Effectiveness of the pharmaceutical supply chain to clinics attached to Mafikeng Provincial Hospital

Effectiveness of the pharmaceutical supply chain to

clinics attached to Mafikeng Provincial Hospital

Moitsoadi Sar~

Mokgatlha

21555990

A mini-dissertation submitted in partial fulfillment of the requirements of the degree Masters of Business Administration at the Mafikeng Campus

North-West University

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Supervisor: Dr. Frazer Kadama

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North-West University Mafikeng Campus library

DECLARATION

I, Moitsoadi Sarah Mokgatlha declare that all the work contained in this study is my original work. I further declare that any part of work or idea taken from any source is properly acknowledged in this research.

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ACKNOWLEDGEMENT

I thank: God for all the blessings, good health, strength, wisdom and insight to succeed in this study.

I am grateful to my supervisor Dr. Frazer Kadama for his generous assistance throughout this study. He was always Viilling to guide me. I thank him for the continu1ed support. His knowledge, insight and constant encouragement are highly valued.

I would like to give special thanks to:

• Mr. Mulatedzi Makhado and Mr. Tshepo Mphaka for all the assistance, advice and support throughout the study periocl.

• The North West Department of Health for !~ranting me permission to conduct the study.

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• Mr. Naphtaly Maruma who assisted me with data analysis and Ms. Neo Sebigi for assisting me with the organisational framework design.

• My colleagues and friends for the support and encouragement.

My heartfelt appreciation and gratitude goes to my husband, Desmond Mokgatlha and my beautiful daughters: Atlegang, Amogelang and Bantle for the sacrifices they made; their support, patience, cooperattion and encouragement in all stagBs of preparing this report. I dedicate this dissertation to them.

ABSTRACT

The study set out to investigate the factors that led to pharmaceutical outages in clinics attached to Mafikeng Provincial Hospital (MPH).

An exploratory research design was adopted for this purpose and a survey that included respondents from Mmabatho Medical Stores (MMS), MPH, clinics attached to MPH and transporters was conducted to address a number of research questions.

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The findings are displayed in charts and tables. The findings show that there were constraints experienced at each and every one of the points of the entire pharmaceutical supply chain. However, it was established that the constraints could be minimised to improve on the supply chain. Measures for improvements in the management of pharmaceutical supply chain were recommended.

It was concluded that the successful implementation of the recommended measures would minimise pharmaceutical supply shortages in clinics.

TABLE OF CONTENTS DECLARATION ... i ACKNOWLEDGEMENT ... ii ABSTRACT ... iii TABLE OF CONTENTS ... iv List of tables ... vii List of figures ... ix List of maps ... ;: ... ix List of pictures ... ix List of charts ... ix List of annexures ... x

List of abbreviations and acronyms ... xi

CHAPTER 1 ... 1

1. INTRODUCTION ... 1

1.1 Background ... 2

1.2 Problem Statement ... 6

1.3 The research questions ... 7

1.4 Aim of the study ... 7

1 . 5 Objectives of the study ... 7

1.6 Delimitations of the study ... 7

1. 7 Ethical considerations ... 8

1.8 Summary ... 9

CHAPTER 2 ... 10 2. LITERATURE REVIEW ... 10

2.1 Brief overview ... 10 2.2 Primary Health Care facilities ... 11

2.3 Medicine Supply Management cycle ... 13 2.3.1 Selection ... 14

2.3.3 Distribution ... 16

2.3.4 Use ... 17

2.3.5 Management support ... 17

2.4 Supply chain management.. ... 18

2.5 Availability of essential medicines at primary health care clinics ... 19

2.5.1 Factors that contribute to non availability of essential medicines ... 20

2.6 Ordering and distribution of medical supplies ... 22

2.7 The role of Small Medium Micro Enterprises (SMME) and the challenges experienced ... 25

2.8 Outsourcing the distribution of medical supplies ... 28

2.8.1 Success stories ... 30 2.8.2 Challenges ... 31 2.9 Summary ... 33 CHAPTER 3 ... 34 3. RESEARCH METHODOLOGY ... 34 3.1 Introduction ... 34 3.2 Research Design ... 34 3.3 Delimitations ... 34 3.4 Population ... 35

3.5 The sampling process ... 36

3.6 Data collection tools ... 38

3. 7 Data collection procedure followed ... 39

3.8 Data consolidation, analysis and interpretation ... .40

3.9 Ethical Considerations ... 41 3.10 Summary ... 42 CHAPTER 4 ... 43 4. PRESENTATION OF RESULTS ... 43 4.1 Introduction ... 43 4.2 Biographical data ... 43 4.3 Ordering process ... 47 4.3.1 Stock outs ... 47

4.3.2 Medicine storage space ... 49

4.3.3 Stock levels ... 51

4.3.4 Stock level management ... 53

4.3.6 Interventions during medical supplies stock outs ... 53

4.3.7 Emergency orders ... 54

4.4 Stock management training ... 54

4.5 Deliveries ... 55

4.5.1 Delivery of medical supplies by SMMEs at MPH and its clinics ... 55

4.5.2 SMME contract for medical supplies delivery to MPH and its clinics .. 56

4.6 SMME operations management. ... ;~ ... 58

4.7 Summary ... .' ... 60

CHAPTER 5 ... 61

5. DISCUSSION OF RESULTS, RECOMMENDATIONS AND CONCLUSION . 61 5.1 Introduction ... 61

5.2 The ordering process in the medical supply chain to the clinics ... 61

5.3 Factors that lead to medicine stock outs at medical facilities ... 62

5.4 Impact of constraints on the supply chain of the clinics ... 62

5.5 The level of training in the medical supply chain management ... 65

5.6 Proposed framework for the medical supply chain ... 66

5.7 Limitations ... 68

5.8 Conclusion ... 68

List of tables

Page

Table 3.1: Categories of the study population ---35

Table 3.2: Analysis of clinics attached to MPH in the different strata ---38

Table 3.3: Planned trips and interview dates for clinic participants ---40

Table 4.1: Category of participants ---43

Table 4.2: Qualifications, occupation and years of experience in current position '• for respondents at MMS and MPH ---44

Table 4.3: Qualifications for transporters ---44

Table 4.4: Occupation of transporters ---45

Table 4.5: Years of experience for transporters ---46

Table 4.6: MMS and MPH participants who received training with regard to procurement of medical supplies ---46

Table 4.7: Clinic participants who received training with regard to procurement of medical supplies ---4 7 Table 4.8: Transporters who received training on the distribution of medical Sup pI ies ---4 7 Table 4.9: Causes of stock outs at the clinics attached to MPH ---48

Table 4.10: Causes of stock outs at MPH ---48

Table 4.11: Causes of stock outs at MMS ---49

Table 4.12: Suitability of storage space capacity at clinics attached to MPH ----49

Table 4.14: Stock levels maintained at MMS and MPH ---52

Table 4.15: Medicine stock level management at the clinics attached to MPH --53

Table 4.16: Medicine stock level management at MPH and MMS ---53 Table 4.17: Stock outs interventions at the clinics attached to MPH ---54 Table 4.18: Emergency orders placed by respondents responsible for ordering

ordering medica I supplies ---54

Table 4.19: Stock management training received at MMS, MPH and its clinics -55

Table 4.20: Deliveries of medical supplies by SMME to MPH and its clinics ---56

Table 4.21: Commencement of medical supplies distribution contract for SMME

deliveries to MPH and its clinics ---58 Table 4.22: Contract period for SMME deliveries to MPH and its clinics ---57

Table 4.23: Number of trucks reported by SMME responsible for delivery of

medical supplies to MPH and its clinics ---57

Table 4.24: Capacity of SMME trucks used for delivery of medical

supplies to MPH and its clinics ---5?

Table 4.25: Age of SMME trucks used for delivery of medical supplies to MPH and its eli nics ---58

Table 4.26: Interaction between transporters and clinic/hospital staff members who receive stock on deliveries ---56

Table 4.27: Factors considered as major challenges to the business of SMME delivering medical supplies to MPH and its clinics ---59

List of figures

Figure 1.1: The medical supply chain management for the clinics attached to

~F>~ ---5

Figure 2.1: F>harmaceutical management framework ---14

Figure 5.1: The conceptual framework for the pharmaceutical supply chain ----67

List of maps ~ .. ~ap 3.1: Clinics attached to MF>~ in ~afikeng and Ratlou local municipality ----37

List of pictures F>late 4.1 ~edical supplies store room in clinic X ---50

F>late 4.2 ~edical supplies store room in clinic Y ---50

List of charts Chart 4.1: qualifications of respondents working at clinics attached to ~F>~ ---44

Chart 4.2: Occupation of respondents working at clinics attached to ~F>~ ---45

Chart 4.3: Years of experience for clinic participants ---46

List of annexures

Annexure A: Interview guide for transporters ---77

Annexure B: Interview guide for MMS ---80

Annexure C: Interview guide for MPH

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Annexure D: Interview guide for clinics

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Annexure E: Letter to respondents requesting participation and informing respondents about the research ---97

Annexure F: Consent form for participants

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Annexure G: Permission to conduct the research obtained from NWDoH ---99

Annexure H: Permission to conduct the research obtained from NWU- Mafikeng Campus

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List of abbreviations and acronyms

AIDS Acquired Immunodeficiency Syndrome

AL Amalgamated Logistics

ARV Anti-retroviral

CHC Community Health Care

DHIS District Health Information System

DTI Department of Trade and Industry :;

EDL Essential Drug· List

EML Essential Medical supplies List

FDA Food and Drug Administra1tion

FEFO First Expiry First Out

FIFO First In First Out

GOP Gross Domestic Product

HIV Human Immunodeficiency Virus

Km Kilometer

KZN KwaZulu Natal

MCC Medicines Control Council

MMS Mmabatho Medical Stores

MOH Ministry Of Health

MPH _{Mafikeng provincial hospital}

MSH _{Management Science for Health}

NCS _{National Core Standard}

NDoH _{National Department of Health}

NED LIT NHIF NMMD NMP NWDoH NWP NWU PATH PA PHC PMC PTC SCM SEDA SLA SMME SOP SPS STG TB VAT VHL WHO

National Essential Drugs List National Health Insurance Fund Ngaka Modiri Molema District National Medical supplies Policy North West Department of Health North West Province

North West University

Program for A~sessment of Technology in Health Pharmacist Assistant

Primary Health Care

Pharmaceutical Matters Committee

Pharmaceutical and Therapeutics Committee Supply Chain Management

Small Enterprises Development Agencies Service Level Agreement

Small Medium Micro Enterprise Standard Operating Procedure

Strengthening Pharmaceutical Services Standard Treatment Guideline

Tuberculosis

Value-Added Tax

Vuna Healthcare Logistics World Health Organization

CHAPTER 1

1. INTRODUCTION

Ensuring availability and accessibility of esse~tial medicines to all citizens is one of the

health objectives in the National Drug Policy for South Africa (Department of Health,

1996). This can be achieved by prescribing medicines in accordance with the

recommended Standard Treatment Guidelines (STG} and Essential Medicines List (EML). Essential medicines, according to World Health Organization (WHO), are those medicines that meet the priority health car~ needs of the population (Department of

Health, 2008). In order to achieve the objective of the National Drug Policy (NDP) on ensuring availability of medicines, medicines must be available to all sites at all times (Department of Health, 1996). The vision of the North West Department of Health (NWDoH) is to have healthy self reliant communities in the North West Province, and

the mission is to render accessible, equitable and integrated quality health and developmental social services (NWDoH, 2011). In support of the vision and mission, the Pharmaceutical Services Directorate must. ensure availability of good quality medicines at the North West Provincial Medical Depot called Mmabatho Medical Stores (MMS) which is the main supplier of all the public hospitals in the Province.

Availability of essential medicines at health care facilities is critical to the success of priority health programmes such as Anti Retroviral (ARV), Tuberculosis (TB) control and immunization. This is noted in the NW State of the Province address for 2011 which indicates that a zero % stock-out rate of antiretroviral and TB drugs is expected (NWDoH, 2011 ). The National Department of Health (NDOH) has ten strategic goals.

Strategic goal number nine is about the review of drug policy with the aim of improving medicine availability at all levels. This aim is supported under programme seven in the 2011 North West health departmental annual performance plan (NWDoH, 2011). These objectives may therefore be achieved if essential medicines are available at all times at all levels of health care.

1.1 Background

MMS serves 26 state hospitals in the North West Province (NWP). The main function of

MMS is to provide pharmaceutical and surgical products to support primary, secondary

and tertiary service delivery systems in line with NDP, Pharmacy Act, Medicines Control

council (MCC) policies and Public Finance Management Act (PFMA) as stipulated on

the depot site master file (NWDoH, 2013). The functions include: ordering, storage and

usage of pharmaceutical and surgical products and these functions have been

conducted since the establishment of the depot in 1991. The management of MMS for

the procurement, warehousing and distribut_i,on of medical supplies was outsourced on the 1st October 1999 to a private company ·Galled Vuna Healthcare Logistics (Maleme, 2003).

Dominguez (2006) defines outsourcing as the way of hiring functional experts to handle

business units that are outside the companies' core business. Outsourcing is also

defined by Derose (2009) as transferring to external resources services that were

previously provided internally. The external supplier takes over important responsibility

for a function, including its activities, events, people, and physical assets. The external

agency does not only oversee the function but is also held accountable for achieving its

objectives. The success of an outsourcing arrangement depends greatly on the success

of the client/vendor relationship. The aim of outsourcing the service at the MMS was to

improve the availability of medicines at the depot, and it was also in line with

government's policy of establishing public private partnership in order to improve

healthcare service delivery (NWDoH, 2000; Maleme, 2003). Outsourcing does not

eliminate the need to manage activities that are outsourced (Mcivor, 2005) and

therefore, the decision by the department to outsource the distribution of medical

supplies with the aim of addressing problems in medical supplies shortages does not

reduce responsibilities of managers in drug supply chain management. The trend

towards increased outsourcing has been influenced by wide ranging reforms occurring in public sector organisations in many countries. According to Mcivor (2005),

proponents of this philosophy argue that in order to improve performance, assets and

that the public sector should aspire to levels of performance attained in the private

sector (Mcivor, 2005).

In a pre-study investigation conducted at MMS, the researcher established that at the expiry of the contract between the department and Vuna Healthcare Logistics (VHL}, the contract was awarded to Amalgamated Logistics (AL) from 1st September 2003 to 3151 _{May 2011. The two service providers, VHL and AL were responsible for}

procurement, warehousing and distribution of medical supplies. VHL and AL were using their own trucks to deliver medical supplies ~p all public hospitals in the NWP according to the delivery schedule. The Department was responsible for database management,

pharmaceutical tender administration and authorisation of all orders that were placed by

the contractors with pharmaceutical companies. In the pre-study investigation, the researcher further established that the department was supposed to oversee effective management of the two contractors and that they produced expected outcomes.

The NWDoH took a decision to in-source the management of the MMS with effect from 01 June 2011(NWDoH, 2011). According to Sikula, Kim, Braun and Sikula (2010), in-sourcing is when an organisation uses internal labour and personnel to satisfy the operational needs of its enterprise. They further state that in-sourcing is a management

decision made so that control of critical production and competencies can be

maintained. The decision to in-source the management of MMS was to save the

department about R6.6m per year (NWDoH, 2011). The researcher noted during a pre -study investigation that there was a delegation from the NWDoH that was tasked to

benchmark the in-sourced warehouse management in the KwaZulu Natal (KZN)

province. KZN depot is responsible for all warehouse operations except distribution which is outsourced. While the management at MMS is in-sourced, distribution from the

depot to the state hospitals remains outsourced. The distribution from MMS is up to the state hospitals only, and these hospitals supply all the state clinics in the province.

The NWDoH took a decision in 2000 to outsource delivery of medical supplies from

state hospitals to clinics by Small Medium Micro Enterprises (SMMEs) (NWDoH, 2000).

It was highlighted in the NWDoH budget speech of 20100 that there was a problem of medical supplies availability and distribution at the clinics and the following concerns were rais«3d which led to the decision of outsourcing delivery of medical supplies by SMMEs from hospitals to the clinics:

(i) State hospital pharmacies had limited storag«~ space to accommodate the

increasing volumes of clinic stock within hospital premises.

(ii) Some of these pharmacies were far/ rom the clinics that they served and it was not economically viable to continue tJsing them as clinic dispatch centers.

(iii) Some state hospital pharmacies were inappropr~ately located to the extent they were not easily accessible.

(iv) BE!Cause of medical supplies shortages, communities arrived at clinics to find that there was no treatment available.

NWDoH (:2000) also stated that this decision was take:n with the intention to support

efforts of the Department to contribute towards job creation and development of

SMMEs. lit is indicated on the minutes of the meeting that was held at the Mmabatho

Justice b10ard room on 22 February 2002 by the NWDoH, 2002 joint project

management committee of the depot that distribution of medical supplies to the clinics was a matter that needed finalisation in order to address issues of medical supplies

stock outB and to support the SMME in the process (NWDoH, 2002). Medicine

shortages that were discussed were not specific to any state clinic or hospital in the NWP, but a general problem. It is from these reports that the researcher wanted to investigate the matter further and selected clinics attached to Mafikeng Provincial Hospital (MPH) because of convenience. MPH is one of the six hospitals in the Ngaka

Modiri Molema District (NMMD). NMMD is one of the four districts in the NWP of South

Africa. NMMD has a total population of 764, 351 which is equivalent to 24% of the total

population in the North West. Mafikeng local municipality has 34% of the total

population, therefore giving it the largest population clensity in the district (NMMD,

In a pre-study investigation, the researcher established that MPH supplies medicine to 36 clinics every two weeks. The distribution of medical supplies from MPH to its clinics is outsourced to two SMMEs. There are four parties involved in the distribution of medicines to the population. Their roles are illustrated in Figure 1.1

1 Distribution from suppliers to MMS Orders from MMS to suppliers 2 Distribution from MMS to MPH 3 Orders from MPH to MMS

Distribution from

MPH to clinics

Orders from

clinics to MPH

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Figure 1.1: Medical supply chain management for clinics attached to MPH

An analysis of Figure 1.1 reveals that there are several factors that may lead to a

shortage of medical supplies at the clinics. These include: (i) Poor stocking of medical supplies at the MMS.

(ii) Poor distribution of medical supplies from MMS to MPH. (iii) Poor stocking by MPH.

(iv) Poor distribution of medical supplies from MPH to its clinics. (v) Poor ordering process at MMS, MPH and its clinics.

MPH receives medical supplies from MMS and if adequate medicine levels are not maintained at the MMS, then they may negatively impact on availability of medicines at MPH and ultimately in the clinics. If adequate levels of medicines are maintained at MMS and distribution to MPH is not efficient, then availability may be affected. The same scenario may be the case with MPH and the clinics attached to it.

According to the warehouse manager at MMS, MPH orders stock from MMS on a weekly basis according to the ordering schedule. Orders for items that may be required before the next order is placed are allowed and the Standard Operating Procedure (SOP) number 15 (NWDoH, 2013), of MMS gives the details on how such orders are handled. The distribution of stock to MMS is undertaken by pharmaceutical companies with which orders are placed. The procurement of medical supplies in the public sector is through a state tender system. Provinces are responsible for forecasting their medical supplies requirements based on the Essential Drug List (EDL) and any additional medicines they have prioritised. A central procurement body referred to as COMED oversees this procurement process (Patel, Norris, Gauld, & Rades, 2009). According to the warehouse manager at MMS, forecasts for medical supplies requirements in the NWP are based on state hospitals consumption figures.

In a pre-study investigation, the researcher established that stock levels at MMS and MPH are managed by a computerised inventory management system; while a manual system is used at the clinics attached to MPH. The researcher further established that the staff at MMS experienced severe challenges with the operations of the Drug Supply Management System (DSMS) to the extent that there were instances where the system would indicate that the stock is not available whereas it is in fact physically available on the shelves or vice versa.

1.2 Problem Statement

The clinics attached to MPH regularly experience shortages of medical supplies; as a result patients are deprived of quality health care. Up until the time of this study, no other studies have been conducted to establish the cause of the shortages. There was therefore a need to conduct the study to establish the factors that lead to shortages of

1.3 The research questions

The primary research question was; what are the factors that lead to shortages of medical supplies at clinics attached to MPH? The secondary research question was; what are the necessary measures required to minimise shortages of medical supplies at the clinics?

1.4 Aim of the study

The aim of the study was to assess the entire medical supply chain management of the clinics attached to MPH with the view o!, identifying constraints there in, and to recommend necessary interventions.

1.5 Objectives of the study

The objectives of the study were to conduct a survey to:

(i) Evaluate the ordering process in the medical supply chain at the clinics attached to MPH.

(ii) Establish the factors that lead to stock outs of medical supplies in the health facilities.

(iii) Establish the extent to which the factors identified in (ii) above impacted on the stock levels at the clinics attached to MPH.

(iv) Establish the level of training in medical supply chain management received by personnel involved in the distribution of medical supplies to the clinics attached to MPH.

1.6Delimitations of the study

(i) The study was restricted to clinics attached to MPH in Mafikeng and Ratlou local municipalities in NMMD.

(ii) The participants of the study included MMS warehouse manager; MPH pharmacy manager; nurses and pharmacist assistants in the clinics attached to MPH as well as transporters distributing medical supplies for MMS and MPH. (iii) The study restricted itself to matters related to the procurement and delivery of

medical supplies to the clinics.

1. 7 Ethical considerations

Ethics is defined as guidelines or rules by which people aim to live (Dobler & Burt, 1990).

Hellriegel Jackson, Slocum, Staud, and Associates (2004) define ethics as a set of values and rules that distinguish right and wrong. The ethical issues could therefore not be avoided during this study. The researcher followed ethical guidelines as outlined below:

(i) Permission was obtained from the North West University - Mafikeng Campus and North West Department of Health to conduct a research at the clinics attached to MPH.

(ii) The data collection forms were accompanied by a letter explaining the purpose of the study and informing the respondents that participation was voluntary, meaning that respondents had the right not to participate in the study.

(iii) Participants were assured that they would remain anonymous and that information they provided would be used for research purposes only. Participants were therefore assigned codes to avoid recording of names on the data collection forms so that the responses would not be linked to any person.

(iv) Confidentiality was guaranteed to all participants. All participants were assured that they would not be harmed as a result of their participation, or be implicated in any legal procedures because of their participation in the study.

1.8 Summary

This chapter reviewed the background surrounding the procurement and distribution of medicines to the clinics attached to MPH. As a result, a problem statement was formulated and the primary and secondary research questions were raised. In this chapter the aim of the study and its objectives were postulated and the study area was defined. The chapter ended with an outline of the ethical issues that were taken into consideration.

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CHAPTER 2

2. LITERATURE REVIEW

2.1 Brief overview

Increasing access to essential medicines is a vital part of the global effort to tackle key diseases such as Tuberculosis (TB), Malaria, Human Immunodeficiency Virus/ Acquired Immunodeficiency Syndrome (HIV/AIDS); and to improve health in the developing

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world. Availability and affordability of essentia·l.medicines which are of good quality save lives and improve health when properly used, but lack of access to medicines remains one of the most serious global health problems even though considerable progress has been made in the last 25 years (United Kingdom, 2004). Medicines are used to cure and prevent diseases and their unavailability increases the burden of diseases. Shortages of essential medicines impact negatively on efforts to improve the effectiveness and efficiency of the pharmaceutical supply chain (WHO, 2011 ).

Department of Health (1998) indicates that the Essential Drug List (EDL) and Standard Treatment Guidelines (STG) were launched in South Africa in 1996 by the DOH for Primary Health Care (PHC) after the introduction of the National Essential Drug Programme. The development of the EDL and STG was based on the most prevalent diseases present at PHC facilities. The hospital EDL and STG was launched in 1998. The purpose of the EDL and the STG is to promote rational prescribing, dispensing and use of medicines by health care practitioners in South Africa (Department of Health, 1996).

The literature review focuses on the use of Primary Health Care (PHC) facilities; medicine supply management cycle; supply chain management; availability of essential medicines at primary health care clinics; factors that contribute to non availability of essential medicines as well as ordering and distribution of essential medicines. This chapter also highlights on the use of Small, Medium, and Micro Enterprises (SMME) in the distribution of medical supplies, which is one of the recommended solutions in addressing problems

relating to medical supply shortages. Objectives, the potential benefits and risks of

outsourcing services are also included.

2.2 Primary Health Care facilities

Naude and Setswe (2000) refer to PHC as the first care that people get for a specific

illness. The care is ongoing for that illness and it includes the essential overall basic care

that a person needs to remain healthy. PHC is the first level of contact for individuals, the

family and community with the national health system bringing health care as close as

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possible to where people live and work. It ma~es up the first element of continuing health

care process (WHO Regional Office, 2002). The World Health Organisation (WHO) has

been strongly supporting PHC since 1978. Many changes have taken place in the context of international health, with the result that PHC is faced with new challenges such as the

growing epidemic of communicable diseases, mental health disorders, injuries and

violence, the impact of HIV and AIDS, and other infectious diseases, demographic

changes, increasing poverty, institutional and social changes. Improvements to PHC are

seen as vital in increasing population access to health care, and reducing the burden of

disease (WHO Regional Office, 2002).

According to Naude and Setswe (2000), the ideal principles upon which PHC should be

provided are:

(i) Equity - meaning that all citizens must have the same access to the services that

are offered.

(ii) Accessibility- people must be able to reach the services with ease.

(iii) Affordability - everybody using that service must be able to afford the service

offered.

(iv) Sustainability- meaning that such service must be offered on a long term basis.

Dennill, King, and Swanepoel (1 999) argue that the essential care aspect of PHC consists

of eight basic components which include the provision of essential medicines. The basic

available on the market. The criteria used in selecting the essential medicines should take

into account the medical needs of the majority of the population, and ensure the efficacy,

safety and cost effectiveness of the medicines (Mirza, 2008). Essential medicines are selected with regard to public health relevance, evidence on efficacy and safety as well as comparative cost-effectiveness. They are intended to be available within the framework of functioning health systems at all times in adequate quantities, in the appropriate dosage forms, with assured quality and adequate information (World Council of Churches, 2009) .

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Medicine supply availability was found to be a challenge by Mbindyo, Siyoi, Mucheru, Cepuch and Wakori (2008) in the study they conducted on access to essential medicines in Kenya. Findings of the study include critical shortage of pharmaceutical personnel; deficient medical supplies storage infrastructure and critical stock outs extending beyond 30 to 90 consecutive days. The findings further indicate that the public facilities in Kenya are a major source of medicines especially for poor households, for that reason most

people are happy to be located near public health facilities. Recommendations made from

this study include improvement of essential medicines availability at health facilities, upgrading of medical supplies storage infrastructure and prioritizing investment in

pharmaceutical human resources to address critical shortage of personnel in

pharmaceuticals. The Centre for Pharmaceutical Management (2003) indicates that

Tanzania was one of the first countries to adopt the essential drug concept and use it as the vehicle to ensure access to medicines that address the most common prevalent conditions in the country. Sharif and Kimani (2009) indicate that Ministry of Medical Services and the Ministry of Public Health & Sanitation in Kenya conducted a survey to establish availability and affordability of essential medicines at health facilities in Kenya. Their findings revealed that

(i) Facilities experienced stock outs of basic essential medicines. (ii) The public sector supply chain was prone to regular interruptions.

During the study period the central warehouse did not experience stock outs. Stock outs in health facilities were attributed to weaknesses in the distribution system (Sharif & Kimani, 2009)

Medicines consume a significant portion of the total health care budget for many countries. The STG and EDL used in public health care facilities therefore ensure the cost effective treatment options available to citizens of the country. It seeks to build capacity in health care workers at PHC levels (Department of Health, 2008). In a study conducted in Romania on access to essential medicines, Leopold and Vogler (201 0) conclude that implementing mandatory gene~!c substitution for pharmacists can improve access to affordable medicines. They also report that generic medicines are promoted by National Health Insurance Fund (NHIF) as a tool to decrease public spending. Generic medicines are identical to branded drugs and they have the same dosage form, safety, strength, route of administration, performance characteristics and intended use which Food and Drug Administration (FDA) confirms. Generic medicines can only be marketed after exclusivity patent period or rights of a brand product ends. They are cheaper because no research and development investments are involved as in the case of new drugs. Thus generic versions help patients by making drugs available at affordable prices while retaining the quality.

2.3 Medicine Supply Management cycle

The medicine supply management cycle is comprised of four functions which show a link between the selection of medicines, procurement, distribution and use in the pharmaceutical supply chain system. This process is guided by policy, law and regulation and it is illustrated in Figure 2.1.

Figure 2.1: Pharmaceutical Management Framework. Adopted from: Management Sciences for Health (201 0)

Management Sciences for Health (201 0) explains the four components of medicine

supply management cycle as follows:

2.3.1 Selection

Medicines are selected on the basis of relevance to pattern of prevalent diseases; proven efficacy and safety; adequate quality; possibility of local manufacturing and cost benefit ratio. Selection of medicines required by doctors for public hospitals in South

Africa at provincial level is done through motivations to Pharmaceutical and

Therapeutics Committees (PTC) whose function include approval or rejection of

motivated pharmaceuticals. At national level selection is informed by the demographics of the whole country. Essential medicines that should be used to treat identified health

2010). The Center for Pharmaceutical Management (2003) indicates that in Tanzania the government continues to control drug selection, prices and access to essential drugs. The National Essential Drugs List (NEDLIT) will continue to be provided in line

with Ministry of Health (MOH) policy vendor selection. Management Sciences for Health

(2012) suggests that in South Africa selection of essential medicines to meet the health

needs of the population is one of the important aspects of the National Medical supplies

Policy (NMP) which gives guidance on how government will ensure that efficacious and

safe medicines of good quality are accessible, affordable and are used rationally.

2.3.2 Procurement

Procurement of pharmaceuticals involves the process of ordering good quality and

cost-effective essential medicines from reliable suppliers. This is done when the needs of the users such as hospitals and clinics are quantified. In South Africa this process usually includes advertising tender specifications and awarding contracts by the National Department of Health and National Treasury for the supply of medicines and medical related products. During the selection and execution of tenders, the highest standard of

ethics must prevail (Management Sciences for Health, 2010). According to Republic of

South Africa (2004) corrupt and fraudulent practices must be avoided. The procurement

process is deemed to be corrupt when the selection process or execution of a tender is influenced by offering, giving, receiving or asking anything of value; while a practice is said to be fraudulent when a bidder or contractor presents wrong information to influence a selection and execution of a tender or engage in price scheming (Republic of South Africa, 2004).

Procurement of medicines is a complex area of drug management. It involves a number

of factors including availability of the latest price information, a reliable supply of products, optimal utilisation of financial and human resources and maintaining both the

buyer and purchaser trust (Center for Pharmaceutical Management, 2003). Leopold

and Vogler (2009) indicate that the Ministry of Public Health in Romania is responsible for pharmaceutical system. It is in charge of regulating prices for prescription only

use of generic prescribing in Romania can increase competition and contain

pharmaceutical expenditure for patients and third party payers and therefore improve

access to affordable medicines. This may be achieved by implementing mandatory

prescribing according to the prescription guidelines set by the National Health Insurance

Fund (NHIF).

The Center for Pharmaceutical Management (2003) suggests that Tanzanian

government may consider making it possible for public hospitals to effectively procure

drugs and medical supplies from approved suppliers to alleviate stock availability

problems experienced by the Medical Store:? Department (MSD) which is the primary

sole supplier for the public sector. Thailand government hospitals formed group

purchasing cooperatives and agreed on a standard list of items from the NEDLIT. The

group then advertises tenders for each item on the NEDLIT so that individual hospitals

can purchase directly from the contracted supplier. Zimbabwe implemented a system

where orders for high cost, slow moving specialty supplies are made from government

selected supplier and delivered directly to the hospitals (Center for Pharmaceutical

Management, 2003). In South Africa a process of realigning the tenders to be according

to the EDL was embarked upon to ensure that items procured on state tender in South

Africa are on the EDL. This was in line with the South African National Drugs Policy

objectives of making essential drugs affordable (Department of Health, 2000).

2.3.3 Distribution

The World Health Organization (2005) defines distribution as movement of products

from the manufacturer's premises or from a central point to the end user by means of

various transport methods. Good distribution practice which is part of quality assurance

must be observed during this phase. It ensures that the quality of pharmaceutical

products is maintained throughout numerous activities occurring during the distribution

process. Once the stock that was procured is received, then these essential medicines

and other medical supplies are stored in designated areas and made available to the

users according to a schedule through a reliable delivery network. The transport used

I

through public and private sectors in South Africa are regulated by a government body called Medicines Control Council (MCC). One of the roles of MCC is to ensure that such medicines are safe, effective and are of acceptable quality (Department of Health,

1996).

2.3.4 Use

At the public facility level, medicines are dispensed to patients as per prescription

according to predefined standard treatment guideline. According to Management

Science for Health (2012), the quality of h~alth care is directly affected by how pharmaceutical supplies are managed at facility level. Medicines that are used at the clinics are stored in the medical supplies store room, and many times working stock is kept in the treatment area. Busy facilities with high volumes of medicines issue out to patients pre-pack medicines in appropriate quantities for standard treatment courses. This is done to save time for both nursing staff and patients. Other medicines commonly used at facilities are purchased in readily pre-packed unit of use.

2.3.5 Management support

Management support is comprised of human resources, information system and

financing. These three components are key systems that support in the management of

personnel, the transformation of data into information as well as the allocation of funds and monitoring thereof. The handling of medicines and medical related items is regulated and guided by the legislative framework comprising policies and acts. This legislative framework covers access to medicines, the safety of the patient and the professional conduct of the healthcare worker. These components of medicine supply management cycle are interdependent. Proper use of medical supplies will lead to proper selection, procurement and distribution of medicines. Good management support

will then make the system work efficiently and effectively to ensure availability of

care of medical supplies management because medicines are expensive. It is important

to use medicines correctly at all times (Management Sciences for Health, 201 0).

2.4 Supply chain management

Malinga (2007) describes supply chain management (SCM) as a function that ensures

that goods and services are delivered at the right time and place, in the right quantity with the right quality, and at the right cost. Sweeny (2005) argues that if there is any

inefficiency anywhere in the supply chain, theq chances of the manufacturer successfully

•

competing against other suppliers will be reduced because the manufacturer's ability to

give the customer what they want, when they want it, at the price and quality they want is

determined by the efficiency and 1effectiveness of the manufacturer's own operation. A

proper focus on total SCM is tlherefore required for the company to achieve true

competitive advantage.

Republic of South Africa (2004) indicates that SCM is an integral part of financial

management. Its aim is to intro1duce international best practice; to breach the gap

between traditional methods of procuring goods and services; balance the supply chain;

and at the same time addresses procurement related matters that are of strategic

importance. According to Republic of South Africa (2004), the following key activities bring the supply chain practitioner closer to the end user and ensure that value for money is achieved:

(i) Understanding future needs and frequency of need;

(ii) Identifying critical delivery dates;

(iii) Linking the requirements to the budget, and doing an expenditure analysis based on past expenditure to b~~ able to identify wasteful spending and allow price

renegotiation when deemed necessary.

(iv) Checking for alternatives, and doing industry analysis which would help identify

Donald and David (1996) indicate that logistics management is part of supply chain which entails the integration of information, warehousing, inventory, transportation, material handling and packaging. According to Republic of South Africa (2004), coding of items, setting of inventory levels, placing of orders, receiving and distributing stock are other functions that are performed under logistics management. Logistics is concerned with providing products and services where they are needed and when they are needed. When consumers go to the store, they expect products to be available and fresh. To ensure that the communities that are highly dependent on the public health system obtain access to essential medicines, the principles underlining the logistics function in the supply chain management aspect mentioned above, need to be understood and implemented. To promote uniformity in SCM processes, the South African Cabinet adopted a SCM policy in September 2003 to replace the outdated procurement and provisioning practices with a SCM function that was considered to be an integral part of financial management which would conform to international best practices (Republic of South Africa, 2004).

2.5 Availability of essential medicines at primary health care clinics

Medicines are the most significant tool that the public have to prevent, alleviate and cure diseases. The first goal to guarantee access to these medicines is ensuring constant availability (Dukes, 2004). According to the World Health Organisation (WHO) and Health Action International (2008), access to essential medicines forms part of the highest attainable standard of healthcare and the reasons why millions of people across the globe go without medical treatment they need may be attributed to two crucial factors which are price and availability of medicines. Physical availability is defined by the Centre for Pharmaceutical Management (2003) as the relationship between the type and quantity of a product and service needed, and the type and quantity of product and service that is available.

Mendis, Fukino, Cameron, Laing, Filipe, Khatib, Leowski, and Ewen, (2007) conducted a study in six low and middle income countries to assess the availability of medicines that

are used to treat chronic diseases. Medical supplies availability comparisons were made between public and private sectors and the overall results were that the availability of medicines in the public sector was considerably lower in the countries studied while in private sector it was substantially higher. This was the case despite the fact that medicines that were provided for chronic diseases were free or at low cost in the public sector. Because of poor availability of these medicines in the public sector, the majority of patients had to purchase medicines from the private sector or forgo treatment if they could not afford the price. Conclusion made from this study is that patients with chronic diseases such as diabetes, asthma and cardiovascular disease, need a reliable supply of medicines. In the absence of such supply, avoipable death will occur. Implementation of strategies such as training health professionals ·on the use of STG's that link price and affordability are there to enable governments to ensure that medicines for chronic diseases are consistently available and affordable. It is indicated in Department of Health (2003) that the supply of medicines is very crucial in order to achieve effective and efficient healthcare services to the community in the country. The approaches in the STG/EDL are used to optimize medicine use at the PHC levels.

2.5.1 Factors that contribute to non availability of essential medicines

Kotwani, Ewen, Dey, lyer, Lakshmi, Patel, Raman, Singhal, Thawani, Tripathi, and Laing (2007) conducted a survey in different states of India to evaluate the price and availability of medicines which are key components in determining access to effective treatment. Information from this survey showed that medicine availability was poor in the public sector and better in the private sector. Products available in the public sector were generally generic equivalents. The availability of some important medicines such as Glibenclamide which is used for the treatment of diabetes, Co-trimoxazole suspension and Amoxicillin which are antibiotics was found to be poor at different sites though they were in the procurement list of the public sector. The survey shows that poor availability of medicines could be due to one or a combination of the following factors:

(ii) Essential medicine list used by dispensaries do not have medicines prescribed by specialists.

(iii) Medicines which are on the essential medicine list of the state are not purchased. (iv) The state governments have financial constraints.

The conclusion made from this study is that state governments in India must increase the availability of medicines in public health facilities. In-depth studies are recommended to find out reasons for poor availability of medicines for suitable interventions that would improve the situation.

(v) Poor estimates of consumption and cash, flow constraints also contribute to non availability of medicines (Mend is eta/, 2007).

(vi) Manufacturing and quality problems, as well as delays and discontinuations of products are other factors that impact negatively on medicine availability (US Food and Drug Administration, 2011 ).

(vii) Management Science for Health (2012) argue that stock outs occur because of

poor monitoring of stock level and wrong quantification at national and facility levels.

Measures to improve medicine availability include and are not limited to: training and certification of pharmacy assistants; focus on the efficiency in the supply chain, regular monitoring of consumption of supplier to plan better for the future (Management Science for Health, 2012).

In Ramallah, it is the responsibility of the Palestinian Ministry of Health to provide drugs and medical disposables to MoH facilities in both the West Bank and Gaza (WHO, 2011 ). The shortage of essential drugs is reported to have been a problem and zero stock levels increased steadily since 2007, addressing this problem was deemed critical for the continued delivery of health care. One of the factors that contributed to the zero stock levels is suppliers that held back deliveries to the MoH due to uncertainty about

receiving payments. The impact caused by medicine shortages on the MoH and patients was that:

(i) It compelled the MoH to cut or stop surgeries in major specialties, and refer most

serious cases to hospitals outside the GAZA Strip.

(ii) Patients were put at serious risk of medical complications and deterioration in health status.

Kotwani et a/ (2007) suggest that the state governments have to ensure increase in the availability of medicines at public facilities. qne aspect mentioned is to reduce the procurement price of medicines and improve the distribution system. In South Africa

measures put in place by the NDOH to reduce price of medicines include price

negotiations for procurement of essential medicines and medical disposables for the public health sector through national tenders (DOH, 1996.) This is one of the achievements on the economic objectives of the NDP which is to lower the cost of medicines. Medicine price reduction in South Africa is also realized through the use of

generic medicines which are less expensive than branded medicines; therefore increased

usage should positively improve affordability (Center for Pharmaceutical Management,

2003). According to Management Science for Health (2012), the use of parallel

importation makes provision for government to import pharmaceuticals that have been

placed on the market more cheaply in foreign markets and this can therefore help reduce the medicine price.

2.6 Ordering and distribution of medical supplies

It is the duty of a national government to ensure that there are effective means of

supplying and distributing medicines to the entire population (Dukes, 2004). The

availability of medication to patients is important as it impacts on the quality of care they receive. Within the healthcare system, the supply chain associated with pharmaceutical products is critical in ensuring a high standard of care for patients and providing adequate supplies of medicines (Mustafa & Potter, 2009).

Projecting future requirements for the next purchase order is referred to as forecasting. It involves estimating the required quantities of specific items for procurement (Management Science for Health, 2012). According to Joel, Keong Leong, and Keah-Choon (2005), forecasting provides an estimate of future demand as well as the basis for planning and sound business decisions.

Management Science for Health (2012) indicates that minimum and maximum stock

level formula is used for scheduled purchasing at set order intervals. Maximum stock level is the target level of stock expected to provide sufficient stock to last from one

order to the next, and minimum stock level determines at what point the order should be

placed. Reorder level is the quantity of stock remaining that should prompt a reorder of an item and it is also called minimum stock level. Back order is an order that was not fulfilled and can only be supplied when the product becomes available.

The average consumption of medicines sometimes called demand is the key variable

that determines how much stock should be ordered. The average consumption is

multiplied by the lead time, plus any additional safety stock. Lead time is the time between the initiation of the purchase order and receipt of stock. Safety stock is the stock that should always be on hand to prevent stock outs. The formulas are as follows:

where: (SMIN)

=

=

CA

=

SS

=

where: (SMAX) = Maximum stock

PP

=

[1]

[2]

(Oo)

=

=

(Sa) = Quantity of stock back ordered

(So)

=

=

Source: Management Science for Health, 2012.

Quantities to be ordered should be based on ni~liable estimates to avoid stock outs or overstocking. Overstocking leads to the risk of expiry while stock outs affect programme output and lead to expensive emergency orders. Past consumption data of units supplied to outlets are the reliable way to estimate future pharmaceutical demand (Management Science for Health, 2012). Forecasting the exact demand for medicines required to be used in a particular month by the clinics impacts directly on how often distribution needs to be done, and also how much must be distributed. Mustafa and Potter (2009) indicate that each clinic is responsible for monitoring and managing their

own inventory, and that they should order medicines when required. They further argue that the decision on which products to order at each period and the quantity required rely on the experience and skill of staff at the clinic. The researcher realizes from experience that training on medicine supply management contributes positively on stock control at all levels and that training must be continuous because of high staff turnover. Management Science for Health (2012) indicates that stock records are important for stock management and they should have current and accurate information. Stock record is the primary source of information used in the various reordering formulas. Stock record cards are therefore used to record stock balances, receipts, issues and outstanding orders. They are important for making decisions on when and how much to order. Continuous updates of stock control cards impacts directly on stock control which makes ordering and pharmaceutical management easier, it is therefore important to train staff on inventory control, storage and ordering procedures.

According to Booyens (2001 ), the expiry dates of medicines should be checked before delivery and on receipt of stock. The shelf life of medicines and the average weekly or

monthly usage should determine the quantity to be kept in stock. It therefore means that

problems of stock expiring on the shelves can be avoided if the staff members managing the stock at the health facilities are trained on stock management. The

Annual Performance Plan (APP) cited in NWDoH (2012) serves as a tool to evaluate

health care service delivery to the public. This plan provides important information that

enables effective monitoring and evaluation of departmental performance in achieving

the planned objectives and outcomes. Priority number three of the APP under

programme seven is about improving skills of pharmaceutical personnel through training

on drug supply management. Strengthening training on drug supply management for

health care workers handling essential medicines at PHC may contribute to improved

stock control and medicine availability. Regarding drug quality in South Africa, Patel et

a/. (2009) indicates that MCC is sufficiently robust in ensuring integrity of medicines

used within the health care system. Effective regulation by MCC incorporates

registration of medicines, licensing and inspections of manufactures, depots, hospitals

and clinics.

2.7 The role of Small Medium Micro Enterprises (SMME) and the challenges experienced

According to Department of Trade and Industry (1995}, small enterprises are businesses

that make part of the formal economy, employing less than 100 paid employees. These

enterprises are usually managed by the owner and have fixed business premises where

they operate. The business is formal and registered. The entrepreneurs include

electricians, plumbers and professionals. Micro enterprises are very small businesses

involving mostly the owner, at times some family members and one or two paid

employees. They commonly lack formal business premises, operating permits or

business licenses, accounting procedures and value-added tax (VAT) registration. Most of the micro entrepreneurs have limited capital base and may only have some business or

business. Earning levels of micro enterprises differ as they depend on a business sector

they occupy, as well as the growth phase of the business and access to relevant support.

Medium enterprises operate from fixed premises with all formal requirements. It is mainly

owner managed and employs more than 200 employees (Department of Trade and

Industry, 1995).

Kongolo (201 0) indicates that SMMEs have historically played an important role in the economic development of many countries around the world. Because of this vital role,

he suggests that government should understand the dynamics of the SMMEs sector by

.

developing it further; providing the necessary financial support; and undertaking various initiatives to accomplish its growth.

In managing the distribution of medical supplies there should be arrangements in place

to ensure among other things that management and personnel are not subjected to

commercial, political or financial pressures that may adversely affect quality of service provided (WHO, 2005). Financial pressures affect many SMMEs in South Africa who cannot access credit. This is attributed to: lack of information and documentation, no fixed income, lack of financial records, customer uncertainty and forecasting limitations.

SMMEs are viewed by lenders as being too risky for credit. Addressing these barriers to

credit access will improve broader, deeper and fairer lending practices (Turner, Varghese and Walker, 2008).

Chittithaworn, Islam, Keawachana and Yusuf (2011) mention that in Thailand

challenges experienced by SMMEs include ongoing high interest charges by financial

institutions on loans borrowed; difficulty to employ a professional and competent workforce because it is often too expensive. SMMEs face a high level of international

competition; efficient SMME business development operations are hindered by a high

level of bureaucracy in government agencies. To address these pressures they

recommend that the government should play a leading role in educating SMME

practitioners on the incentives that are available to them and how these incentives can be accessed; SMMEs should not totally rely on government agencies, they should build

strong social networks which are used as a means to reduce transaction costs and improve access to business ideas, knowledge and capital.

Nkonoki (201 0) conducted a study in Tanzania to identify the factors limiting the growth of small business in Tanzania. Factors such as lack of proper business plan, financial/capital constraints, lack of talent, improper professional advice and consultation, lack of proper record keeping, inadequate training and lack of experience/background in the business were found to be most influential in impacting the growth of small firms in Tanzania. To improve the business environment in Tanzania in order to harness the growth of small firms, he recommends that:

(i) It is vital for small firm communities to get proper support and guidance so that their businesses can grow.

(ii) Entrepreneurs seek first enough knowledge of business before implementing any business ideas they have. They need to undergo training programmes and courses on business administration and management.

(iii) They acquire experience in the type of business they aspire by working first in a similar line of business for a number of years before establishing their own businesses. For them to be motivated and successful, they should try to work with what suit them best and their personality.

A research study by Underhill Corporate Solutions (2013) reveals that there are challenges that are experienced by people buying from the SMMEs and they include stock availability, quality of products and pricing. The implication to the buyer is that it is

better to deal with large companies as opposed to SMMEs because of competitive prices,

favourable payment methods, stock availability and better service delivery.

Recommendations made include: The department of Trade and Industry (OTI) and Small

Enterprises Development Agency (SEDA) as government representatives should

increase awareness of business development and financial services for SMEs, since lack

resources is an important factor; it is therefore important for South African government to come up with a strategy that will attract multinationals in the pharmaceutical industry so that much needed skills from multinationals can be transferred over time to the SMMEs. In a survey conducted by Van Scheers (2011) in South Africa, lack of marketing skills and financial problems were again found to be contributing to small business failure. The recommendation from this survey also includes training of SMME owners on marketing skills.

2.8 Outsourcing the distribution of medical su:f:?plies

Outsourcing as defined in Chapter 1 involves hiring of functional experts to handle business units of an organization that are outside the companies' core business. Functions that were provided internally are performed by external service provider. Orcasitas and Sahibzada (201 0) indicate that the outsourcing process is a better opportunity to grow in competitive environment if the company and the service provider share capabilities and knowledge of common fields. Such synergy may increase output of the two firms and can result in increased cooperative performance. However they warn instability in the relationship due to opportunistic behavior, which may result in loss of strategic performance. This can harm the trust and the level of commitment between the two parties and may result in heavy losses.

The American Society of Health-System Pharmacists (1998) argues that health care organizations outsource pharmaceutical services to improve:

(i) Medical supplies distribution systems; (ii) Computer and information systems;

(iii) And to reduce administration and medical supplies dispensing.

A choice to continue providing own pharmaceutical services by health care organizations and not to outsource is based on a belief that:

(i) Pharmaceutical services are well managed and provided better than they would be by a contractor;

(ii) Outsourcing will dilute or confuse the ultimate professional authority and responsibility of a pharmacist who is on-site for all medication related activities and outcomes;

(iii) Costs can increase rather than decrease; and

(iv) For services that are outsourced it is important to evaluate and document the contractor's performance and assess contractor's compliance with the terms of the contract.

According to Management Science for Health (2012), distribution management is crucial to maintain a steady supply of pharmaceutical and medical disposables to facilities where they are needed most. A well run distribution system will ensure that constant supply of medicines is maintained, medicines are kept in good condition and medicine loss due to spoilage is minimized. Good planning around delivery schedule is critical to ensure that each facility receives supplies regularly and on time. The required time to supply all facilities with medicines should not exceed one month. It is important to consider storage capacity of an institution when delivering stock and therefore irregular distribution must be avoided.

USAID (2010) indicates that a number of potential functional areas in public health systems and supply chain management can be outsourced. These include delivery and transportation. This function is the physical delivery of goods between different levels in the supply chain according to the schedule. When the decision to outsource an activity is made, then the client must develop a thoughtful management plan to implement changes that may be proposed. Roles and responsibilities for both parties must be defined. For the relationship to succeed, there must be commitment and open communication between the two parties. The decision to outsource must be done after careful consideration of potential benefits and risks as well as clear understanding of the expected outcomes from an outsourcing company.

According to the Program for Assessment of Technology in Health (PATH) and WHO (2012), outsourcing may not be an appropriate solution for all countries even if it has the