BACKGROUND

The Mozambiquan Ministry of Health (MISAU) and its partners developed a Strategic Plan for Pharmaceutical Logistics (PELF) to address supply chain challenges and craft a cohesive national strategy for the delivery of medicines to all who need them. The Central de Medicamentos e Artigos Médicos (CMAM) is responsible for implementing the PELF. In line with the recommendations of the PELF, a Transportation Market Assessment (TMA) was conducted in 2018 to identify the feasibility of outsourcing transportation. The objective of the assessment was to explore the private sector’s willingness and ability to deliver last-mile transport services to CMAM. The TMA included desktop research on past studies into the sector and a wide-ranging interview process of stakeholders and private sector enterprises using outsourced distribution, third-party transport operators, and potential fourth-party logistic partners. It was concluded that the private sector is willing and capable but had concerns about CMAM’s ability to make regular and timely payments, given the complexity of financial management in the public sector. At the time, CMAM already had contracts with third-party transport operators at the higher tier of the supply chain to service central warehouses to province depots and decided to explore how to ensure last mile delivery of medicines through outsourcing.

ARC’S ROLE

In 2017 ARC established an informal advisory relationship with the Global Financing Facility (GFF). This later led to the GFF engaging ARC to join the Private Sector Innovation for more effective Supply Chains (PSISC) partnership and provide project scoping, resource brokering and subject matter expertise. As a result, ARC developed the initial statement of work for the PSISC Transportation Outsourcing Investment Planning project in 2019 and for the second phase of work in 2020, which was completed in July 2021. In response to CMAM’s request for support, this project was established to generate an investment case for managing the nationwide pharmaceutical transport network and to compare different insourcing and outsourcing scenarios. This analysis intended to help CMAM motivate and mobilise the budget necessary to implement the recommendations of the PELF. The project was conducted in two phases. Phase 1, which took place in 2019/20, estimated CMAM’s budget requirements to assume nationwide storage and transportation, and identified the best alternative for the extent of transport outsourcing. Phase 2 (2020/21) focused on optimising the site selection and sizing of warehouses to minimise costs and improve customer service levels. Phase 2 was motivated by an important finding that the original plan of 27 warehouses would result in underutilisation (and hence over investment) in several locations. Phase 2 expanded on the analysis of indirect costs, such as management overhead, that began in Phase 1.

OUTCOMES AND IMPACT

ARC’s support to ministries of health focuses on strengthening six supply chain elements. The work with CMAM on network optimisation strengthened five of these six areas: strategy, improvement roadmap, governance, solutions proposals, and budgets and investment cases.

SUPPORTING STRATEGY IMPLEMENTATION

Key elements: Strategy and Improvement roadmap

ARC and its fellow PSISC partners were intentional in aligning both phases of the networking and outsourcing scoping and planning project to the PELF to support its implementation as effectively as possible.

IMPACT: ARC designed and developed a solution and roadmap that would support the implementation of the PELF’s recommendations.

ADVANCING GOVERNMENT’S OVERSIGHT CAPABILITIES

Key elements: Governance

ARC’s work aimed to help ensure CMAM would be empowered as the manager of the end-to-end supply chain, with a mandate to employ staff, plan and spend funds on warehousing and transportation of pharmaceuticals, all the way to service points, without a fracture in the chain of command, which is essential for efficiency.

IMPACT: This work can be used by government and donors to quantify, plan and sequence investments and facilitate investment policy discussions.

OPTIMISING THE COST OF NETWORK UPGRADES

Key elements: Solutions proposals and Budgets and investment cases The optimised network could reduce annual operating costs for the supply chain by up to $6 million a year (30%) if an upfront investment of $60 million were made to overhaul and extend capacity at 35 selected sites. A simpler network, with three distinct sub-networks to cover the country’s northern, central and southern regions, is much cheaper than upgrading all 162 existing sites.

IMPACT:

The payback period for the initial investment is 10 years, and overall costs (capital costs, plus operational costs for 10 years) may be halved.

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