Risk Management Framework for Healthcare Commodities

Risk management is an important aspect of procurement and supply management. A recent study developed a risk management framework specifically for the supply of healthcare commodities that integrates the process of identifying risks, assessing them, and developing appropriate mitigation strategies.[1]

From a global meta-analysis, supply risks for healthcare commodities were identified, categorised and organised into types and sub-types. The resultant hierarchy is shown in the figure below.

An empirical analysis was then undertaken with relevant healthcare professionals (pharmacists, hospital managers, procurement, supply chain, consultants and academics) in order to place specific risks in rank order of their perceived importance. It is useful to rank order the risks in order to prioritise mitigation actions. The results are shown in the following table.

It should be noted that, although the risks were identified through a global meta-analysis, the ranking stage was conducted with professionals in China and the UK only. The rank order of the risks may well vary in different countries and regions. Furthermore, risk assessment is time-specific; for example the study was undertaken just before the Covid-19 pandemic, which explains why natural environmental factors score so low. Procurement managers must undertake risk assessment taking into account their own contingent circumstances and should undertake this on a regular basis to capture any emerging risks.

Having identified healthcare commodities supply risks, the next stage was to devise relevant mitigation strategies. These are shown in the table below. Nine strategies are commonly being developed in the healthcare sector in order to mitigate supply risks. These have been matched with the risks previously identified.

CONTINGENT RISK FACTORS

Whilst a framework provides a template for managing healthcare commodities supply risk, it is important that contingent circumstances are taken into consideration when undertaking risk assessment. A report into donor-funded healthcare supply chains in four African countries (Tanzania, Malawi, Mozambique and Nigeria) found that the donor organisations did not take into consideration some country-specific risks when undertaking their risk assessments. Some examples of those risks are provided below.[1]

In Tanzania and Malawi, the governments agreed to absorb financial responsibilities for some donor-funded activities. However, when the time came to transfer these responsibilities, the governments did not fulfil their financial commitments. In Tanzania, the Government agreed to absorb salaries of advisors who provided technical assistance in logistics management to Government officials. This transition was delayed. According to Tanzanian Government officials and donor staff in Tanzania, the Government did not have the funds to hire the advisors at their current salary. Also, the advisors were concerned about being absorbed by the Government because of a potential salary decrease and said that moving on to other donors with equal or higher pay was a better option.

In Malawi, the Government agreed to provide fuel for prefabricated warehousing unit generators in order to maintain proper storage temperatures for donor-funded commodities. However, there were instances when the generator was not working because the Government did not provide the fuel.

In Tanzania and Mozambique, each Government’s commitment to managing its national supply chain was impacted by financial constraints, which prevented them from following through. The Tanzanian Government’s failure to contribute its portion of supply chain funds affected its central medical store’s ability to effectively deliver commodities and meet its financial obligations to suppliers. In Mozambique, the country’s financial crisis hampered efforts by the Government to take over some elements of the supply chain, including warehousing costs and distribution to health facilities.

In all four countries, problems with electricity supply or internet connectivity hindered proper storage of commodities and timely reporting of commodity data. In Malawi, electricity blackouts occurred for about 6 hours every day. Donor-funded generators were not being used or were being used for purposes other than maintaining proper storage conditions for commodities during the blackout period, such as supplying power to the operating room.

In all four countries, some health facilities did not have stable internet access, causing untimely data reporting. In Malawi, staff sometimes lacked transportation to travel to district facilities to enter monthly data. In Malawi and Nigeria, staff sometimes entered data after working hours using personal computers or phones when internet access was available.

These examples demonstrate the importance of considering specific in-country risks when undertaking a risk assessment.

[1] https://core.ac.uk/download/pdf/161097932

[2] https://oig.usaid.gov/node/4174