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SUPPLYING READY-TO-USE THERAPEUTIC FOODS TO THE HORN OF AFRICA

The Nutrition Articulation Project: A supply chain analysis

Background and overview of the project

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RUTF Supply Chain Analysis Project

To study the supply chain of ready-to-use therapeutic foods in the Horn of Africa, to formulate suggestions for improvements, and to develop guidelines for future such analyses

� Stage 1: Static Supply Chain

� Stage 2: Dynamic Supply Chain Model

� Stage 3: Articulation Guideline

Project team

� Duke University’s Sanford Institute of Public Policy� Anthony So, PI

� Corrina Moucheraud Vickery

� University of North Carolina’s Kenan-Flagler Business School� Jayashankar Swaminathan

� Wendell Gilland

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Project team: Research assistance

� Sara Abdoulayi

� Kevin Hwang

� Vidya Mani

� Kevin Martin

Expert Advisory Group

� Margaret Bentley, Professor of Nutrition and Associate Dean of the Office of Global Health, University of North Carolina at Chapel Hill’s Gillings School of Global Public Health

� Miriam Labbok, Professor of the Practice of Maternal and Child Health and Director of the Carolina Breastfeeding Institute, University of North Carolina at Chapel Hill’s Gillings School of Global Public Health

� Gary Gereffi, Professor of Sociology and Director of the Center on Globalization, Governance, and Competitiveness, Duke University

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UNICEF

� Project director at UNICEF: Paul Molinaro, Supply Division

� Project coordinator at UNICEF: Jurgen Hulst, Supply Division

� Key research support provided by UNICEF ESARO, and Kenya and Somalia Country Offices

UNICEF participants

� UNICEF ESARO: Peter Hailey, Lars Jensen, SuviRautio

� UNICEF Kenya CO: Kiriti Chowdhury, Peter Krouwel, Noreen Prendiville, Ruth Situma, Elizabeth Waitha

� UNICEF Somalia CO: Fitsum Assefa, Suraya Dalil, Emma Maspero, Olivier Mulet, Unni Silkoset, Tom Ziraguma

� UNICEF HQ: Tanya Khara, Ted Maly

� UNICEF SD: Francisco Blanco, Jurgen Hulst, Paul Molinaro, Giogia Paiella, Peter Svarrer Jakobsen, Jan Komrska, Josephine McCloskey

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External participants

� Kenya Ministry of Health: Francis Wambua� ACF: Maggy Tiemdjo� Concern: Erin McCloskey, Charles Mutunga, Mueni

Mutunga

� Merlin: Afeworki Abraham, Onno Van Manen� USAID: Georgianna Platt� ECHO: Torben Bruhn, Roselyn Mullo� Nutriset: Adeline Lescanne, Francois Lescanne� InstaFoods: Stewart Alison, Rolf Campbell� Kuehne+Nagel Copenhagen: Søren Christensen, Daniel

Mira

� Kuehne+Nagel Nairobi: Tariq Arain

Project process

� Survey

� Interviews (telephone and in-person)� November 10-14, 2008 (Nairobi)

� December 15-17, 2008 (Copenhagen)

� Stakeholder feedback meetings� October 21, 2008

� November 12, 2008

� December 16, 2008

� February 16, 2009

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Agenda

� Introduction to RUTF supply chain framework and analysis

� Current RUTF supply chain performance: Key findings

� Recommendations for improvement, including Key Performance Indicators

� Using the supply chain dynamic model

� Overview of the Articulation Guideline

PLAN

• Demand planning UNICEF CO Nutrition with MOH (& NGO) with technical support by PD• Supply planning Country: UNICEF CO Nutrition & Supply with support by PD and SD;

Global: UNICEF SD with support by PD, with Nutriset/suppliers

• Budgeting UNICEF CO Nutrition with Regional office and PD, support by SD for prices & specs

PROCURE

• Sourcing Local: UNICEF CO Supply, support by Regional office and SD; Global: UNICEF SD Essential Medicines and Nutrition Unit of HIV/AIDS and Health Centre

• Supplier management UNICEF SD, UNICEF CO Supply

PRODUCE

• Capacity planning SD with Nutriset for production capacity available to UNICEF• Inventory planning Nutriset• Materials requirements planning Nutriset

• Production Nutriset• Scheduling and prioritization UNICEF SD with PD if demand exceeds supply

DELIVER

• Warehousing Varies by country: MOH, UNICEF CO Nutrition/UNICEF CO Logistics/Kuehne + Nagel• Transportation Kuehne + Nagel, UNICEF CO + SD Logistics, can be with support by Regional office• Customs processing Kuehne + Nagel, UNICEF SD, CO + MOH

• Program delivery UNICEF Health and Nutrition (regional, country), NGOs, MOH• Trans-shipment In-country: by UNICEF CO and a transporter; International: by Kuehne + Nagel with

UNICEF SD

Processes Stakeholders

information

product

funds

monitoring & evaluation

quality assurance

invoicing & payments

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RUTF supply chain

Production costShipment prep cost

Global transport

cost

Customs processing

cost

In-country transport

cost

Warehouse storage cost

Distribution cost

Order processing time

Production time

Shipment preparation

time

Global transport

time

Customs processing

time

In-country transport

time

Warehouse storage

time

Distribution time

Raw materials

Containers Ships Trucks

PRODUCT FLOW

CO/ ESARO create fund raising proposals

COs receive promise of

funding

COs place orders for RUTF

CO transfers money to SD to pay for order

SD pays invoices from Producers,

Freight Forwarders

Donors decide

what to fund at

what level

Producers and

freight forwarders

send invoices to SD

Donors disburse

funds on varied

schedules

FUNDING FLOW

COs write annual work plans

COs request funds

Orders are placed for

RUTF

NGOs report on programs

Surveys measure

malnutrition

NGOs develop

program plans

Donors give feedback on

proposals

Producer helps adjust order

volume, dates

Logistics firms give updates on shipments

INFORMATION FLOW

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Project results and recommendations

Product Flow

RUTF Product Flow

Production costShipment prep cost

Global transport

cost

Customs processing

cost

In-country transport

cost

Warehouse storage cost

Distribution cost

Order processing time

Production time

Shipment preparation

time

Global transport

time

Customs processing

time

In-country transport

time

Warehouse storage

time

Distribution time

Raw materials

Containers Ships Trucks

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Lead times are long and variable

SO

MA

LIAETH

IOP

IAK

ENY

A

* Anecdotal evidence

Non- Emergency Orders Emergency Orders

Uncertainty leads to TAD changes

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Spikes in order volume stress production lead time

Limits of production capacity stress lead time

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Global transportation lead times are lengthy, despite extraordinary events

Uncertainty leads to increases in global transportation costs

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Uncertain future demand for RUTF could stress the system further

Key Performance Indicators (KPI)

� Lead time

� Landed cost

� Quality

� Access

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KPI Definition FrequencyData currently collected/

communicated?

Overall lead time

Aggregate of four component lead times: production, global transportation, warehousing and in-country transportation

Quarterly Production: YesGlobal transportation: YesWarehousing: NoIn-country transportation: No

TAD delays How many orders are amended to extend TAD; how TADs requested by COs compare to true arrival dates

Monthly TAD amendments: YesRequested vs true TADs: Yes

Overall landed cost

Aggregate of four component costs: production, global transportation, warehousing and in-country transportation

Quarterly Production: YesGlobal transportation: YesWarehousing: NoIn-country transportation: No

Product nutritional quality and safety

Progress in meeting food safety and nutritionalrequirements

TBA TBA

Coverage Number and percent (from all SAM) of SAM children in CTC programs

Semi-annual Not always

Efficacy Readmission and cure rates from CTC programs Semi-annual Not always

Product flow KPIs

Using the dynamic model: Buffer stock

Impact of Buffer Inventory on Average Delay in RUTF Supply Chain

0

1

2

3

4

5

6

7

0 50 100 150 200 250 300 350 400 450 500 550 600

Av

era

ge D

ela

y (

Weeks)

Buffer Inventory Level (MT of RUTF)

Mombasa

Jebel Ali

Local

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Recommendation: Buffer stock

� Establish 300-400 MT buffer inventory in Jebel Ali� Most buffer inventory benefits obtained at this level

� Physical and legal infrastructure in Jebel Ali/Dubai conducive to buffer stock storage

� Centralized buffer inventory provides flexibility to assist in hunger crisis wherever it arises with minimum investment in inventory

� Will require one-time investment of $1.5-2.0 MM

� All non-local orders in Horn of Africa filled from Jebel Ali� Jebel Ali resupplied from Nutriset

� Ensures product will not expire

� Size of buffer inventory will need to be increased if used beyond Horn of Africa

Using the dynamic model: Local production

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

0

1

2

3

4

5

6

7

8

9

Baseline Kenya Production

Su

pp

ly C

ha

in C

ost

($

MM

)

Av

era

ge D

ela

y (

Weeks)

Delay SC Cost

Impact of Local Production in Kenya on Performance of RUTF Supply Chain for Kenya

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Recommendation: Expand local production capacity

� Local production offers many significant benefits� Reduces risks associated with single sourcing

� Eliminates lengthy transportation time

� Adds to global production capacity

� Fosters economic self-sufficiency

� Several obstacles must be addressed� Investment in production capacity

� Patent restrictions

� Quality control

Funding Flow

Project results and recommendations

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Funding requirements for RUTF continue to climb

Cartons of RUTF ordered by UNICEF, 2004-2008

Ingredients comprise much of RUTF product cost:

Adapted from: Jarrett, Steve. “RUTF (Ready to Use Therapeutic Foods): Addressing the situation of children with severe acute malnutrition.” Presentation at PIH/Tufts “Integrating Health, Nutrition, and Food Security: Making the Case” Conference. Cambridge, Mass. 12 October 2007.

And ingredient costs were dramatically on the rise:

Source: United States Department of Agriculture. “Dairy: World Market and Trade Circular Archives.” December 2008.

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Shipping is also expensive

New Nutriset pricing discount for UNICEF

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Economies of scale for RUTF pricing

Local production faces challenges

� Financial: Capital start-up costs, investors

� Logistic: Imported inputs (vitamin premix, milk powder)

� Legal: Patent protection for Plumpy’Nut and related products by manufacturers

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Product patent designated states:

Filed so far in:- ARIPO (AP1211)- Australia- Canada- Germany- Denmark- Spain- France- OAPI (OA11416)- US

Process patent designated states:

Filed so far in:- ARIPO (AP1647)- Austria- Australia- Canada- Germany- Denmark- Spain- France- OAPI (OA12530)

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Principles for Effective Aid

� Good Humanitarian Donorship Initiative (2003)� “strive to ensure predictability and flexibility in funding”

� “explore the possibility of reducing, or enhancing the flexibility of, earmarking, and of introducing longer-term funding arrangements”

� Paris Declaration on Aid Effectiveness (2005)� Alignment: “Provide reliable indicative commitments of aid

over a multi-year framework and disburse aid in a timely and predictable fashion…”

� Harmonization: “common arrangements at country level for planning, funding, disbursement, monitoring, evaluating and reporting to government on donor activities and aid flows”

Timing of donations can stress the system

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Recommendations: Collaborations with funders and other agencies

� Advance funding could smooth ordering behavior� Multi-year funding� CHAP to CAP� Fiscal year asynchrony� Thematic funding

� Other strategic considerations� Funds for buffer stock� Funding for product vs. delivery of product� Use of performance-based funding to enhance MoH

ownership and commitment to program (e.g., Kenya) � Consolidated database tracking which organization has

funded what proposal and at what level

Using the dynamic model: Funding

Impact of funding delays on average delay in RUTF supply chain

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Project results and recommendations

Information Flow

Need versus demand

Severely malnourished children in a district

=

Need for RUTF

Severely malnourished children who will be reached by program

=Forecasted demand for

RUTF

Severely malnourished children who will not be reached by a program

=Unmet need for RUTF

This is usually an estimate based on demographic/historic/programmatic data

Severely malnourished children who receive treatment

=Actual demand for RUTF

=Unmet demand for RUTF

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Uncertain estimates of demand can stress the system

Different metrics yield different levels of need

Severe wasting

2.2% of children under 5

= 32,186 children

Severe underweight

11.6% of children under 5

= 169,708 children

Using 2006 MICS data from Somalia

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Additional considerations in estimating need and demand

� Seasonality� In hunger and in transport

� Accounting for young infants� MICS2 Somalia survey: among all severely wasted children, 12% were

under 6 months

� National versus district-level data

� New WHO reference standards� Studies indicate numbers of children with SAM will increase by a factor

of 1.5-4.2; treatment costs will increase by 97% for SAM programs

� ACF 2007 Garissa survey: 1.0-1.3% SAM with old standard and 3.8-3.9% SAM with new standard

Inefficient information-sharing can undermine the supply chain

� Stress on UNICEF� Low data visibility downstream can make it difficult to strategically

place and prioritize orders

� Stress on implementing partners� Stockouts mean missed feeding days and/or fewer children in

treatment and/or shorter courses of treatment

� Concerns about dropouts, incomplete treatment, loss from nutrition and health system

� Stress on producers� Spikes in orders lead to long lead times

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Interoperability of software

ProMSSAP UniTrack

CIELTWM/L

WM

Country Office / Regional OfficeSupply Division

data pushlinkage

visibility

Nutriset

Other producers

Information flow KPIs

KPI Definition FrequencyData currently collected/

communicated?

Customer service response time

Days from when a complaint is launched to when it is processed

Quarterly This KPI is already in use

Exceptions handling

How and when was an exception communicated to relevant parties

Quarterly No

Forecasting information accuracy

Comparison between projected demand and actual order volume

Annual This KPI is already in usefor other commodities

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Systematize forecasting with the new tool

� Measuring need versus demand

� Develop recommendations on data standards:� Use of demographic metrics

� Inclusion of young infants

� Allowing for district-level data

� Determining incidence factors

� Accounting for new reference standards

� Incorporating seasonal effects

Increase data transparency

� Automate data entry across the supply chain� To reduce manual errors

� Make data more transparent to partners� Interoperable and easily web-accessible systems

� RapidSMS project

� Introduce exceptions handling mechanisms

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Impact of unexpected demand surge in Ethiopia onperformance of RUTF supply chain for Ethiopia (no buffer inventory)

Using the dynamic model: Unexpected demand surge

Articulation Guideline