Tools and Practices to Leverage Private Sector Logistics Services to Enhance Performance of Public Sector Health Supply Chains

Background: Despite significant improvements in public health supply chains in recent decades, low- and middle-income countries (LMICs), such as Nigeria and the Philippines, still face numerous challenges. Major challenges include poorly defined and understood accountabilities; incomplete and inaccurate data; uncertainties in and lack of financing; technical limitations in quantification, procurement, warehousing, and distribution of health products, and suboptimal competencies and motivations.(1,2)

In response to these challenges, Nigeria’s National Products Supply Chain Management Program (NPSCMP) formulated a comprehensive Supply Chain Policy and Implementation Plan: 2021 to 2025(3), while the Department of Health (DOH) of the Philippines developed their National Strategic Plan (NSP) for Procurement and Supply Chain Management (PSCM): 2019 to 2023. Both strategic initiatives recognize the need to leverage private sector resources to augment the capabilities of public sector supply chains, aiming to optimize healthcare supply chains and enhance service delivery and health outcomes in their countries. Although outsourcing strategies are employed in Nigeria and the Philippines, they typically involve traditional fee-for-service contracts that do not leverage global best practice relationships. Recognizing the above challenges, the USAID Medicines, Technologies, and Pharmaceutical Services (MTaPS) Program in collaboration with USAID’s Commodity Security and Logistics (CSL) Division in the Population and Reproductive Health Office, embarked on a two-phase project to address these issues. The mission was to explore tools and best practices in third-party logistics (3PL) and lead logistics provider (LLP) relationships, with a focus on operationalizing private sector engagement /outsourcing supply chain policies and fortifying logistics capabilities for improved performance in the public sector.

In Phase 1 of the project, MTaPS led the development of a Supply Chain Outsourcing Decision Framework, which was applied in analyses of the political economy, operational capability, and cost-benefits factors that influence outsourcing decisions in Nigeria and the Philippines. From in-country discussions and these analyses, MTaPS developed and disseminated Advocacy Briefs on the benefits of engaging private logistics service providers, including third-party logistics (3PLs), fourth-party logistics (4PLs) and lead logistics providers (LLPs).

1. Supply Chain Outsourcing Decision Framework provides a structured and systematic approach for generating evidence and making decisions on outsourcing. It serves as a general guide that helps public sector decision makers evaluate options, assess risks and benefits, and ultimately make informed and rational decisions. It consists of criteria, methods, and steps that assist in analyzing information, weighing factors, and reaching a well-considered conclusion.
2. Reports of Political economy, operational capability, and cost-benefit analysis: Applying the supply chain decision framework, MTaPS supported the MOH of Nigeria and DOH of the Philippines to assess and understand the current public-sector supply chain costs and service levels, the operational capability of the public and private sectors, as well as perceptions and factors that influence decision making in each sector.
3. Supply Chain Outsourcing Advocacy Briefs were developed, encapsulating findings and recommendations from the political economy, operational capability, and cost-benefit analyses in Nigeria and the Philippines. The advocacy briefs were disseminated to stakeholders, public sector healthcare supply chain decision makers, for use in their effort to advocate SC outsourcing.

In Phase 2 of the project (2023), building on the achievements of phase 1, MTaPS supported Nigeria’s NPSCMP to develop a guidance document to facilitate implementation of current supply chain management outsourcing policyies, drawing on their National Health Products Supply Chain Strategy and Implementation Plan: 2021-2025. Furthermore, MTaPS provided focused technical assistance to Kaduna State to strengthen policy implementation for contracting and managing outsourced logistics management services. Eight major milestones and deliverables were achieved during Phase 2, including two workshops, the operationalizing guidance document, a Service Specification, a Performance Management Plan, and a Training Report. A service specification and performance management plan were also developed specifically for Kaduna State’s context, but generic templates are available for public use.

1. Learning and Advocacy Workshop focused on learning and advocacy on best practice supply chain outsourcing; identifying capacity strengthening needs; and defining next steps for operationalizing related policies.
2. A Guidance Document for Operationalizing a 3PL or LLP Supply Chain Model is a comprehensive and practical guide for operationalizing existing logistics service outsourcing policies in Nigeria.
3. Learning, Advocacy and Validation Workshop focused on learning objectives, validation of project deliverables for Kaduna State, and discussions on a phased rollout of the Supply Chain Transition Plan (SCTP).
4. Service Specifications for outsourcing distribution of health products is a template for public sector agencies to adapt and deploy for inclusion in a contract, which specifies the level of service that can be expected from potential 3PLs and LLPs.
5. Performance Management Plan for outsourcing distribution of health products is a plan that can be adapted and used by public sector agencies and private logistics service contractors to assess the overall effectiveness of distribution activities, support the joint reporting processes, and measure the impact of any managerial intervention post contract award.
6. Training Report details the essential capabilities required, outlines the capacity strengthening activities conducted by the MTaPS program, identifies immediate needs for capacity enhancement, discusses opportunities for continuous improvements, and explores potential organizations that may provide future technical assistance beyond the conclusion of the MTaPS program.

Short-Term Recommendations:

Key recommendations include initiation by public-sector health organizations of collaborative working approaches for private-sector outsourcing activities and trainings. The resources and tools developed during this project can be applied nationally for transport-related performance measurement and improvement through the advocacy of best practices in outsourcing.

In summary, the project has made significant contributions in policy development, advocacy, guidance creation, and capacity strengthening for operationalizing best practices in logistics outsourcing to enhance the performance of public-sector health supply chains.