lead times are variable, accurately setting the lead-time stock level can be difficult. As a designer, you could set the lead-time stock level to equal the average of the lead time levels for the past two or three review periods for the average facility. Determining the average can be tricky. If you use the lead time for urban clinics last month, for example, to set the lead- time stock level for district-to-clinic deliveries, the level may not be appro­ priate for rural facilities. Instead, you should use an average for all facilities at the same level. Consider, however, a system for which transport is not routinely available, or where weather conditions (e.g., a rainy season) make selected roads impass­ able (see figure 4-1). In such situations, the designer must use the longest lead time observed between the two least-reliable facilities, or at least some facilities will stockout. This will ensure that, under almost every conceivable situation, a stockout will not occur. But increasing the lead-time stock level increases the min and, ultimately, the length of the pipeline. FIGURE 4-1. Clinic Locations May Vary Greatly in Distance from Issuer 85 The Logistics Handbook Should Lead Time Ever Be Longer Than the Review Period? We recommend that the lead time always be shorter than the review period. Consider a system in which clinics order monthly, but supplies are not available for use until five weeks later. The result is that you place your next order before the first order arrives. Though the order quantity formula accounts for an order that has not been received, it is difficult to count on outstand­ ing orders arriving on time and in the full quantity expected. This situation adds unnecessary guesswork to the system (see figure 4-2). FIGURE 4-2. Lead Time Longer than Review Period SETTING THE SAFETY STOCK LEVEL. Safety stock accounts for the other uncer­ tainties mentioned earlier. Other terms for safety stock include security stock or buffer stock. The safety stock level is one of the most important decisions the system designer must make. How should it be set? Safety stock is the buffer, cushion, or reserve stock kept on hand to protect against stockouts caused by delayed deliveries or markedly increased demand. 86 Chapter 4 | Maximum-Minimum Inventory Control Systems As a general guideline, the safety stock should equal at least half of the review period stock. Decimal Dilemma When setting 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 one-half months of stock. If the lead time is one month, therefore, 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. For example, if the average lead time is three weeks, and the safety stock level is four weeks, the min is one and three-fourths months. For ease of use, round this number up to two months. The additional stock is not likely to be enough to affect the overall system. How much larger than half the review period stock should the safety stock be? Only the designer and personnel in the system assessing confidence in the system can determine this. Personnel must believe that the safety stock is sufficient to prevent a stockout, or they may begin to order more stock than they actually need. When demand is stable, and the logistics system functions well, the safety stock can be lower because there is less uncertainty. When demand is unstable, or the logistics system does not function well, the safety stock level should be set higher. In a new system, the designer should set the safety stock higher, monitor the system’s per­ formance, and lower the safety stock, if possible, as data on actual fluctua­ tions in demand and supply become available. Remember, however, that setting a higher safety stock increases the quantities kept in stock, which, in small warehouses, may result in expired or damaged products. DETERMINING THE MIN. After you decide on a lead-time stock level and a safety stock level, you set the min by adding these two elements together. 87 The Logistics Handbook Remember, in a forced-ordering system, storekeepers do not need to know the min, nor are they concerned about what it is. All they need to do is bring the stock level up to the maximum at the end of the review period. Why, then, establish a min in a forced-ordering system? First, you, as the designer, determine the max based on the min, as described below. Also, the min is the stock level you would like the facility to have on hand at the end of a normal review period—that is, a review period when nothing special has gone wrong. It must be high enough to prevent stockouts when things do go wrong. How to set the max Setting the max is relatively easy in a forced-ordering system. The formula for setting the max is— Max stock level ≥ Min stock level + Review period stock level You set your min previously, and your review period is fixed (probably monthly or quarterly). Simply add the two to find the max. The greater than or equal to symbol (≥) indicates that it may make sense to set the maximum level higher than the sum of the min and review period stock level, when it is logically and economically sensible to deliver a larger quantity. For example, it may make economic sense to deliver an entire pallet of condoms rather than loose cartons. Forced-Ordering System To set the max and min for a hypothetical clinic in a forced-ordering system, begin by setting the min. If the lead time is known to be approximately one month, the min has to be at least one month. In addition, each year, the delivery truck is called on occasionally to take care of other duties, and the warehouse skips that month’s delivery. The designer of the system needs to include a safety stock of about one month to account for skipped months. The min, therefore, would be 1 + 1 = 2 months (the sum of the lead time and safety stock). If the clinic is instructed to order monthly, the max would be at least the min plus the review period—that is, greater than or equal to 3. The min for the clinic would be 2, and the max would be greater than or equal to 3. 88 Chapter 4 | Maximum-Minimum Inventory Control Systems Setting the emergency order point As a system designer, you should set max and min levels high enough to avoid stockouts yet low enough not to increase the risk of expiration or damage (if the warehouse is too full, the risk of damage increases). On rare occasions, however, a facility may find itself very low on stock before it is time to place a routine order. When stocks reach the emergency order point (EOP), the storekeeper should place an emergency order. The EOP should not be set to equal the min, because the min includes the buffer stock. The EOP could be as high as the lead-time stock level if urgent orders take as long to process as a routine order. In most cases, however, it should be possible to issue stock faster than normal in urgent or emergency situations. This is called the emergency lead time. The EOP is defined as— Emergency order point ≥ Longest emergency lead time stock The designer should set the EOP equal to or greater than the longest emer­ gency lead time to avoid a mistake in timing the delivery of an emer­ gency order. ADVANTAGES AND DISADVANTAGES OF THE SYSTEM. A forced-ordering system has both advantages and disadvantages:  The storekeeper’s decision rule is simple: order every item at the end of the period. CASE STUDY Forced Ordering in Malawi In Malawi, the logistics pipeline consists of a central warehouse, three regional warehouses, 24 district warehouses, and approximately 400 SDPs. Every month, district family planning coordinators determine how much of all seven contraceptive commodities should be allocated (pushed) to each SDP they supervise to bring them up to a three month max. Quarterly, these same coordinators request (pull) all seven contraceptives up to a six month max from the regional warehouses. As this example demon­ strates, forced-ordering systems can be push or pull. Because districts pull all seven types of contraceptives from the regions and push them to the clinics, at the end of each review period regardless of how many units are in stock, it is a forced-ordering system. 89 The Logistics Handbook  Because orders are placed at regular intervals (i.e., the end of each review period), transportation can be scheduled for specific times, making it easier to ensure the availability of transport resources.  Because all items are ordered at the end of every review period, storekeepers do not need to assess stock status constantly, unless they believe there is potential for a stockout to occur. One disadvantage of a forced-ordering system is that orders for some items may be for small quantities, because all items are ordered, regardless of the stock on hand. A Variation: Forced-Ordering Delivery Truck System One variation of a forced-ordering max-min system is the delivery truck system, sometimes called a topping up or bread truck system. The rules for the storekeeper and the considerations for the designer are the same as for a regular forced-ordering system. The difference between a regular forced-ordering system and a delivery truck system is the way the deliveries are made. In a delivery truck system, a truck is loaded with supplies at the end of the review period. The truck and a de­ livery team travel to a single facility, assess the stock, and leave (top up) an amount of each product that is sufficient to bring stock levels up to the max at that location. In more efficient delivery truck systems, the truck is loaded to capacity, and the delivery team tops up several facilities before returning to the higher level for additional supplies. Delivery truck systems can be either pull or push systems. In the former, the truck arrives, and the storekeeper completes the report/transaction record and orders from the truck. In the latter, the supervisor on the truck calcu­ lates the quantity to be issued and issues it from the truck. The supervisor may or may not also complete the facility’s report. In some cases, the super­ visor and storekeeper complete the order form together. The difference for the designer is determining who is trained to complete the order form: many storekeepers or fewer supervisors/delivery team members. Advantages and disadvantages of this system The delivery truck system has several advantages over regular forced ordering:  The lead time is zero because the order is filled on the spot, lowering the lead-time stock to zero. This lowers the min and, consequently, the maximum stock levels. 90 Chapter 4 | Maximum-Minimum Inventory Control Systems  Damaged or expired products can be put back on the truck for disposal (if this is the procedure for handling these products), taking advantage of space on the truck.  The truck can be sent out with a full load of supplies, eliminating multiple small orders.  The LMIS report can be completed and collected at the time of delivery. This is especially advantageous when reporting is delayed because of poor mail service, or when reporting is spotty because facilities lack postage funds.  If a supervisor goes along on the truck for deliveries, he or she can provide on-the-job training and supervision at the various stops. This is helpful when transport for supervision alone is difficult, and higher-level managers want to ensure routine supervision. Forced-Ordering Delivery Truck System The Philippines uses the delivery-truck variation of forced- ordering max-min systems. The Philippine system consists of a central level, provincial level, and SDPs (rural health units [RHU], hospitals, and NGOs). One hundred forty-seven delivery teams were created at the provincial level to make deliver­ ies to 3,879 SDPs. The inventory control system was designed in part due to changes in the Philippine government, which transferred authority for managing supplies to the provinces. Provinces were trained to make deliveries to SDPs. Delivery teams of about three people each make quarterly deliveries to SDPs. Delivery team leaders complete the SDPs’ monthly reports and determine the quantity to be issued. At this level, the Philippine system is a push delivery truck system. The Philippine delivery truck system has proved quite effective in reducing stockouts. A 1991 survey of RHUs showed an 8 percent stockout rate for pills and a 52 percent stockout rate for condoms. By 1993 this had been reduced to 0 percent for pills and 1 percent for condoms. The reduction in stockouts can be credited not just to the delivery truck system, but also to training in systemwide inventory control procedures. This example demonstrates that introduction of inventory control systems can significantly affect the well-being of a family planning program. (Although data from the two surveys are not entirely compatible, the evident reduction in stockouts is still significant.) 91 The Logistics Handbook The delivery truck system can also have certain disadvantages—  If the truck breaks down, the whole system breaks down, so alternate transport for emergency orders must be available.  A sufficient number of staff must be available in the office to complete logistics management and other duties while supervisors are away making deliveries. 4.3.2 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. To understand why, we discuss both the implementation and design of continuous review. Comparing continuous review with forced-ordering max-min systems shows how small variations in design can change the way an entire system functions. Implementation Rules for ordering In a continuous review system, the storekeeper is told when to order and how much to order based on the following decision rule— Review the stock level of each item every time an issue is made. 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—  The review period is not fixed; a decision about whether to order is made each time a product is issued.  The storekeeper must know both the maximum and minimum stock levels.  The storekeeper does not need an emergency order point, because an order can be placed any time stock is needed.  The storekeeper must assess stock status each time an issue is made. In a system with many items, this means that the storekeeper’s workload increases: in a forced-ordering system, the storekeeper needs to assess stock status only when levels appear low enough to warrant an emergency order.  The storekeeper must be able to order (pull) stock from the higher level, because the storekeeper is the only one who can assess stock status every time an issue is made. A continuous review system must be a pull system. 92 Chapter 4 | Maximum-Minimum Inventory Control Systems How to calculate the order quantity The formula used to calculate the order quantity is— Maximum stock quantity – Stock on hand – Quantity on order = Order quantity where Maximum stock quantity = AMC x Maximum number of months of stock to be kept This is exactly the same formula used in a forced-ordering max-min system (see table 4-1, the job aid for calculating order quantity). Designing a Continuous Review System The goal in designing a continuous review max-min system is the same as for any inventory control system—to set the max and min levels high enough to avoid stockouts, yet low enough so as not to increase the risk of expiration or damage. Continuous Review System Imagine a clinic in which the storekeeper is given a max level of three months and a min level of two months. Average monthly consumption is 100. After issuing a quantity of condoms, the storekeeper notes that 200 are left, so he or she orders 100 condoms. The formulas for setting the max and min in a continuous review system are the same as for a forced-ordering system. They are— Min stock level = Lead-time stock level + Safety stock level and Max stock level ≥ Minimum stock level + Review period stock level You will note that a review period is included in the second formula, even though a continuous review system has no fixed review period as far as the storekeeper is concerned. As a designer, however, you want to set a review period about as often as you would like to have orders processed. For example, orders should not be placed as often as weekly, nor as infrequently as once a year. As the designer, you should choose a desired review period to factor into the min. The desired review period is also used to help set the safety stock, if no better information is available. 93 The Logistics Handbook Advantages and disadvantages of this system Continuous review inventory control has both advantages and disadvantages. Advantages include—  The storekeeper’s decision rule is simple.  The system is more responsive and flexible, because orders can be placed at any time.  Small orders are eliminated because stock levels are at the min when an order is placed. Disadvantages of a continuous review system include—  Transportation resources are harder to control, because orders may be placed at any time; a single facility may order pills one day, condoms the next, and intrauterine devices (IUDs) the following week.  In facilities with a large number of products or a great deal of activity, the storekeeper’s job is harder because the stock status must be assessed every time stock is issued. Continuous Review System To set the max and min for a hypothetical clinic in a continuous review system, the designer begins by setting the min. If the lead time is known to be approximately one month, the min must be at least one month. If no other information is available to guide the designer in setting the safety stock level, the guideline is to use half of the review period stock. No review period is needed in a continuous review system. The designer of the system knows that central management would like the clinic level to order no more often than monthly, so the review period should be at least one month. If the review period is one month, half a month is adequate as the safety stock. Adding this to the lead time (min = lead time + safety stock) means a min of one and one- half months, which, rounded up, equals two months. If the min is two months and the expected review period is one month, the max will be at least three months. The min for the clinic would, thus, be two, and the max would be three. These happen to be the same as the levels calculated in the forced-ordering example, but the rules for the storekeeper are dif­ ferent. Additionally, the system must be a pull system between the district and the clinic. 94 Chapter 4 | Maximum-Minimum Inventory Control Systems CASE STUDIES Two Continuous Review Systems Continuous review systems generally are not applicable where transportation is limited and government bureaucracy already re­ quires fixed-interval reporting. Continuous review systems can work in some situations, however. The following are two examples: GhAnA. The Ghana Social Marketing Foundation (GSMF) sells con­ traceptives at low cost through private sector retailers. GSMF works with hundreds of private chemists, pharmacists, workplaces, and other outlets for contraceptive delivery. To get products to these diverse outlets, GSMF sells contraceptives at low cost to resellers, who, in turn, sell them to the outlets for a small profit. The outlets, then, sell the contraceptives to customers for a small profit. There is no fixed reordering system between the reseller and outlets. Chem­ ists and others simply wait until they are low on stock, then call the reseller and ask for additional supplies. Although the outlets may not formally have a definition for low (for example, the min), if the product is selling, they will want to avoid a stockout, so they place an order. This is a good example of how the principles of continuous review can be applied, even though the GSMF system is not math­ ematically rigorous. kEnyA AnD BAnGLADESh. A second, more common example of continuous review is used for AIDS prevention in Kenya and Bangla­ desh. In both countries, condoms are placed in dispensers and the dispensers are hung on the wall. Condom customers who want to remain anonymous and yet need access to high-quality condoms can easily take strips of condoms from the dispenser without giving their name or waiting in a clinic line. The dispenser is checked often (i.e., the stock status is checked often), and when the supplies are low (i.e., reach min), the dispenser is filled up. This does not strictly follow the rules established in this handbook for continuous review, because the stock status is not checked after every issue, nor is the min an exact number; however, the condom dispenser is an example of continuous review at work. 95 The Logistics Handbook A Variation: Two-Bin Continuous Review Systems One variation of continuous review max-min systems is the two-bin system. In this case, the rules for the storekeeper and considerations for the designer are the same as for any other continuous review system. The difference between a regular continuous review system and a two-bin system is the way the storekeeper determines when the min has been reached. In the two-bin system, the storekeeper has two equal-sized bins (containers, boxes, cartons, sacks, or other receptacles) of a product. When the first bin is empty, the min has been reached. An order is placed for another bin (i.e., a bin’s worth of stock), and the storekeeper begins issuing from the remaining bin. The arrival of a new bin brings the stock level up to the max. The two-bin system is designed to be extremely simple for the provider. No calculations need be made, and paperwork is kept to a minimum. In an even simpler ver­ sion of the two-bin system, an order form is included at the bottom of each bin, and the provider needs only sign and date the form before posting it. A two-bin system designer’s most challenging task is to choose an appropriate bin size. The min is equal to one bin, and the max is equal to two bins, but because the bin size is fixed, orders may come too frequently if demand increases. The bins must be designed to allow some expansion in the program without risking product expiration. Two-Bin Continuous Review Where transport is limited, two-bin continuous review systems generally are not used. They do, however, have enormous potential for community-based distribution (CBD) programs. CBD programs ask local community members (often volunteers) to train as community-based distribution agents (CBD agents). (CBD agents may provide condoms, pills, and vaginal foaming tablets, referring customers to local clinics for injectables, IUDs, and sterilization.) Because CBD agents are often volunteers, family planning programs try not to overburden counseling and promotion activities with complicated forms and calculations. Two-bin continuous review systems are frequently appropriate in CBD work. 96 Chapter 4 | Maximum-Minimum Inventory Control Systems 4.3.3 Standard Max-Min System Theoretically, the standard version of the max-min system is the most effective because it combines the decision rules of both forced ordering and continuous review and, therefore, shares the advantages of both. However, it also has disadvantages. Under some circumstances, the stan­ dard version may be the only choice. To understand why, we need to dis­ cuss both the implementation and design of standard max-min systems. Implementation Users of standard systems must follow more complex rules to make their orders. Rules for ordering In a standard system, the storekeeper is instructed when to order and how much to order based on the following decision rules— In a standard system—  The review period is fixed, and the stock level is fixed. This means that the storekeeper must know the min, max, and timing of the review period.  The storekeeper will need an emergency order point to ensure that a stockout does not occur between review periods.  The storekeeper must assess the stock status at the end of each review period and at any time levels appear low enough to warrant an emergency order. Review all stock levels at the end of each review period. For products that are at or have fallen below the min, order enough stock to bring stock levels up to the max. If the stock level for any item falls below the emergency order point before the end of the review period, place an emergency order. 97 The Logistics Handbook How to calculate the order quantity The formula to calculate the order quantity is— Maximum stock quantity – Stock on hand – Quantity on order = Order quantity where Maximum stock quantity = Average monthly consumption × Maximum number of months of stock to be kept This is exactly the same as the formulas for a forced-ordering max-min system (see figure 4-1). Designing a Standard System To design a standard max-min system, our goal remains the same—to avoid stockouts and expiration by setting the max and min levels appropriately. As a designer of a standard system, you will need to set the min and max levels, the emergency order point level, and the review period. Standard System Imagine a clinic in which a storekeeper is given a max level of three months, a min level of two months, and an emergency order point of one month. The review period is monthly. If the stock on hand at the end of the month is 200 condoms, and the average monthly consumption is 100, an order should be placed because the stock on hand is just at the min. The order quantity should be 100 condoms. If the stock on hand at the end of the month were 201 condoms, however, no order would be placed, because the stock level is not at the min. Rou­ tine orders are placed only when both of the following conditions are met: (1) it is the end of the review period, and (2) the stock level is at or has fallen below the min. An emergency order would be placed any time stock levels fall below the emergency order point. 98 Chapter 4 | Maximum-Minimum Inventory Control Systems In a standard system, the formula for setting the min is— Min stock level = Lead-time stock level + Safety stock level + Review period stock level We have discussed setting the lead-time stock level in the section on forced ordering. For a standard system, however, the review period stock must be added to the min, because it is possible that at the end of the review period, you may be barely above the min. In such cases you would not place an order, which means that no order would be made until the end of the next review period. The formula for setting the max in a standard system is the same as for a forced-ordering system— Max stock level ≥ Min stock level + Review period stock level The review period stock level is added for the same reason as in forced ordering; the storekeeper must have enough stock to reach at least the next review period. Since the min stock level is higher due to the addi­ tion to safety stock, the max is higher, as well. Standard System To set the max and min for a hypothetical clinic in a standard system, begin by setting the min. If you know the lead time is about one month, the min must be at least one month. If the review period is monthly, and no additional information is available to guide you, the safety stock should include at least half a month’s stock. In the stan­ dard system, however, you must add an additional review period’s stock to prevent a stockout. Add safety stock and review period stock to the lead time (lead time + safety stock + review period stock = min), for a min of two and one-half months; round up to three months. If the min is three, and the review period is one, the max will be at least four. The min for the clinic would be three, and the max would be four. The max and min levels are higher than either the forced-ordering or continuous review examples be­ cause of the size of the safety stock. 99 The Logistics Handbook CASE STUDY Nepal In Nepal, the Ministry of Health distribution system consists of one central warehouse, five regional warehouses, 75 district warehouses, and more than 3,000 SDPs. During the mid-1990s, the MOH decided that delivery and logistics for more than 300 health products would be integrated. This meant that all items were to be ordered on the same order form, and orders would be delivered at the same time. Because some facilities are extremely difficult to reach (some require walking for 14 days!), it was thought that delivery of small orders for all 300 products would be impossible. To avoid small orders, the standard max-min inventory control system was chosen. A continuous review system was not possible. Unfortunately, the decision to implement a standard system has increased the storage space requirements due to higher minimum stock levels (and, there­ fore, higher maximum levels). Nonetheless, Nepal uses a standard system because it is the only practical system for a country in which a large number of items are managed and transportation is difficult. The formula for setting the EOP in a standard system is the same as for a forced-ordering system— Longest emergency lead-time stock ≥ Emergency order point The EOP must be set in a standard system to ensure that no stockouts occur between review periods. Advantages and disadvantages of this system A standard system has advantages and disadvantages. Advantages include—  Small orders are eliminated because an order is placed only when stock levels are at or below the min.  In programs with many products, standard systems eliminate the need to assess stock status continually (as in continuous review) and reduce the number of calculations that must be made because fewer products will be ordered than in forced ordering. 100 Chapter 4 | Maximum-Minimum Inventory Control Systems  In programs with many products, fewer items will be ordered, reducing confusion about which items are to be delivered to which locations.  Because orders are placed at regular intervals (i.e., at the end of each review period), transportation can be scheduled for specific times, making it easier to ensure the availability of transport resources. Disadvantages include—  The primary disadvantage of a standard system is that the minimum stock levels are high, increasing the likelihood of expiry and requiring more storage capacity, both of which also mean increased costs.  Storekeepers must learn the max, min, and EOP; know how to assess stock status; and be able to calculate the order quantity. More training for the storekeepers may be required because their decision rules are more complex. 4.4 Issues in Selecting and Using an Inventory Control System Two issues arise when designers set up an inventory control system. First, how long should you allow the pipeline to be? Second, is it wise to vary the max-min levels or systems within the same level? 4.4.1 Analyzing Overall Pipeline Length Setting max-min levels for each level of the system may result in a lengthy pipeline. For example, consider a situation in which the max-min levels are as depicted in table 4-2. This analysis suggests that it may take as long as 30 months (two and one- half years) for a product to reach a customer after it has entered the country. Add to this the time from the manufacturer until the product has cleared the port and is placed in the central warehouse ready for distribution, and the product could easily be more than three years old by the time the customer receives it. This is, of course, the maximum time a product might be kept in storage, yet it is possible. For essential drugs, a 30-month in-country pipeline is un­ acceptable, because some drugs have a shelf life as short as six months. Solutions to this dilemma include—  Shorten the review periods at one or more levels. This will reduce the pipeline length by reducing the max. (Remember that max ≥ min + review period.) Shorter review periods, however, mean that orders are placed more often, increasing the frequency of delivery 101 The Logistics Handbook TABLE 4-2. Sample Max-Min Levels Level Min Max and, perhaps, requiring additional transportation. Additional labor in calculating order quantities will also be required.  Reduce the lead time at one or more levels. Lead time is often extended by administrative requirements such as obtaining signatures and approvals. Reducing the lead time reduces the min and max levels.  Improve reliability in the system so safety stock levels can be reduced. Safety stocks are kept primarily because of uncertainty about the system’s ability to provide routine service. If uncertainty can be reduced, both min and max levels can be reduced. This is more easily said than done, however.  Eliminate an entire level. Eliminating an entire level will result in a large resource savings and is probably the single most effective method for reducing the pipeline. For example, eliminating the regional level in this example immediately reduces the total pipeline length by nine months. An additional burden is placed on transportation from the central level to the districts, however, and the supervision burden of the central level is increased, as well. Politically, this may be a difficult proposal to implement. Government units, such as regions, may hesitate to yield control over valuable commodities; yet, where the pipeline is too long, eliminating a level may be the only appropriate solution. 4.4.2 Varying Max-Min Levels or Systems Max-min systems could be implemented in a variety of ways. You might—  Recommend using different types of max-min systems at different levels—for example, standard for central to district and forced ordering for district to clinics.  Recommend using different max-min levels for different facilities at the same level—for example, a six-month max for rural clinics and a three-month max for urban clinics. 102 Chapter 4 | Maximum-Minimum Inventory Control Systems CASE STUDIES Eliminating a System Level To reduce storage space requirements, Malawi’s Ministry of Health (MOH) eliminated the central-level warehouse. Instead, the MOH ships new products immediately to each of three regional stores. The regional warehouse located in the nation’s capital, Lilongwe, includes additional office staff, who serve the administrative role of central store managers. Elimination of the separate central store re­ duces the need for storage space and warehouse staff and shortens the pipeline. To reduce administrative burden, Kenya’s MOH eliminated the management function of the regional level. Each of five regional stores continues to hold supplies, but the central level, which uses the regional stores as satellites for its delivery-truck system, manages these supplies. By eliminating the administrative steps at the regional level, lead times are reduced significantly. Such strategies, however, usually are not recommended because—  Managers at the next level up (e.g., district level) find it extremely difficult to manage facilities with different rules, systems, and levels.  Training for lower-level facilities is more complicated if the max level is six for some and three for others.  Ordering forms work best when the formula for ordering can be printed on the form. With different max-min levels, this is difficult. (For example, column D may be column C × 3. If some facilities must multiply column C × 4, it is less effective to create a form that reads C × max # of months.)  Usually little is gained from such variations. For example, setting the safety stock level for rural clinics higher than that for urban clinics results in higher min and max levels for rural clinics. Although this may seem advantageous, the lower safety stock level for urban clinics complicates the system unnecessarily, because urban clinics can handle the additional safety stock, and they often have better storage facilities. 103 The Logistics Handbook An important exception to mixing systems is CBD programs, for which a two-bin continuous review system is recommended in most cases, because it is a relatively simple system and does not complicate inventory control procedures elsewhere in the system. An often-recommended strategy is that some levels be push and oth­ ers pull—for example, pull from central to district, push from district to clinics. In chapter 1, we suggested that facilities at the same level—for ex­ ample, clinics—should not be both push and pull; however, between levels, different push and pull systems can be recommended where appropriate. Some logistics systems are designed to be pull from the center to the level above the delivery point, where the system changes to a push system. This allows service delivery staff to focus on serving customers, while staff at higher levels take responsibility for determining what quantity to issue. Some extreme cases may necessitate mixing strategies. In Morocco, for ex­ ample, a decision was made to differentiate among the provinces. Because the Moroccan system was decentralized, it was believed that large differ­ ences in provinces (e.g., urban and rural) meant that each province should determine the max-min levels for its own clinics. This meant sophisticated training for provincial staff, but the training was considered worthwhile be­ cause Morocco’s 60-plus provinces vary so greatly. Although not recommended in most cases, this level of complexity is possible if it makes sense. 4.5 Selecting an Appropriate Max-Min System To implement a max-min inventory control system, you must select from five choices, including—  Forced-ordering  Forced-ordering/delivery truck  Continuous review  Two-bin continuous review  Standard. Your selection is critical to the success of the logistics system. In addition to selecting a system, you need to set the max and min levels and determine whether each level should be a push or pull system. 104 Chapter 4 | Maximum-Minimum Inventory Control Systems The following factors should influence your decision on an appropriate max-min system—  The number of items managed by your program More than any other factor, the number of items managed will influence your choice of an inventory control system.  For a system that manages only a few items (one or two), continuous review may be appropriate.  For a system that manages a large number of items (more than 100), however, a continuous review system would be difficult to manage without making transport impossible. A standard system works better, because the number of orders placed will be lower than for any other system, and the timing of the orders will be fixed. A forced-ordering system is usually impractical for a large number of items; many items would be ordered, and many of those orders would be for small quantities.  For a system that manages a small number of items (perhaps 1–20 items), a forced-ordering system is likely to be the most appropriate, because it is not difficult to calculate 20 order quantities. There is usually no particular advantage to using a standard system for a small number of items, and as you have seen, stock levels are much higher in a standard system. A continuous review system would work for a small number of items, but only where reliable transportation is available and inexpensive.  For a program managing many items (between 20 and 100), your selection depends on many factors, such as the quantity and quality of transport and storage, who is best equipped to make calculations, how well supervision is carried out, and other factors discussed below.  The quality and quantity of transport available Transport availability should be your second consideration in selecting a max-min system. If transport is always available, and the infrastructure (e.g., roads and bridges) good, a continuous review system may be feasible. When transport is limited, either a forced-ordering or standard system is best, because it is easier to make transport available for fixed and limited times (for example, negotiating in advance for trucks to be available the first two weeks of each quarter for central to regional deliveries). With limited delivery schedules, you may also be able to piggyback or 105 The Logistics Handbook share transport resources with other programs, such as delivering contraceptives and vaccines at the same time.  The level of training you want (or can afford) to implement Any max-min system will require some training at all levels of the service delivery system. The extent of the training, however, may determine the kind of system you implement. For example, at the clinic level you may want to keep service providers focused on service and not on extensive calculations and stock assessment. You may elect, therefore, to have a push system, either forced-ordering or standard. Consider, also, the number of people to be trained. If you have 75 districts and 5,000 SDPs, it is easier to train the 75 district staff to push supplies to the SDPs than to teach 5,000 SDPs to place their own orders.  The level of reporting you currently have or the level you expect In forced-ordering and standard systems, reports may come in regularly with orders; in continuous review systems, reporting may not be regular. Regular reporting can be used as a supervision tool: if a report is submitted on time, the facility tells you how it is doing. In a forced-ordering delivery truck system, you dramatically improve reporting rates from the level to which you are delivering, because you collect the report during the delivery. Where reporting systems are poor (e.g., limited or slow postal service and/or having to rely on personal deliveries or expensive express package services), the delivery truck system helps improve reporting.  Whether a push or pull system is best Your decisions about push versus pull help determine your choice of max-min systems. To implement a pull system, you need staff with the ability and motivation to make the appropriate calculations. At the service provider level, the system should be as simple as possible to keep providers working with customers rather than filling out forms and making calculations. If you decide to use a push system, you cannot choose continuous review. A push system will mean more extensive training for the upper level, because they have to do all the calculations for those they supervise, and they have to understand how to use the data they are receiving to do the calculations. In some systems, lower levels are expected to pick up supplies on a regular basis from higher levels. In such cases, the difference between push and pull is blurred, because the lower and higher levels may calculate the order together. 106 Chapter 4 | Maximum-Minimum Inventory Control Systems  The level of supervision you expect A delivery truck system helps reinforce supervision because the supervisor comes along with the supplies. This requires additional supervision resources, however, because supervisors must be out of the office for extended periods. Forced ordering also forces routine reporting, which allows supervisors to check math errors and changes in consumption. In a standard system, if no products are needed, a report might be skipped. The same is true in continuous review. It is difficult to supervise outlets that are not visited regularly and do not report regularly; absence of information should not be regarded as a positive sign.  The availability of storage space A standard system requires the most storage space, because the buffer stock is higher. The lead time in the delivery truck system is zero, so the min will be lower and will require less space. For two- bin continuous review systems, the designer must be careful when selecting the bin size and may need to create custom (and perhaps expensive) bins for storage. Forced-ordering and continuous review systems require similar amounts of storage space. The factors involved in selecting max-min systems are summarized in table 4-3: Factor Forced-Ordering Forced-Ordering Delivery Truck Continuous Review Two-Bin Continuous Review Standard Number of items Few to a small number few to a small number Few Few Many Transport Needed only at fixed times Needed only at fixed times Needed continuously Needed continuously Needed only at fixed times Training Staff at all levels must be well trained Staff receiving supplies do not need as much training Staff at all levels must be well trained Staff receiving supplies need not be trained or have good literacy skills Staff at all levels must be well trained Reporting Report required with each order helps improve data submission Ensures that completed reports are actually picked up May not receive reports often May not receive reports often If no items are needed, no report is submitted Push or pull Either Either (usually push) Must be pull Must be pull Either Supervision From reports only Opportunity to include with delivery, but requires more supervisors From reports only; irregular From reports only; irregular From reports only Storage Neutral Lead time is zero, so less room is needed Neutral Requires creating numerous “bins” Extra room needed for additional review period stock TABLE 4-3. Factors Involved in Selecting Max- Min Systems 107 The Logistics Handbook Choosing a System Consider a distribution system with the following characteristics— The service delivery system consists of one central warehouse, 50 districts, and 1,000 clinics.  An additional 30,000 CBD agents report to the district level.  Types of contraceptives are delivered in this sys­ tem, along with some equipment.  CBD agents handle only two products: condoms and vaginal foaming tablets.  Training was conducted two years ago, but only for the central and district levels.  Mail service is good, but transport is limited, as is the transport budget.  Reporting from the district to the central level is good.  Districts report aggregated clinic data in addi­ tion to a separate report for the district store, making it unclear what percentage of clinics are reporting regularly. Given these factors, a forced-ordering system is the most appropriate. Such a system should be a push sys­ tem from districts to clinics, because clinic staff are un­ trained and should focus on service delivery. The system could be pull or push from the central level to districts, but more of a pull system is probably better, given the large number of districts. Continuous review is inappro­ priate because transport is limited. A standard system would work, but its higher level of safety stock is not warranted because there are only two products. Each district has about 600 CBD agents. Therefore, the two- bin continuous review system would be most appropri­ ate for the CBD level. Preferably, CBDs should report to clinics rather than to the district. 108 Chapter 4 | Maximum-Minimum Inventory Control Systems CASE STUDIES Choosing a System TAnzAnIA Because of the limited number of products involved (five contracep­ tives), Tanzania’s Ministry of Health (MOH) decided to implement a forced-ordering system throughout its service delivery network, which consists of a central warehouse, 20 regions, 106 districts, and approximately 3,400 SDPs (including hospitals, health centers, and dispensaries). The Tanzanian government has started to decentralize decision making, so regions pull from the central warehouse. Like­ wise, districts pull from the regions. The original intent had been to have SDPs pull from districts, but the costs of training all SDP staff exceeded the available budget. It was decided, therefore, to make the system a push system from districts to SDPs. Tanzania uses a forced-ordering system because of the limited number of products involved. kEnyA Kenya’s MOH distribution system consists of a central warehouse, 5 regional depots, 30 districts, and more than 1,900 SDPs (including government clinics, NGOs, and private clinics, all of which receive supplies from government district facilities). The central level has an efficient, computerized LMIS and plenty of reliable transporta­ tion. Districts have little transport, so they cannot pick up supplies. In some cases, they have difficulty delivering supplies. Given these factors, Kenya uses a forced-ordering delivery truck system to deliver contraceptives and essential drug kits from the central level to dis­ tricts. (Regional stores are used only for storage and do not have a management role in logistics.) The computerized LMIS helps the cen­ tral level make the calculations for all districts; this is a push system. Truck drivers have been trained to act as supervisors during delivery visits, and they also collect forms for processing at the central level. SDPs pull supplies monthly from the district and, in some cases, re­ ceive supplies directly from the delivery truck. 109 The Logistics Handbook 4.6 Key Concept: Continuous Improvement In designing a max-min system, you should plan to keep the system and all levels you have set in place for several full ordering cycles before making any modifications. You will need to monitor lead times, stockout frequency, reporting levels, supervi­ sion, and other factors to understand how well your system is functioning. You may find improvements that can be made immediately, such as ad­ ditional transport resources, additional on-the-job training, or increased supervision. As a system designer, you will always find ways to improve the system. Some solutions will be easy, such as providing additional LMIS forms to a district that has run out; some will be more extensive, such as partnering with another program in a region where transportation is limited. Management studies suggest that small, incremental improvements to a system may prove more effective than working with a defective system and waiting for the day when large-scale changes can be made. You should use all sources of information (reports, word of mouth, and others) to improve your system continually. 4.7 Chapter Summary In this chapter you learned the following: 1. The purpose of an inventory control system is to inform the storekeeper (a) when to order and issue, (b) how much to order and issue, and (c) how to maintain an appropriate stock level of all products to avoid shortages and oversupply. 2. Key terms in inventory control include the following:  Maximum-minimum inventory control system  Maximum stock level/maximum quantity  Minimum stock level/minimum quantity  Review period/review period stock, safety stock level  Lead-time stock level  Emergency order point. 3. The three types of maximum-minimum inventory control systems use different rules for storekeepers—  FORCED ORDERING. At the end of each review period, review all stock levels and order enough stock to bring stock levels up to the max. 110 Chapter 4 | Maximum-Minimum Inventory Control Systems  CONTINUOUS REVIEW. Review the stock level for an item every time an issue is made. If the stock level is at or has fallen below the min, order enough stock to bring the level up to the max.  STANDARD. Review all stock levels at the end of each review period. For products that are at or have fallen below the min, order enough stock to bring stock levels up to the max. 4. How to determine order and supply quantities using any max-min system— Maximum stock quantity - Stock on hand - Quantity on order = Order quantity where Maximum stock quantity = Average monthly consumption (AMC) × Maximum number of months of stock to be kept 5. How to set the maximum and minimum stock levels— Min stock level = Lead-time stock level + Safety stock level Max stock level ≥ Minimum stock level + Review period stock level where, when no better information is available, Safety stock level ≥ ½ review period stock for forced-ordering and continuous review systems. For a standard system, the setting of min differs: Min stock level = Lead-time stock level + Safety stock level + Review period stock level 6. The advantages of using max-min inventory control include—  Avoids overstocking.  Avoids understocking and stockout.  Minimizes wastage of product.  Simplifies inventory control decision making.  Aids forecasting when there is a consistency of stock levels.  Improves supervision in a system when everyone uses the same decision rules. 111 The Logistics Handbook  Improves training of storekeepers to follow one rule.  Streamlines job for storekeepers with only one, relatively simple rule to follow.  Increases confidence of storekeepers and service providers that stockouts will not occur, reducing the likelihood that some facilities will hoard (over order) supplies. 7. To select the appropriate max-min system, consider the following factors when you make your decision—  Number of items managed by your program.  Quality and quantity of transport available.  Level of training you want (or can afford) to implement.  Level of reporting you currently have or the level you expect.  Conclusion about whether a push system or pull system is best.  Level of supervision you expect. 112 Chapter 5 | Contraceptive Storage 5 | Contraceptive Storage Objectives In this chapter, you will learn the following:  Guidelines for proper storage of contraceptives and other medicines  A definition of visual inspection and how the inspections fit together  When to conduct a visual inspection of contraceptives and other medicines  How to identify and resolve common contra-ceptive quality problems found during a visual inspection  How to calculate warehouse space requirements  The purpose of a physical inventory and when to conduct a physical inventory of your warehouse. 113 The Logistics Handbook 114 Chapter 5 | Contraceptive Storage 5.1 Purpose of Storing Products Storage is a basic part of warehousing. Warehousing and storage, however, are more than just shelving products. To have viable products available for distribution, a warehouse manager must ensure the quality of a product and its packaging. Excessive quantities of damaged and expired goods could mean that some products will not be available for customers. All products require procedures for safe storage that maximize their shelf life and make them readily available for distribution. Shelf life is the length of time a product may be stored without affecting its usability, safety, purity, or potency. All contraceptives and drugs have a shelf life. The manufacturer usually specifies shelf life, but it often must be approved by a national formulary and therapeutics board, as well. Contraceptives are relatively stable prod­ ucts with a shelf life of four to five years. Essential drugs have much more variation in shelf life, anywhere from six months to more than five years, depending on the drug. Contraceptives and essential drugs must be stored and distributed in a way that ensures they are received by customers in good condition and in time to be used before their expiration dates. The following are some basic questions and answers on shelf life:  Where can I find the shelf life for contraceptives? The DELIVER project of John Snow, Inc., and the Program for Appropriate Technology in Health (PATH) have developed ”Contraceptive Fact Sheets: A Tool for Logistics Advisors“ with the latest shelf life information for condoms, oral contraceptives, IUDs, injectable contraceptives, implants, and spermicidal/vaginal barrier methods. The fact sheets also list—  Description of the method  Visual indicators of potential quality problems  Special considerations  Donor, manufacturer, and brand  Primary and secondary packaging presentation  Units per shipping carton  Dimensions and weight of carton. 115 The Logistics Handbook Everyone in the logistics system, from the central store to SDPs, should have access to shelf life information and other storage considerations for contraceptive products. (See the suggested reading list at the end of the handbook for information on how to obtain a copy of these contraceptive fact sheets.)  What is the shelf life in my country? Drug manufacturers in the United States are required by the U.S. Food and Drug Administration (FDA) to put their medicines and packaging through numerous tests to determine the appropriate shelf life. Many countries believe that U.S. standards are acceptable, and many national formulary and therapeutics boards accept these guidelines. In some countries, national policies are more restrictive than in the United States. For example, Bangladeshi officials recognized that their storage conditions (heat and humidity) are severe, so they have reduced the shelf life for condoms. In the Philippines, the government’s drug regulatory authority requires its own testing for some products. Refer to your country’s national formulary and therapeutics board or similar authority for the applicable policy.  Why does shelf life change? If you have worked in family planning for many years, you may have noticed that the shelf life for some products, notably Depo- Provera and Copper T 380A IUDs supplied by USAID, has changed. The shelf life for Depo-Provera changed from 36 months to 48 months in 1997. The shelf life for IUDs changed from 60 months to 84 months in 1994. Testing for shelf life takes time and cannot be entirely simulated in a laboratory. The shelf life of Depo-Provera and IUDs (and their packaging) was extended when they were proven to maintain purity, potency, safety, and effectiveness for longer periods of time. Due to a change in manufacturers and packaging, the shelf life for USAID-supplied condoms manufactured from 1998 on was reduced from five years to four years. To reestablish a five-year shelf life, both the manufacturer and USAID need to demonstrate that the product is viable for this length of time. Shelf life depends on real-time testing, combined with simulated lab testing. When procuring supplies, purchasers should follow the example of USAID and specify the shelf life they require in their procurement documents. It may be necessary to work with the manufacturer to allow for real-life testing to ensure that the packaging and products are acceptable over time. 116 Chapter 5 | Contraceptive Storage  How important is the expiration date? After a product’s shelf life has expired, its usability, purity, and/or potency may be adversely affected. For some medicines, the safety of the product is also affected after the expiration date. As a safety precaution, the expiration date should be considered the last date on which the customer should use the contraceptive or medicine. Staff should not dispense any products that are at or very close to their expiration dates. 5.2 Storage Procedures Proper storage procedures can help ensure that only high-quality products are issued by a storage facility. When all levels of the pipeline follow these procedures, customers can be assured that the same high-quality product has been put in their hands. Warehouse managers can evaluate how well their warehouse is performing against these procedures and look for ways to improve storage quality. Table 5-1 shows the storage procedures you should follow, regardless of your facility’s size. You may need to adapt these rules to your facility, how­ ever. For example, it is unreasonable to expect a small clinic store to have more than a small closet for storing medical supplies. The use of pallets in such cases is inappropriate. Small shelves that keep products away from exterior walls and off the floor may be sufficient. For a comprehensive description of storage procedures, consult Guidelines for the Storage of Essential Medicines and Other Health Commodities refer­ enced in the reading list at the end of this handbook. 5.3 Visual Inspection In a perfect pipeline, all products are stored under ideal temperature and hu­ midity conditions and according to proper storage guidelines. In reality, the quality of storage conditions may vary widely from place to place. You may wonder about and want to verify the quality of some products. In a ware­ house facility, storekeepers can best verify quality by regularly checking the condition of all products visually in their facility. Visual inspection is the process of examining products and their packaging by eye to look for obvious prob­ lems with product quality. 117 The Logistics Handbook TABLE 5-1. Storage Procedures Storage Procedures Why This Procedure Is Important Clean and disinfect storeroom regularly. Rodents and insects (e.g., termites and roaches) eat oral contraceptives and their packaging. If you clean and disinfect your storeroom (and keep food and drink out), pests are less attracted to storage areas. If possible, a regular schedule for extermination will also help eliminate pests. If rodents are a serious problem, cats may be an inexpensive, nontoxic alternative to traps or poisons. Store supplies in a dry, well-lit, well-ventilated storeroom out of direct sunlight. Extreme heat and exposure to direct sunlight can degrade contra-ceptives and essential drugs and dramatically shorten shelf life. If warehouse temperatures rise above 104 degrees F (40°C), the latex in condoms, for example, can begin to break down. If exposed to heat for a long time, condoms may expire well before their stated shelf life. Although air conditioning is an ideal means of controlling the temperature, it is expensive; alternatives include ceiling fans and forced ventilation. Direct sunlight is also a danger, as it raises the temperature of a product. To avoid this, store products in their original shipping cartons and shade the interior of the storeroom from sunlight. At lower levels, store products in the inner boxes (i.e., those that came inside the cartons) and leave medicines in their dark-colored or opaque bottles. Secure storeroom from water penetration. Water can destroy both supplies and their packaging. Even if a product itself is not damaged by water, damaged packaging makes the product unacceptable to the customer. Repair leaky roofs and windows. To avoid water damage from moisture that seeps through walls and floors, stack supplies off the floor on pallets at least 10 cm (4 in) high and 30 cm (1 ft) away from walls. Ensure that fire safety equipment is available and accessible and personnel are trained to use it. Stopping a fire before it spreads can save thousands of dollars of supplies and the storage space itself. Have the right equipment available; water douses wood and paper fires but will not work on electrical or chemical fires. Place appropriate, well-maintained fire extinguishers throughout the storage facility (especially near doors). If extinguishers are not available, use buckets of sand. No matter which method you use, train your staff in the use of the available fire safety equipment. Store condoms and other latex products away from electric motors and fluorescent lights. Latex products, such as condoms and gloves, can be damaged if they are directly exposed to flourescent lights and electric motors. Electric motors and flourescent lights create a chemical called ozone that can rapidly deteriorate condoms. Condoms and gloves stored in their proper packaging (i.e., boxes and cartons) will not be affected by limited exposure to ozone. Whenever possible, keep condoms and gloves in their paper boxes and cartons. If this is not possible, move them away from lights and motors. Maintain cold storage, including a cold chain, for commodities that require it. Cold storage, including the cold chain, is essential for maintaining the shelf life of drugs and vaccines that require it. These items are irreparably damaged if the cold chain is broken. If the electricity is unreliable, you may need to use bottled gas or kerosene-powered refrigeration. During immunizat

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