ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE

DEPARTMENT OF LOGISTICS AND SUPPLY CHAIN

MANAGEMENT

MEASURING SUPPLY CHAIN PERFORMANC OF PHARMACEUTICALS USING

SUPPLY CHAIN OPERATION REFERENCE (SCOR) MODEL: THE CASE OF
BLACK LION SPECIALIZED HOSPITAL

BY

HAYMANOT DERBEA (GSE/1163/09)

ADVISOR: Dr. MATIWOS ENSERMU (PhD)

A Thesis Submitted to Addis Ababa University School of Commerce in

Partial Fulfillment of the Requirements for the Award of Masters of Arts
Degree in Logistics and Supply Chain Management

SEPTEMBER, 2019

ADDIS ABABA, ETHIOPIA

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 DECLARATION

I the undersigned, hereby declare that the work which is presented in this thesis entitled
‘’measuring supply chain performance of pharmaceuticals using supply chain operation
reference (scor) model: the case of black lion specialized hospital’’ is the original work of
my own effort and done under the guidance of Dr. Matiwos Ensermu (Phd), and that all the
sources of materials used for the study have been duly acknowledged. I further confirm that
the thesis has not been submitted either in part or in full to any other university for the
purpose of earning any degree.

Declared by:

Haymanot Derbea _______________________ __________________

Student Signature Date

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 ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE

LOGISTICS AND SUPPLY CHAIN MANAGEMENT

ENDORSEMENT

This thesis has been submitted to Addis Ababa University School of Commerce Graduate
Studies for examination with my approval as a university advisor.

Dr.Matiwos Ensermu (Phd) _____________________ _________________

Advisor Signature Date

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE

DEPARTMENT OF LOGISTICS AND SUPPLY CHAIN

MANAGEMENT

MEASURING SUPPLY CHAIN PERFORMANC OF

PHARMACEUTICALS USING SUPPLY CHAIN OPERATION
REFERENCE (SCOR) MODEL: THE CASE OF BLACK LION
SPECIALIZED HOSPITAL

BY

HAYMANOT DERBEA (GSE/1163/09)

APPROVED BY BORED OF EXAMINERS AND ADVISORS

1. Dr. Matiwos Ensermu (Phd) …………………… …….………..

(Advisor) signature date
2. Dr. Busha Temesgen (Phd) ……………………
………………..
(Internal examiner) signature date
3. Dr Habtamu Regassa (Phd) ……………………
……………….
(External examiner) signature date

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 ACKNOWLEDGEMENTS

First and foremost, thanks to the Almighty GOD for providing me the strength, grace and
knowledge to finalize this thesis work successfully.

Next, I would like to acknowledge my advisor Dr. Matiwos Ensermu for his great support,
encouragement, and guidance he provided me through the process.

I also want to express my thanks to the Black Lion specialized Hospital especially the
Pharmacy section staff for their cooperation, support they provided and willingness they
showed me in all my time of data collection process.

Last but not least I want to extend my deepest heartfelt thanks to my husband Behailu Girma
for His unending encouragement and support throughout this work. I wish to express my
gratitude and respects to my parents for their unending support. And my friends for their
comments and ideas.

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 Table of contents
Acknowledgment ………………………………………………...…………………………. i
Lists of table…………………………………………………………………..………………iv
Lists of figure ………………………………………………………………….……………..v
Abbreviations and acronym ……………………………………………………………….....vi
Abstract ……………………………………………………………………………………...vii
CHAPTER ONE: INTRODUCTION

1.1 Background of the study .............................................................................................................. 1

1.2 Statement of the problem ............................................................................................................ 2
1.3 Research question ........................................................................................................................ 5
1.4 Objective of the study .................................................................................................................. 5
1.5 Significance of the study ............................................................................................................. 5
1.6 Scope of the study ....................................................................................................................... 6
1.7 Limitations of the study ............................................................................................................... 6
1.8 Definition of terms ...................................................................................................................... 7
1.9 Organization of the study ............................................................................................................ 7

CHAPTER TWO: REVIEW OF RELATED LITRATURE

2.1 Theoretical review …………………………………………………………………….8

2.1.1 Health care supply chain ....................................................................................... 8
2.1.2 Pharmaceutical supply chain............................................................................. 9
2.1.3 Supply chain performance ................................................................................ 10

2.2 Empirical review 13

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY

3.1 Description of the study area ....................................................................................... 15
3.2 Research approach ....................................................................................................... 15
3.3 Research design ........................................................................................................... 15
3.4 Study Population and sample size............................................................................... 16
3.5 Data source and type .................................................................................................... 16
3.6 Data collection procedure ........................................................................................... 16
3.7 Validity and reliability . ……………………………………………………………...17
3.8 Ethical consideration ............................................................................................... 17

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 3.9 Data analysis ................................................................................................................ 18
CHAPTER FOUR: RESULT AND DISCCUSION

4.1 Demographic Characteristics of Respondents……………………………………..19

4.2 Assessment of the overall supply chain activity of the hospital…………………….21
4.3 Evaluation of the supply chain with respect to SCOR attributes……………………...24
4.3.1 Supply chain responsiveness……………………………………………......24
4.3.2 Supply chain reliability…………………………………………………......26
4.3.3 Supply chain agility/flexibility……………………………………………...29
4.3.4 Supply chain cost and asset management…………………………………...32
CHAPTER FIVE: SUMMARY CONCLUSION AND RECOMMENDATIONS
5.1 Summary and conclusion………..…………………………………………………..36
5.2 Recommendations …………………………………………………………………...37
5.3 limitations of the study and suggestion for further study……..……………………...38
REFERENCES ………………….……………………………………………………..…...39
Annex1
Questionnaire……………………….……………………………………………………......42

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LIST OF TABLES

Table 1: Supply chain attributes and SCOR key performance indicators

Table 2: Demographic character of respondents (sex)

Table 3: Educational background of respondents

Table 4: Use of recording formats in the hospital

Table 5: Frequency of requisition and purchasing of medication

Table 6: Determination of facilities resupply quantity

Table 7: Supply chain responsiveness

Table 8: Supply chain responsiveness

Table 9: Supply supply chain activity total cost of resource used chain flexibility

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LIST OF FIGURE

Figure 1: proposed conceptual framework

Figure 2: work experience of pharmacy staff

Figure 3: work position of respondents

Figure 4: effect of supply chain performance on sales rate

Figure 5: effect of supply chain performance on supply chain reliability

Figure 6: Hospital ability to respond to and accommodate period of poor supplier

performance

Figure 7: Ability to respond to and accommodate new product, new market or new
competitor

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LIST OF ACRONYMS & ABBREVIATIONS

BLSH Black lion specialized hospital

EPSA Ethiopian pharmaceutical supply agency

FMOH federal ministry of health

IPLS integrated pharmaceutical logistics system

KPI key performance indicators

PSC pharmaceutical supply chain

SCOR Supply Chain Operations Reference

SCC Supply chain council

SCM Supply chain management

SCPM Supply chain performance measurement

WHO world health organization

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 ABSTRACT

Pharmaceutical supply chain (PSC) is the overall activities involved with the manufacturing
of pharmaceuticals to delivery of products to the end user through supply chain management
system. Supply chain performance measurement is key process in evaluating supply chain
from this supply chain operation reference (SCOR) model is commonly used. Objective of
the study is to assess the pharmaceutical supply chain performance of Black lion specialized
hospital (BLSH) with SCOR analysis. Descriptive approach is used in the study. Purposive
sampling technique is used to collect data. Structured questioners & observations were some
of the tools used in the data collection process. General assessment of the supply chain
activities of BLSH shows that there is an improvement in documentation and requisition
formats and procedures are being followed. Results from SCOR analysis indicates the
hospital supply chain is working well with respect to supply chain reliability but low in
assessing and acting on customers complain and satisfaction. Moreover it reviles the hospital
is dependable on few supplier ability to respond to demand variation and seasonality is not
satisfactory. The study shows that cost associated to supply chain is not separated from other
activities of the hospital and data’s on transportation and handling cost are unpredictable.

Key words: pharmaceutical supply chain, SCOR, supply chain performance

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 CHAPTER ONE: INTRODUCTION

1.1 Background of the study

Pharmaceutical supply chain (PSC) is the overall activities involved with the manufacturing
of pharmaceuticals to delivery of products to the end user through supply chain management
system. The activities include, sourcing of row material, manufacturing, transportation,
storage and delivery to end user. Four main components of the supply chain includes:
producers, purchasers, providers, and patients (Brian, 2011).

Health care supply chain is unique from other supply chain since it’s a matter of life and
death. It involves monitoring the acquisition of products and their path from origin to
destination. On top of this managing health care supply chain creates significant expense for
health care providers. Recent survey found that it’s the second biggest expense that providers
have. When prescription drugs, medical devices and other medical supplies fall in to
optimized supply chain, health care providers see their cost lowered, their revenue enhanced
and most importantly, their quality of care improved. To optimize the supply chain, providers
need to address the biggest challenges they face in the supply chain of this valuable drugs and
medical supplies (Detlef et al, 2011)

Hospitals are complex organizations providing a multiple of service to patients, physicians

and staffs. The main logistics service includes pharmaceutical supply chain which involves
selection, quantification, procurement, storage and dispensing of pharmaceuticals and
medical supplies. Black lion specialized hospital, which was founded in 1972 is one of the
largest serving hospital of the country which serves approximately 400,000 patients a year.
The performance measurement system in the SC is important in the joint efforts of the
stakeholders in the logistics system under the premise that generates added value to
customers in the short, medium and long term, better-looking global local optima service
(Sisay, 2017).

According to Ramdas et al.2003, improving the performance of the SC is a continuous

process that requires an analytical system for measuring performance and a mechanism for
the implementation of key performance evaluations (KPIs).

The Supply Chain Operations Reference (SCOR) model was developed by the Supply-Chain
Council (SCC) to assist firms in increasing the effectiveness of their supply chains, to provide

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a process-based approach to SCM. As a tool to address, improve, communicate and evaluate
the performance of SC. The SCOR model provides a common process oriented language for
communicating among supply-chain partners in decision areas of plan, source, make, and
deliver. Recently, the details for the decision area of return have been added to the SCOR
Version 5.0 model (Lockamy et al, 2004 and Richardo, 2013).

1.2 Statement of the problem

The pharmaceutical supply chain is complex and unique by itself since it operates with the
availability of valuable and lifesaving pharmaceuticals and medical supplies. Moreover, it
involves many organizations that play differing roles. In Supply chain performance
measurement the main purpose is to get information for top management to decision making,
evaluate the level of service provided and customer satisfaction. In 2004 Gunasekaran et al
introduced six metrics for measuring SCM capability and performance. Metrics are based on
the following SCM processes: plan, source, make/assemble and delivery/customer
(Gunasekaran et al, 2004).

In the health care industry there is no debate with the need for overnight shipping.
Unexpected situations, disease outbreak or disasters might happen and hospitals have to deal
with the situation no matter what the cost is. Forecasting demand based on previous year
consumption might not give us exact figure of medications to procure in the presence of
unexpected demand. This results in frequent shortage (stock out) of valuable pharmaceuticals
to patients and inventory holding cost and expire for over stocked pharmaceuticals. Since
black lion serves patients from all over the country, demand forecasting is difficult in
considering different disease pattern and disease out breaks.

According to WHO report in 2004, one third of the world’s population suffers with lack of
access to essential pharmaceutical items, diagnostic facilities and health care system. This
proportion greatly increases to fifty percent in the poorest part of Africa and Asia. Even
though, the major causes for poor availability and hence accessibility of pharmaceutical items
remains complex, major contributing factors includes unaffordable price of pharmaceutical
items, irrational drug use, shortage of budget, unreliable supply and distribution system to
make essential pharmaceutical items available for patients. (WHO, 2004)

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The Ethiopian pharmaceutical supply agency (EPSA) is the only supplier that procure and
distribute pharmaceuticals to all government hospitals and health institutions. Its capability to
meet variable needs of all health institutions based on different disease pattern of different
regions is in question. EPSA deliver pharmaceuticals mostly with cottas rather than actual
demand forecasted (PFSA SOP, 2010).

Black lion Specialized hospital (BLSH) faces frequent shortage of valuable medications
especially after midterm of the year and the problem gets worst when EPSA perform annual
inventory of pharmaceuticals for more than a month. Moreover, Dependency on single
supplier and unable to perform emergency order from other suppliers worsen stock out of
these valuable drugs. Since stock outs at health facilities can result in treatment interruption
that can quickly lead to drug resistance or missed opportunities for diagnosis, significant
resource for procurement and distribution of essential drugs. Patients frequently complains on
unavailability, most of the patients are with chronic disease with lifelong medical treatment,
are from rural area and couldn’t come back frequently or can’t afford to buy it (Bunting,
2013).

The health system’s cost saving goal to address other area of care is also another challenge in
the hospitals supply chain of pharmaceuticals. Budget constrains limits procurement and
availability of pharmaceuticals. One of the most important issues affecting the sustainability
of healthcare service in Canada is medicine cost. They represent the third largest budget item
for the Canadian health care system which is 32 billion in 2011 (Romero, 2013).

Despite high sales rate and being the 1st biggest revenue source for Black lion hospital, the
pharmacy department is on debt of procured pharmaceuticals from EPSA because the sales
obtained from pharmaceuticals is used to pay for duties of health professionals and other
activities than paying to PSA (Black lion hospital directory).

Lack of Integration across care delivery system is another challenge the hospital is facing.
Supply chain integration with revenue capture, quality and IT are important in terms of cost
effective and efficient process. To solve these problems in public health facilities, EPSA
introduced integrated pharmaceutical logistics system (IPLS) since 2010. IPLS is single
pharmaceutical reporting and distribution system based on the overall mandate and scope of
EPSA. It ensures the patient gets pharmaceuticals they need and fulfill the 6 rights of SCM.

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The right product, in the right quantity, of the right quality, at the right place, at the right
time, and for the right cost (PFSA SOP, 2010).

Data shortage is the other main challenge the hospital is facing. Actionable data is important
for institution to see what they are missing. Data’s on consumption pattern, available budget,
stock level, treated disease pattern, patient complain feedback and level of satisfaction are
key information for tope level decision making and all the parties involved in the supply
chain. Application of IT system throughout the supply chain is important for cost saving and
efficient process (Romero, 2013).

Physician’s preference on the type of product they use or prescribe might not go well with
available pharmaceuticals. They may not understand the associated cost of product with
patient’s affordability and availability in the hospital. Patients may need to buy branded
medications at privet pharmacy at higher cost this intern make the service unaffordable,
tedious and lower patient satisfaction (Romero, 2013).

Measuring supply chain performance is not as such simple as traditionally known sets of
performance measurement that only focuses on financial measures. Supply chain activities
like sourcing, producing, inventory and distribution and associated factors that affect supply
chain performance and meet the maximum service level provided by the company. The
pharmaceutical industry is not renowned for its supply chain management capabilities, unlike
many other highly publicized industries that have profitably exploited their supply chains
(Adane, 2017).

A study done by Amare S. on BLSH, IPLS implementation in the Hospital is encouraging

only with respect to some measurements such as availability of logistics reporting and
recording tools and stock keeping logistic formats, providing supervision and training,
availability of drugs and some measurements of logistic system performance such as having
an acceptable resupply period and less frequent emergency order trend. Even though the
hospital showed good logistic and inventory system management practice and logistic system
performance with respect to the above mentioned measurements, much gap is observed in
some other logistic and inventory system management practice and logistic system
performance measurements such as in proper utilization of the logistics recording and
reporting tools, LMIS data quality, and perceived order fill rate. In addition, the study
showed that certain gaps are observed in Stock status information & Storage condition

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measurements that include, availability of expired items, gaps in storage conditions for ARV
drugs store (Sisay, 2017).

Based on the above facts measuring the supply chain performance of BLSH is crucial to
solve supply chain related issues and challenges that in turn impacts the success of health
service delivery and patient satisfaction with cost saving and less wastage of pharmaceuticals
in the hospital. More over the research will try to answer research questions related to the
level of SC performance of the hospital, most important SC planning practice of the hospital
and how the supply chain performing of the hospital is in terms of planning, sourcing,
making, and delivery and return aspects of SCOR.

1.3 Research question

1) What does the pharmaceutical supply chain practice with in the Hospital looks like?
2) What is the level of pharmaceutical supply chain responsiveness of the hospital?
3) How is the level of pharmaceutical supply chain performance of the hospital in terms
of supply chain reliability?
4) How flexible is the pharmaceutical supply chain of the hospital?
5) How is cost and asset management of pharmaceutical supply chain in the hospital

1.4 Objectives of the study

1.4.1 General objective

The general objective of the study is to measure the supply chain performance of
pharmaceuticals in Ethiopia the case of black lion specialized hospital with SCOR model

1.4.2 Specific objectives

1. To measure pharmaceutical supply chin performance of the hospital in terms of

SCOR categories of plan, source, make, deliver and return.
2. To measure the pharmaceutical supply chain reliability of the hospital
3. To measure the pharmaceutical supply chain responsiveness of the hospital
4. To measure the pharmaceutical supply chain flexibility of the hospital
5. To measure the pharmaceutical supply chain cost and asset management of the
hospital

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1.5 Significance of the study

In delivering health care service, ensuring availability of valuable drugs and medicals to each
patient is important to avoid treatment interruption that can quickly lead to drug resistance or
missed opportunities for diagnosis, wastage of significant resource for procurement and
distribution of essential drugs (Bunting, 2013).

To avoid such consequences, the supply chain of a hospital must function properly. Hence,
this study will help to examine the supply chain performance of the hospital in terms of
SCOR. Moreover, it help to increase the understanding of the use of SCOR model in the
evaluation of SC performance of hospitals in Ethiopia the case of Black lion specialized
hospital and how other hospitals can improve and develop SCOR model in their context for
better performance of their supply chain.

In addition, this study contribute in academics & training by providing important insights to
learners and trainees on possible challenges of pharmaceutical supply chain, how SCOR
model could be implemented in performance measurement and on what actions should be
taken to enable proper functioning of PSC.

On top of this, since there are no enough studies in the area, this study is believed to provide
a comprehensive starting point and will help as a source of information for future research
that is aimed to go in-depth to the subject matter and also for any study that is aimed to assess
the supply chain performance with SCOR model and to sort out any other PSC challenges
that has not been identified in this study.

1.6 The scope of the study

The study is focused on measuring the pharmaceutical supply chain performance of BLSH
with SCOR model. Because of the wider nature of hospital logistics the scope of the study is
limited to pharmaceuticals and medicals supply only. The geographical scope of the research
is Black lion specialized hospital and addresses the pharmaceutical supply chain Performance
from SCOR model perspective.. Despite many parties involved in the supply chain of the
hospital, it only included the view of staffs working on the hospital. The study does not
include the view of its supplier (EPSA) and end customers (patients).
1.7 Limitations of the study

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The encountered limitation from the study were lack of similar studies in Ethiopia to compare
and contrast and make comparative conclusions. In addition it did not include the view of its
supplier (EPSA) and can’t discuss on supply chain performance of the hospital from EPSA
perspective.

Other limitation were sample size determination where number of respondents with supply
chain analysis knowledge can’t be determined.

1.8 Definitions of terms

PSC: Pharmaceutical supply chain (PSC) is the overall activities involved with the
manufacturing of pharmaceuticals to delivery of products to the end user through supply
chain management system.

SCOR: The supply chain operation reference (SCOR) model is a framework which supports
communication between supply chain partners and enhances the effectiveness of supply
chain management, technology, and related supply chain improvement activities

IPLS: is single pharmaceutical reporting and distribution system based on the overall
mandate and scope of PSA. It insures the patient gets pharmaceuticals they need and fulfill
the 6 rights of SCM. The right product, in the right quantity, of the right quality, at the right
place, at the right time, and for the right cost

1.9 Organization of the study

The study was organized in five chapters. Chapter one includes the introductory part of the
study, the background of the study, and statement of the problem along with the research
questions and objectives of the proposed study.
Chapter two deals with the review of the literature related to pharmaceutical supply chain
and SCOR model.
Chapter three deals with detail account of research design and methodology that was
employed in sampling and data collection.
The analysis of the study data, presentation of the results and corresponding discussions is
presented under chapter four.

Chapter five concludes the thesis by providing brief conclusions and relevant suggestions on
the basis of the findings of the study.

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 CHAPTER TWO: REVIEW OF RELATED LITRATURE

2.1 Theoretical review

2.1.1 Health care supply chain

Health supply chains can be characterized by different modes of integration which are:
Integration and co-ordination of processes, information flows, planning processes, integration of
intra- and inter organizational processes, integration of market approach and market-
development. Hospital supply chain is divided in to two areas which are, supply chain of
pharmaceuticals and medical products, and supply chain of non-medical products that aids in
providing service to the patient (Yongyi, 2014).

The hospital supply chain includes four areas. These are goods and services planning,
procurement and contracting, materials management and working capital management. To set up
an extra ordinary supply chain, hospitals need to establish an integrated governance system,
employ dynamic processes, and automate their IT systems. Integration of the internal and
external hospital supply chain may reduce the costs associated with supply chain almost half. It
is believed that staffs in any hospital spend 10% of their time performing logistics tasks instead
of taking care of patients (Nawshad et.al, 2016).

Hospital Supply Chain Management is a set of approaches to efficiently integrate suppliers or

vendors, transport, hospital services (including outpatient, emergency, inpatient, laboratory,
radiology, stores and purchase, food, laundry and medicines or equipment) to achieve Total
Quality Management (TQM) in health care services by optimum utilization of resources SCM in
hospitals involves the internal chain, including patient care unit, hospital storage, patient and the
external chain, including vendors, manufacturers, and distributors. Healthcare SCM processes
have three types of flows: physical product flow, information flow, and financial flow (Yongyi,
2014 and Kazemzadeh et al, 2014).

Healthcare supply chains are characterized by multiple stakeholders that work together in order
to ensure the flow of products and services. Inside and outside hospital, medicine management
requires a wide variety of human intensive processes which are poorly supported by technology.
This results in an increased of workload and a higher possibility of errors. Moreover, healthcare

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supply chains are high regulated and must respect a number of standards and procedures. In fact,
national and international healthcare organizations and government have defined several
standards for the distribution, storage, preparation and administration of medical products and
materials. Finally, healthcare supply chains are vulnerable to terrorism and criminal facts.
According to many observers, this industry experiences a strong possibility of being affected by
the presence of counterfeited products. From the above-mentioned reasons, one can conclude
that healthcare supply chains are indeed inherently complex (Romero, 2013).

2.1.2 pharmaceutical supply chain

Pharmaceutical supply chains are different because they usually have large and extended global
pipelines requiring high levels of product availability with high uncertainty in supply and
demand. In order to sustain and expand the successful interventions, these supply chains need to
be made more robust and flexible through better management and increased investment of
resources to achieve supply chain optimization (Ames, 2011 and Nilay, 2004).

The management of drug supply is organized around five basic functions of the Medicines
Management cycle namely, selection, quantification, procurement, distribution, and use. At the
center of this cycle is a core of management support systems, which include organization,
financing and sustainability, information management, human resource and quality assurance
management. The selection of pharmaceuticals is a basic function of the qualified hospital
pharmacist who is charged with making decisions regarding products, quantities, product
specifications, and sources of supply. Although the pharmacist has the authority to select a
brand or source of supply, with economic considerations and quality (Ames, 2011 and Javid
et.al, 2017).

In selecting a vendor, the hospital must consider price, terms, shipping times, dependability,
quality of service, returned goods policy, and packaging. It’s estimated that there are 3000-4000
drugs, registered in any country of which almost 70% are non-essential. National list of
essential medicines should have 300-400 drugs. , selection of essential drugs is very important
and is considered as a crucial step in ensuring access to essential drugs and in promoting rational
drug use (Javid et.al, 2017)

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Quantification is the process of estimating needs for quantities of specific health commodities
during a specific period of time. Accurate quantification requires information from various
sources including the consumption data, epidemiological (morbidity) data, prescription patterns,
minimum and maximum stock levels, frequency of stock-outs, and length of the procurement
cycle. Delivery and distribution of drugs at various levels is not possible without effective drug
procurement and inventory control. Various medicine management tools help managers with the
process of distributing drugs and supplies to health facilities and ultimately to patients by
following a series of steps, forecasting needs, tendering, ordering, receiving, storing
warehousing, and distribution (Javid et.al, 2017 ).

2.1.3 supply chain performance

Supply Chain Performance Measures (SCPM) serve as an indicator of how well the SC system is
functioning. Measuring SC performance can facilitate a greater understanding of the SC and
improve its overall performance. Effective performance measurement systems characterized as
Inclusiveness (measurement of all pertinent aspects), Universality (allow for comparison under
various operating conditions), Measurability (data required are measurable) and Consistency
(measures consistent with organization goals) (Kazemkhanlou et al., 2014 and Sillanpaa, 2012).

A performance measurement system offers the necessary information for the monitor, control,
evaluation, and feedback function for operations management. It might help as a motivation
driver and a driver for continuous improvement and help achieve strategic objectives through
measuring key performance indicators (KPI) of the supply chain (Nicolas G. et.al, 2015 and
Hosein. et al, 2013)

The supply chain operation reference (SCOR) model is a framework which supports
communication between supply chain partners and enhances the effectiveness of supply chain
management, technology, and related supply chain improvement activities. The model provides a
unique framework that links performance metrics, processes, best practices, and people into a
unified structure. It was developed in 1994 by the Supply Chain Council (SCC) as a tool to
address, improve, communicate and evaluate the performance of SC and assist an organization in
its supply chain performance.

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The model has five attributes, which are Supply chain delivery reliability, Supply chain
responsiveness, Supply chain agility, Supply chain costs and Supply chain asset management
efficiency. It describes the business activities of the SC in order to meet customer demand, from
the simplest to the most complex, covering many different industries and projects (Supply Chain
Council, 2010 and Samuel, 2008).

The SCOR model provides a common process oriented language for communicating among
supply-chain partners in decision areas of plan, source, make, and deliver. Recently, the details
for the decision area of return have been added to the SCOR Version 5.0 model (Archie et al,
2004 and Richardo 2013).

The SCOR model published twelve subsequent versions of the original by updating analysis
dimensions related to performance which describe the performance of SC, processes which
explain how the SC is configured, practices to see unique ways to configure the SC processes
and in terms of people assessing needs, and availability of skills gaps in the workforce SC.

Performance attribute Performance attribute Measurement metrics

definition
1 Supply chain delivery The performance of the supply on-time delivery, right quality
reliability chain in delivering the correct (perfect order fulfilment),
product, to the correct place, at right quantity (fill rate)
the correct condition and
packaging in the correct
quantity, with the correct
documentation, to the correct
customer
2 Supply chain The speed at which tasks are Order fulfilment lead time
responsiveness performed.
3 Supply chain agility The agility of a supply in Response rate
(flexibility) responding to market place
Production flexibility
changes to gain or maintain
competitive advantage

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4 Supply chain cost Costs associated with Cost of goods sold
operating the supply chain
Total supply chain

management costs

5 Supply chain asset Effectiveness of an Cash to cash cycle

organization in managing
assets to support demand
satisfaction. This includes the
management of all assets:
fixed and working capital

Table 2.1: Supply chain attributes and SCOR key performance indicators (Supply Chain Council,
2010)

According to SCOR model version 12.0, the supply chain of an organization can be assessed
based on five categories of processes which are planning, procurement, manufacturing,
distribution and return. The model encompasses all customer interactions including from order to
the payment of the bill, all material transactions from the first suppliers to the last customers, and
all interactions with the marketplace which is from prediction of aggregate demand to the
fulfillment of each request. The SCOR model is structured in 4 levels (Archie et al, 2004,
Delipinar. et al, 2016 and Richardo 2013).

 Level 1: defines the models scope and content by setting core process of plan, source, make,
deliver and return.
 Level 2: contains four process categories explains the main process categories that exist in
real and created supply chain in an enterprise.
 Level 3: includes information for the supply chain management to plan source and build
goals for supply chain management strategy. This also consists of definitions, benchmarks,
and system software capabilities.

12
 Level 4: centers on implementation. Since the supply chain management implementations are
special to each company, the specific parts of level 4 are not explained in the SCOR model.(
Delipinar et al, 2016).
2.2 Empirical Review
Supply chains can account for up to 30% of total costs in hospitals. Efficient supply chain
management provides hospitals with the opportunity to control rising costs and at the same time
improve patient care (Kazemzadeh et al, 2014).

According to a research study presented to the Medical Device Supply Chain Council in 2011,
40-45% of the hospital operating expense is represented by supply chain and potential savings of
5-15% of supply chain cost can be realized with better supply chain management strategies
(lenin 2014) more over An empirical study in South Korea showed that customer satisfaction in
healthcare industry is positively related to supply chain performance (Yongyi S, 2014)

According to Nawshad P. et.al study on Square Hospitals Ltd, inefficient supply chain
management practices will not only hurt a hospitals bottom line but will also reduce its overall
performance in a highly competitive industry. Hospital Supply Chain can be considered much
more complex than that of other industries. If medicines are out of stock or applied enormously,
it can result in the death of a patient. Thus hospital supply chains have to be more responsive
than effective. This was observed in the case of Square Hospitals Ltd. The hospital gives more
importance to the quick and accurate delivery of medicine to patients and they are quite efficient
in this respect. However, there are areas in the supply chain where changes may bring about an
improvement in the quality of the service provided by the hospital (Nawshad P. et.al)

According to research done on Kenya, the major supply chain management challenges faced in
the health sector include poor infrastructure, bulky materials to be transported and uncertainty in
terms of demand. Lack of cold chain maintenance and qualified personnel were also considered
as supply chain management challenges at Kenya’s medical supplies agency (KMSA). The
findings imply that KEMSA as an organization has not been able to put in place effective supply
chain management practices that can improve the overall performance of its supply chain
(Samuel, 2008).

13
Study on inventory management practice of PFSA revealed that inadequate staff competency,
management support are the major factors that affects the inventory management practice at
PFSA. The study also showed that majority of respondents are in agreement with the importance
of information technology for the improvement of inventory management practice (Mulatu,
2017).

According to a study on Addis pharmaceutical factory (APF) supply chain performance

measurement by balanced score card, the supply chain performance of the company is moderate
based on external respondents (customers) view. The study reviled that the company has poor IT
infrastructure and communication system. Furthermore, the regression analysis showed that
internal business, learning and growth and customer perspective parameters of BSC has
significant influence on supply chain performance (Alemu, 2017)

According to study done by Amare S. on BLSH, IPLS implementation in the Hospital is

encouraging only with respect to some measurements such as availability of logistics reporting
and recording tools and stock keeping logistic formats, providing supervision and training,
availability of drugs and some measurements of logistic system performance such as having an
acceptable resupply period and less frequent emergency order trend (Sisay, 2017).

Even though the hospital showed good logistic and inventory system management practice and
logistic system performance with respect to the above mentioned measurements, much gap is
observed in some other logistic and inventory system management practice and logistic system
performance measurements such as in proper utilization of the logistics recording and reporting
tools, LMIS data quality, and perceived order fill rate. In addition, the study showed that certain
gaps are observed in Stock status information & Storage condition measurements that include,
availability of expired items, gaps in storage conditions for ARV drugs storage (Sisay, 2017).

14
 CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY
3.1 Description of the study area
The study is conducted at Black lion specialized hospital, which was founded in 1972. It’s one of
the largest serving hospitals of the country which serves approximately 400,000 patients a year.
The hospital has 800 beds, with 130 specialists, 50 non-teaching doctors. The emergency
department sees around 80,000 patients a year (Amare, 2017). The pharmacy department has 1
big store for pharmaceuticals and 2 other stores for medical supplies. It has 12 dispensary units
from this 10 of them operates 24 hours 7 days of the week 1 pharmacy is located at Lideta health
center where the hospital provides oncology service.

The pharmaceutical supply chain of the hospital involves selecting, quantification, procurement,
storage and dispensing of pharmaceuticals and medical supplies to patients, staffs and customers
outside of the hospital. EPSA is the only supplier for this hospital and in rare cases privet
suppliers participate in the process through tenders when emergency order is needed. Some
program drugs and medical supplies will be donated by foreign organizations in support of
specific health situations. Moreover, Federal ministry of health (FMOH) sponsors medications
like chemotherapeutic drugs and those for maternity and infants <5 years.

3.2 Research approach

The study focused on collecting both qualitative and quantitative data and results are expressed
both qualitatively and quantitatively.

3.3 Research design

The study uses descriptive method which describes population, situation or phenomena and data
from the study were discussed in descriptive statics. Descriptive method is suitable to this
research that aims to study the supply chain performance and identify factors affecting supply
chain practice of BLSH. Results from the study was assessed and examined against the
requirements and standards of SCOR model.

3.4 Study Population and sample size

The study populations was staffs working at Black lion specialized hospital in general and
health professionals in particular were taken as study population. From this, pharmacy

15
professionals were taken as sample population. Pharmacy staffs who are not familiar with
SCOR model and pharmaceutical supply chain were excluded from the study.

There are about 71 pharmacy professional who are working in the hospital from this 53 are
actively working staffs and the remaining are masters students and excluded from the study. it
was decided to use purposive sampling technique to select respondents who has knowledge on
supply chain activities of the hospital.

3.5 Data source and type

Data were collected both from primary and secondary sources. Primary data were collected by
conducting interviews with the procurement manager, top management and key informants
about performance of supply chain and purchasing policy of the company. Structured
questionnaires were given to pharmacy staffs which used to measure the supply chain
performance based on SCOR parameter.

Secondary data’s were collected from documented data’s on purchasing order, budget report,
internal facility requisition form (IFRR) and related documents. Observation was conducted
during days of visit.

3.6 Data collection procedures

Supporting letter from school of commerce were obtained and presented to the hospital head to
get permission on data collection. Data were collected through questioners, interview of key
informants and documented materials. Respondents were communicated to get their consent.
Once their consent known, the prepared questionnaires was distributed to each participant by
appreciating their participation and devoting their precious time for the research. The
questionnaires were collected by checking the completeness of the data. Documented materials
were used to assess financial aspect of the supply chain performance.

16
3.7 Validity and Reliability

Validity implies the degree to which a question measures what it was intended to measure. To
assure the validity of the study, questionnaires were developed on the bases of previous studies
and review of related literature. The questionnaire was subjected to a validity test. Pre testing
was done to see the applicability of the tools and how the questionnaire was acceptable to the
respondents. Pre testing was done on selected respondents which were not part of the final
research. After the pretest, alterations were made to the tool. Cronbach’s alpha is calculated
using SPSS version 20.0. An alpha coefficient of 0.70 or higher indicated that the gathered data
are reliable as they have a relatively high internal consistency and can be generalized to reflect
opinions of all respondents in the target population (Meskerem, 2017).

Variable Cronbach’s alpha No of items

Supply chain responsiveness 0.762 11
Supply chain reliability 0.781 7
Supply chain flexibility 0.721 4
Supply chain cost and asset management 0.826 5
Source, own survey, 2019

3.8 Ethical consideration

The relevant ethical issues has been given special attention through all phases of the research
process. Respondents informed clearly about the purpose of the study, the right to participate
voluntarily, the right to ask questions including personal address of the researcher, the right to
get the copy of the study, and the right to have their privacy respected; the right not to respond to
question that they didn’t want to respond. The information provided by participants will not be
disclosed in any way. In addition, the researcher acknowledged all materials and sources of data
used in this research. Supporting letter were received from AAU school of commerce and
presented to the hospital pharmacy directorate. Before data collection, the research has received
consents of participants. Names, phone numbers, addresses and other details are not included in
the questionnaire to ensure confidentiality.

17
3.9 Data analysis

The collected data were coded, entered, cleaned and analyzed using SPSS version 20.0 software
Package by the principal investigator. Descriptive statistics was computed for all the variables
and data was presented in the form of frequency distribution tables and figures to summarize
responses for further analysis and facilitate comparison. The quantitative reports were presented
as tabulations, percentages, and measure of central tendency. Analysis was done in a descriptive
and explanatory approach with reference to the different Requirements, tools, procedures and
practices demanded by SCOR model.

18
 CHAPTER FOUR: RESULT AND DISCUSSION

This chapter presents the data analysis, results, and interpretation of the findings. The findings
are based on data collected by the use of questionnaire and observation during visit so as to
assess the pharmaceutical supply chain activities at BLSH. The analysis is performed around the
objectives for this study; however, other relevant details are added for better presentation of
findings. A total of 49 experts were participated in the study. However, 6 participants did not
return and appropriately fill the questionnaire thus excluded from the analysis making the
response rate 43 (89.8%).

4.1 Demographic Characteristics of Respondents

The findings of demographic characteristics include: sex, academic qualification, Service year,
and work position. Table 2 below shows the details of background information of the
respondents.

Sex Frequenc Percent Valid Cumulative

y Percent Percent
Male 25 58.1 58.1 58.1
Female 18 41.9 41.9 100.0
Total 43 100.0 100.0

Table 2: demographic character of respondents (sex)

As noted in table 2 above, the majority of the respondents (58.1%) were male and the remaining
41.9% were females. From this we can see that the pharmacy staff is well versed on gender.

Educational background Frequency Valid percent Cumulative

percent
Degree 41 95.3% 95.3
MSc. 2 4.7% 100.0
Total 43 100.0

19
Table 3: Educational background of respondents (source: own survey 2019)

As for the educational background 95.3% of respondents were with bachelorette degree and
4.7% were with MSc. This shows that majority of the respondents were mature with appropriate
work experience and therefore they were well versed with relevant information on supply chain
management which was needed for the study.

As show on the chart below most of the respondents (34.9%) have work experience of more than
5 years, 32.6% has work experience of 3-5 years and 27.9% has 1-2 years of experience. This
indicates the pharmacy service is running by senior, chief and expert pharmacists and majority of
the respondents were mature with appropriate work experience and therefore they were well
versed with relevant information on supply chain practice which was needed for the study.

YEAR OF SERVICE AT BLACKLION SPECIALIZED

HOSPITAL
less than a year,
4.7, 5%

mor than 5 years,

1to2 year, 27.9,
34.9, 35%
28%

3-5 year, 32.6, 32%

Fig 2: work experience of respondents (source: own survey 2019)

20
Majority (74.4%) of respondents were from dispensary unit pharmacy

WORK POSSITION OF STAFS

store manager,
case team leader,
2.33
9.3

pharmacy
coordinator, 13.95

dispensary unit,
74.42

Fig 3: work position of pharmacy staff (source: own 2019)

As indicated on the above figure the number of respondents working on dispensary unite is
higher than those working on store who directly involve in the procurement and storage of
pharmaceuticals in the hospital. From this we can learn that there is low work force in the area of
PSC activity.

21
 4.2 Assessment of the overall supply chain activity of the hospital

The overall supply chain activity of the hospital in terms of IPLS was assessed table below
shows the supply chain activities in terms of documentation and stock management of the
hospital using IPLS system.

Questions frequency Percent Valid percent Cumulative

percent
Are bin cards available? yes 43 100.0 100.0 100.0
Are IFRR available? yes 43 100.0 100.0 100.0
Are RRF available? Yes 41 95.3 95.3 95.3

no 2 4.7 4.7 100.0

Do you use bin cards to yes 43 100.0 100.0 100.0
manage products in this
hospital
Availability of SOP for Yes 30 69.8 69.8 69.8
IPLS
No 12 30.2 30.2 100.0

Table 4: use of recording formats in the hospital (source; own 2019)

as per the result obtained from questioner of personnel and observation during the day of visit,
this assessment showed that all (100% of) the required blank logistics recording and reporting
tools such as bin cards, stock card and IFRR formats are available in the hospital. The result was
similar with study under taken in 2017 at this hospital on the assessment of IPLS implementation
and its challenge except that availability of SOP manual for IPLS is 69.8% and that of RRF is
95.3 this shows there is an improvement on documentation and use of reporting format this may
be associated with the implementation of auditable pharmaceutical transaction system (APTS) in
2016 which require extreme documentation throughout the PSC and now days its revolving to
electronics based documentation and reporting system.

22
On the use of reporting formats for requesting and purchasing medications 97.7% of respondents
use IFRR format and on RRF use 72.1% of respondents use it as reporting and requisition
format.

Table below is result for frequency of sending requisition form to supplier

Frequency Percentage Valid percentage Cumulative

percentage
Monthly 20 46.5 46.5 46.5
Bi monthly 10 23.3 23.3 69.8
Quarterly 11 25.6 25.6 95.3
Other 2 4.7 4.7 100.0
Total 43 100.0 100.0 100.0

Table 5: frequency of requisition and purchasing of medication (source; own 2019)

On the assessment of Requisition and reporting format sent to EPSA 46.5% says monthly, 23.3%
every two month, 25.6% quarterly. From this we can say that the hospital did not have fixed
schedule of purchasing medication and make available medication to the patient this in turn
results in shortage and interruption of availability of valuable drugs and decrease quality of
service.

Who determines this facility Frequency Percent Valid Percent Cumulative

resupply quantity Percent
the facility itself 37 86.0 86.0 86.0
higher-level facility (health center, 6 14.0 14.0 100.0
PFSA/ Woreda/ Zone/ RHH

Total 43 100.0 100.0

Table 6: determination of facilities resupply quantity

As shown on the table above, the facility majorly determines resupply quantity of medication to
purchase and higher facilities has little impact on it. From this we can learn that stock out of

23
pharmaceuticals can be as a result of either wrong quantification or poor delivery from the
supplier. During the study it was found that short supply and stock out are common phenomenon
which ultimate result in non-availability of drug and causes ultimate dissatisfaction among the
patients and physicians. Since most of pharmaceutical preparations are exported items as such
the suppliers sometimes fail to deliver the drugs in time or not available at all.

4.3 Evaluation of the supply chain with respect to SCOR attributes

4.3.1 Supply chain responsiveness

Supply chain responsiveness is an indicator of a supply chain’s ability to respond to customer

requests. It indicates the continuous average response time to events. Respondents were asked to
state the extent to which they agreed or disagreed with the questionnaire items developed to
assess the supply chain responsiveness. the respondents were instructed to respond to the
statements on a 5 point Likert scale and indicate the extent they agree with the statements that is:
5-Strongly disagree, 4 disagree, 3-Neutral, 2-agree, 1-Strongly agree.. Mean of each item
together with their respected dimension was calculated in order to conclude supply chain
performance of the hospital. Mean of < 2.5 is said to be respondents are in agreement with the
point and >2.5 is respondents are in disagreement. Result is summarized on the table below.

Supply chain Strongly Agree Neutral Disagree Strongly Mean SD

responsiveness agree disagree
The hospital rely on few 48.8 30.2 4.7 2.3 14.0 2.02 1.39
dependable suppliers
The hospital rely on few 9.3 46.5 18.6 9.3 16.3 2.77 1.25
high quality suppliers
BLSH consider quality 7.0 48.8 20.9 16.3 10.0 2.67 1.06
as number one criterion
in selecting suppliers

Table 7: supply chain responsiveness Source: Own Survey, 2019

Regarding the number of reliable suppliers the hospital depend on, 48.8% strongly agrees that
the hospital rely on few dependable supplier with (mean 2.02 and SD 1.39), 14% of respondents

24
strongly disagree with the subject matter. Respondents’ stat that EPSA is the major supplier for
the hospital and in rare case privet suppliers involved. Majority of respondents 46.5% agree that
the hospital relay on few high quality supplier with (mean 2.77 and SD 1.55) which is EPSA
mainly. Regarding selection of supplier, 48.8% stated that quality is the number one criteria for
selecting supplier. From this we can learn that supply chain activity and availability of
pharmaceuticals of the hospital revolve around the performance of EPSA where the supplier
should avail the products with the requested quantity.

Strongly Agree Neutral Disa Strongly Mean SD

agree gree disagree
The hospital strive to establish 14.0 46.5 27.9 4.7 7.0 2.44 1.03
long term relationship with its
suppliers
The hospital has continuous 11.6 18.6 25.6 34.9 9.3 3.12 1.17
improvement programs that
include its key suppliers
4.7 14.0 44.2 25.6 11.6 3.26 1.00
The hospital helps its suppliers
to improve their product quality

The hospital includes its key 4.7 30.2 18.6 37.2 9.3 3.16 1.11
suppliers in its planning and
goals setting activities of
pharmaceutical supply chain

Table 8: supply chain responsiveness Source: Own Survey, 2019

Regarding the relationship of BLSH with its suppliers, the result showed that there is no much
communication and cooperation between the two parties on continuous improvement program
and planning and goal setting of their business relationship. Moreover, Its relation with
customers (end user) is not improved 44.2% of respondents dis agrees that the hospital
frequently evaluates and identify informal and formal complains of patients()M 3.19 SD 1.09).
Despite 51.2% agrees that the hospital determines future perspective and expectation of

25
customers (M 2.72 SD1.00). Again 44.2% (M 3.16 SD 1.15) of respondents disagree that BLSH
evaluates the level of customer satisfaction.

4.3.2 Supply chain reliability

Supply chain reliability is an indicator for the ability to deliver on-time, in-full, in the right
condition, right packaging, with the right documentation to the right customer. Reliability is an
indicator that describes the predictability of a supply-chain. Respondents were asked to state the
extent to which they agreed or disagreed with the questionnaire items developed to assess the
supply chain reliability. Result is summarized in figure below.

supply chain performance sales rate

60 58.14

50

40
%of respondent

30
20.93
16.28
20

10 4.65

0
STRONGLY AGREE AGREE NEUTRAL DISAGREE

supply chain performance sales rate

Fig 4: effect of supply chain performance on sales rate (Source: Own Survey, 2019)

On the effect of supply chain performance on sales rate, more than half of respondents (58.1%)
agrees that supply chain performance of BLSH results in higher sales rate, 20.93 strongly agrees
with the subject matter. This reviles that products are relatively available in the dispensary units
moreover, majority of items were circulating throughout the supply chain from the supplier
EPSA to the hospital then to each dispensary units.
26
Order fill rate, which is the percentage of items resupplied (filled) by the supplying EPSA with
respect to the total amount of items requested by the Hospital. Resupply quantity shows that, out
of 56 items recently requested by the hospital 39 items were resupplied fully (100% order fill
rate), 13 of them were resupplied in less quantity and 4 items were not resupplied or stocked out
from the supplier (0% order fill rate). As depicted on figure 5 below, order fill rate with respect
to availing items from main store to dispensary units (resupply through IFRR) result show that
more than (76.8%) of the respondents either strongly agreed or agreed that supply chain
performance of the hospital results in higher order fill rate with mean 1.98 and standard deviation
of 0.88. This showed that the supply chain performance of the hospital is functioning well with
respect to availing basic items.

Similar Study done in 2017 on BLSH shows that out of the 17 types of ARV drugs, the hospital
has recently placed order (request of resupply) for 13 items, 9 of the items were received as per
requested (100 % order fill rate) while for the remaining four items, 3 items were received with
less quantity (90.3 – 40%), while one items is not totally delivered (0% order fill rate) even
though requested by the Hospital (Sisay, 2017). Related study in Kenya medical supply agency
stated that supply chain management at the agency results in perfect order fulfillment with
(M=4.870 SD=1.245). However the respondents disagreed that supply chain management has led
to Faster response to customer complaints (M=2.484; SD=0.565), and lower cost of goods sold
(M=2.456; SD=0.784) (Samuel, 2008).

27
60 strongly agree agree neutral disagree strongly disagree

48.8
50
44.2

40

32.6
%responce

30.2
30 27.9
25.6 25.6
23.3 23.3
20.9
20 18.6 18.6
16.3

11.6 11.6
9.3
10 7
4.7

0
order fill rate on time delivery high custemer response time custemer complain

Fig 5: effect of supply chain performance on supply chain reliability

On time delivery of pharmaceuticals is one of the six basic rights of pharmaceutical supply chain
where the right drug should be delivered to the patient at the right time so that patient care
outcome can be achieved if not disease will progress and patients suffer to buy at high cost or
may not find it on market this in turn makes the health service tedious and unaffordable with
poor prognosis. On time delivery also express receiving of requested pharmaceuticals from the
supplier at the right time or from the main store to dispensary unit. 27.9% of respondents
strongly agrees that supply chain performance of the hospital results in on time delivery of items
whereas 18.6% disagrees. Each dispensary units has its own date of requesting and receiving of
pharmaceuticals from main store. 65.1% of respondents stated that the dispensary units follow
their schedule where IFRR mostly hand carried by facility staff and placing emergency order at
any time is a common trained throughout the system.

Customer response time measures the time taken from receiving of request from patient to
delivering of item. It’s also related to availability of products so that the right product will be
delivered at the right time. Result of the survey as presented on figure 5 shows that more than
half of respondents agrees (30.2% strongly agree and 25.6% agree) that supply chain activities of

28
the hospital results in high Customer response time. In contrary, 23.3% of respondents disagree
with the subject. From this we can state there is still high volume of customer order and customer
complain on availability and delivery of pharmaceuticals to the patient with the right quantity
through the supply chain process.

Moreover, the survey sought to find that supply chain activity of the hospital is related to
customer complain. 48.8% of respondents agree that supply chain activity results customer
complain and 11.6% of respondents strongly agree with this. The result is similar with study
done in Kenya (KEMSA). From this we can be sure that pharmaceutical supply chain of BLSH
is not functioning with respect to meeting patients satisfaction with the service provided and is
not responding fast to customer complain.

4.3.3 Supply chain flexibility (agility)

Supply chain flexibility indicates a supply chain's ability to respond to changing (market)
conditions. One way to estimate flexibility metrics is to take the time it takes to execute each
Level Two process in the supply chain, take the longest time parallel processes, and sum
sequential processes. It’s related to uncertain conditions the health care face such as
unpredictable patient flow, unpredictable disease variation, disaster or disease outbreak, wrong
selection of pharmaceuticals, wrong forecasting of demand (poor quantifications), poor
performance of supplier and late delivery. If the supply chain sought to tackle the above
challenges its said to be flexible. Respondents were asked to state the extent to which they
agreed or disagreed with the questionnaire items developed to assess the supply chain flexibility.
Result is summarized in the table below.

29
 N Minimum Maximum Mean Std. Deviation
The hospital has ability to respond to
and accommodate demand variation, 43 1 5 2.40 1.294
such as seasonality
The hospital has ability to respond to
and accommodate the periods of poor 43 1 5 2.77 1.212
delivery from supplier
The hospital has ability to respond to
and accommodate the period of poor 43 1 5 2.86 1.226
supplier performance
The hospital has ability to respond to
and accommodate new products, new 43 1 5 2.63 1.215
markets or new competitors
Valid N (list wise) 43

Table 9: supply chain flexibility Source: Own Survey, 2019

The study sought to determine that 62.8% of respondents agree that BLSH has the ability to
respond to seasonal variation, out of this 30.2% of them strongly agrees (M; 2.40 SD; 1.29). This
reflects the hospital has stock level to coup up with seasonality or the mechanism to resupply it
immediately with emergency orders considering the fact that is serves patients from all over the
country.

51.2% of respondents agrees that the hospital has ability to respond to and accommodate the
period of poor supplier performance. During the visit day, documented request and resupply
forms show that the normal time between sending request and resupply by the supplier is more
than two weeks which is the point to minimum stock level. The fact that request is send through
hand carried by staff and EPSA being the only supplier to Government hospitals delay delivery
of items.

30
 hospital ability to respond to and accomodat period of poor suplier
performance

34.9
35
30
%of respondent

25 20.9 20.9
18.6
20
15
10 4.7
5
0
strongly agree agree neutral disagree strongly
disagree
level of agreement

Fig 6: hospital ability to respond to and accommodate period of poor supplier performance

With respect to supplier performance, most respondents 34.5% disagrees with the hospital ability
to respond and accommodate to poor supplier performance 20.9% are in neutral state with (M
2.9 and SD 1.2). This shows receiving of valuable pharmaceuticals is solely depends on only one
supplier (EPSA) than benefiting the chance of competitive delivery from several suppliers at
negotiable cost. Poor performance of EPSA means poor delivery to the hospital which in turn
affects service delivery of the hospital but despite this fact the hospital maintain minimum stock
level to coup up with poor performance or delivery.

Similar study on hospital pharmacy logistics stated that patients could be affected if their
medication doses cannot be delivered in time to the care unit. Several pharmacists mentioned
that the procurement cycle might be too lengthy for two main reasons. First, at the reception
point, hospital could receive medicines that do not correspond to the purchase order or, in rare
but documented cases, could receive altered or counterfeited products. Second, it could take a
rather long time to distribute a medicine from the hospital dock to the care unit if the pharmacy
staff cannot properly and immediately identify the medicines (Romero, 2013).

31
Another study on PFSA the then EPSA, 60.7% of respondents has expressed their agreement that
the long procurement lead time at PFSA affects the inventory management with mean 2.43 and
standard deviation of 0.991 (Mulatu, 2017).

strongly disagree
2%
[CATEGORY NAME]
23.3

[CATEGORY NAME]
30.2

[CATEGORY NAME]
25.6
[CATEGORY NAME]
18.6

Fig 7: Ability to respond to and accommodate new product, new market or new competitor

Moreover the ability to respond and accommodate to new product and new market depends on
the ability of supplier to avail. Sometimes the hospital purchase new and very useful items from
privet suppliers which are not available from EPSA. As shown on figure 7, more than half of
respondents (23.3% of respondents strongly agrees and 25.6%agrees) that the hospital has the
ability to respond to and accommodate new product, new market or new competitor. From the
total respondents 30.2% disagrees with the subject. This is associated to the fact that
Procurement policy of the hospital is somewhat tight and involve non pharmacy professionals
like other consumable products so that its sight for new product and market is somewhat blinded.

32
4.3.4 Supply chain cost and asset management

Supply Chain costs indicate an organization’s ability to manage the costs associated with
operating the supply chain whereas, Supply chain asset management indicates the effectiveness
of an organization in managing assets to support demand satisfaction. This includes the
management of all assets: fixed and working capital. Pharmacy logistics processes are related to
several issues that impact negatively the cost and quality of the medication services. Several
studies show different inefficiencies, namely out-of-stock high costs or emergency purchase,
excessive manual labor shrinkage, high frequency of reorders counterfeit products and product
recalls.

Respondents were asked to state the extent to which they agreed or disagreed with the
questionnaire items developed to assess the supply chain cost and asset management. Result is
summarized below.

Frequency Percent
strongly agree 15 34.9
Agree 21 48.8
Neutral 5 11.6
Disagree 2 4.7
Total 43 100

Table 9: supply chain activity total cost of resource used Source: Own Survey, 2019

As shown on table below, 34.9% of respondents strongly agrees and 48.8% agrees that supply
chain activity has total cost of resource used. This cost is directly related to pharmaceuticals
procured throughout the supply chain and the main resource is budget from the government.
Despite huge budget for procurement of pharmaceuticals, the hospital was on debt from EPSA
and recently ministry of health announce that it will cover all the debts and allow the hospital
purchase cash.

Cost of distribution, transportation and handling are major cost of supply chain where purchased
items transported from supplier to hospital then to each dispensary units. Loading and unloading

33
is done by porters who are permanent staffs of the pharmacy department. At BLSH
Transportation is handled by the hospitals vehicle and perform other duties of the hospital so that
we can’t determine pharmaceutical transportation solely. From the respondents, 18.6% strongly
agrees and 55.8% agrees (M 2.1 and SD 0.76) that supply chain has total cost of distribution
transportation and handling covered by the hospital.

Documented data revile total cost related to distribution to dispensary units through man power
is approximately 95000 birr/year (porter’s salary and additional payment). Excluding fuel cost
for transportation from supplier to the hospital. The result contradict with a study on Square
Hospital Limited’s where transportation cost, for pharmaceutical products is negligible. In most
cases manufacturers/suppliers bear the costs of transporting pharmaceutical products supplying
to the hospital so that it is quite efficient in transportation.

Cost associated with held inventory is related to resource spent on stocked pharmaceuticals and
labor force who manage it. Majority of respondents 55.8% agrees and 11.6 strongly agree on
supply chain cost of held inventory. A minimum of two weeks stock is kept in each pharmacy
section plus to that of expired medication. From this we can learn that stock kept on each
pharmacy section and labor spent on inventory is major cost for supply chain at BLSH. The cost
depends on the variety of medication each unit use. The figure below shows the level of response
of participants.

34
 strongly dis agree, strongly agree,
7 RESPONSE (%) 11.6
disagree, 4.7

neutral, 20.9

agree, 55.8

Fig 8: cost associated with held inventory

As being government hospital margin of profit for sales of pharmaceuticals is not more than 15%
and some items are given for free. Despite this fact there is still return on investment from sales
of pharmaceuticals to paying patients. 41.9% of respondents agree that the hospital has return on
investment from sales item and 11.6 strongly agrees. 32.6% of them are in neutral this could be
as a result of Purchased items are provided for sales and free patients equally so that it’s difficult
to determine the level of return on investment unless cost of free patients covered and returned
by sponsored body (each kebeles who give free cards or institutions) which is not happening yet.
This has been major problem throughout the past year where the pharmacy department could not
return sales and forced to purchase credit from EPSA

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 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMENDATION

5.1 Summary and Conclusion

The results of the study provide important insights on supply chain activities in terms of SCOR
attributes in the health care sector specifically of BLSH and their effect on performance. The
way the SC function in the hospital has a significant impact on the selection of and cooperation
with best suppliers, increase of SC efficiency, and enhancement of supply chain management
practice, which subsequently improves organizational performance. The findings of the study
revolves around the supply chain performance that have been practiced at BLSH include: supply
chain reliability, supply chain responsiveness, supply chain agility, supply chain cost and asset
management.

From finding of the study, the number of respondents working on store is low (2.33%) who
directly involve in the procurement and storage of pharmaceuticals in the hospital. From this we
can conclude that there is low work force in the area of PSC activity.

Supply chain responsiveness of the study reviles that the hospital depends on few supplier which
is EPSA and consider quality as its basic criteria in selecting its supplier. The supply chain is
responsive in terms of supplier selection. The level of cooperation, involvement on planning and
continuous improvement program with its supplier is low with mean of each >3. Moreover, it’s
less responsive on identifying and evaluating customer satisfaction but works on meeting future
customer expectation.

From the finding mean result of Sales rate order fill rate and on time delivery is 2.05, 1.98and
2.45 respectively which is <2.5where strongly agree (1) and strongly disagrees is (5), revile most
respondents are in agreement with supply chain activity of the hospital result in higher order fill
rate, one time delivery and higher sales rate . Whereas mean of supply chain effect on customer
complain, shipping error, and lead time is >2.5 reviling respondents are in disagreement with the
point that supply chain activity result in customer complain shipping error or longer lead time.
From this we can conclude Supply chain is functioning well with respect to the above point.
From this we can deduce that the supply chain is reliable with respect to the above result.

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With respect to supply chain agility (flexibility) elements which are demand variation, poor
delivery from supplier, poor supplier performance and ability to accommodate / respond to new
product or new market (with mean 2.4, 2.7, 2.8 and 2.6 respectively), results indicate there is still
a gap on supply quantity and frequent stock out and its performance depends on supplier
performance and ability to avail items. This is directly related to Procurement policy of the
hospital that doesn’t allow privet suppliers to participate. From this we can conclude that the
supply chain is not agile (flexible).

Cost and asset management aspect of the hospital supply chain is somewhat complicated where
cash flow of pharmaceuticals is not separated from other service the hospital provide. Despite
being the first big revenue source for the hospital. Daily sales is calculated from cash sales
receipt and documented by the new APTS system makes it easy to predict level of return on
investment but on for items provided to free patients, returning of investment from sponsors of
free patient is still a challenge. In addition transportation and labor cost is covered by the
hospital.

5.2 Recommendation
 Staff work load assessment should be done by higher management to ensure adequate
manpower is in place to successfully work towards full scale implementation APTS and
proper functioning of the SC.
 In order to have staffs well function in the SC of pharmaceuticals, the hospital needs to
improve the competency of its staffs through appropriate capacity building training,
mentoring, and supervision. So that selection, quantification, procurement, storage, and
distribution of pharmaceuticals flow systematically and avoid stocked out or wastage/
expiry.
 To ensure cost reduction and improve organizational performance in SC of the hospital,
organizations and suppliers in the health care sector should try to have a positive
relationship and devise approaches to collaboratively solve supply chain challenges in
order to improve on efficiency. As a result, the collaborative strategy will provide
competitive advantage to both the hospital and suppliers in the sector.

37
 It’s recommended for the hospital to frequently identify patients complain, evaluate
customer’s satisfaction to identify future customers’ expectations and work on its
weakness.
 To improve quality in SC activity, organizations such as BLSH and EPSA should create
good partnerships with all players in the healthcare sector for better patient outcome.
 The hospital should work on its procurement policy and participate capable privet
suppliers to benefit competitive delivery at negotiable price and avoid cost of emergency
order.
 Proper documentation and recording through electronics and IT application should be
encouraged in PSC.
 It’s recommended that the BLSH separate pharmaceutical cash flow from other service of
the hospital so that total supply chain cost and return on investment could be identified to
avoid unnecessary cost in the SC.
 Its recommended for the hospital to develop continuous evaluation program for the PSC
 Further study is recommended to assess the SC performance of the hospital with respect
to supplier and patients’ perspective.
5.1 Limitations and Suggestion for further study
 The major limitation of the study is that the data was collected from a small convenience
sample of staff at BLSH. A study on a wider scale within the health sector including
supply chain managers, nurses and doctors in the hospitals may provide different results.
 Based on results of the study wider scale research is recommended to cover PSC
performance of BLSH with respect to patient and supplier side.
 Another limitation of this study is that the research focused only on the supply chain
Performance in the health sector with a relatively small sample size that only targeted one
organization, and therefore requires further research covering various organizations and
institutions in the health sector and taking into consideration the specific conditions in
different institutions.
 Further analysis of PSC using SCOR model should be done in other hospitals and
organizations for better outcome in the health system.

38
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(2014), Science Journal of Business and Management. 2(5), 136-142.

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Drugs in Public Hospitals in Addis Ababa, Ethiopia
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Management in Hospitals: A Supply Chain Perspective. Systematic Reviews in Pharmacy,
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Computers and Chemical Engineering. (2004), 28, 929–941. Also available online at
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24. Yongyi Shou,(2013), Perspectives on Supply Chain Management in the Healthcare
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Annex 1: Questionnaire

Dear sir/madam; Greetings! My name is Haymanot Derbea and I am a post graduate student in
Logistics and supply Chain management at Addis Ababa University School of commerce.
Currently I am doing my thesis work a research designed to assess pharmaceutical supply chain
practice in Ethiopia the case of black lion specialized hospital. You are kindly requested to fill in
your response properly in the blank space provided or tick single responses as relevant. This
research is intended to get information which will be used and treated confidentiality and solely
for academic purposes. The survey will take no more than 20 minutes to complete. I would like
to confirm that this is neither a supervisory visit nor performance evaluation of individual staff
members. Rather, the findings of this research work will help to provide relevant information to
make decisions and to bring improvements your response are kept confidential.

Thank you in advance for agreeing to participate in this assessment and for your valuable inputs/

SECTION 1: Personal background

Q no Question Alternative
1 Sex 1. Male

2. Female

2 Educational background 1. College certificate

2. Diploma

3. Bachelor degree

4. Master’s degree

Others: Specify______________
3 Year of service at black lion specialized hospital 1. Less than a year

42
 2. 1- 2 years

3. 3-5 years

4. More than 5 years

4 Please indicate Your current position 1. Pharmacist

2. physician
3. Nurse
4. Management
5. Other specify

SECTION 2: Assessment of overall supply chain practice of the hospital

1. Are the following Logistic Management Information System LMIS formats, Job Aids and
SOPs are available at the facility?

a. Bin cards: 1. Yes_________ 2. No_____

b. Internal Facility Report & Requisition Form (IFRR): 1. Yes_________ 2. No_____

c. Facility Report & requisition Form: 1. Yes_________ 2. No_____

d. Standard Operation Procedure (SOP for IPLS: 1. Yes_________ 2. No_____

2. Do you use the following stock keeping logistics formats to manage health products in this

Facility? (Must be verified by checking sample completed bin cards)

a. Bin cards: 1. Yes ______ No________

b. Stock cards: 1. Yes ______ No________

c. Others (Specify) _______________

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3. What LMIS forms do you use for reporting/ordering?

Multiple response are possible (must be verified with completed reports)

a. IFRR: 1. Yes ______ No________

b. RRF: 1. Yes ______ No________

c. HPMRR: 1. Yes ______ No________

d. Other. 1. Yes____ (Specify) _________________ 2. No_____

4. The Hospital compiles and sends RRF reports to higher level?

1. Yes______ 2. No_______

If No, go to question no. 5.

5. If yes, to whom? Multiple responses are possible.

a. PFSA ____________

b. RHB_____________

c. Zone Health Office__________

d. WHO ___________

e. Resupply Health Center __________

f. Don’t Know__________

g. Other (Specify)_________

6. If Yes, How often are these LMIS reports (RRF reports) sent to the higher level?

Multiple responses are possible.

44
a. Monthly._______

b. Bimonthly (every two months)_________

c. Quarterly________

d. Semi-annually __________

e. Annually_________

f. Other ___________

7. When was the last time the Hospital sent RRF report? (Must be verified with completed
reports)

a) Never _________

b) Within the last month___________

c) Months ago_______

d) 3 months ago_______

e) More than 3 month ago______

8. Do all columns in RRF are completed for all medicines? (Must be verified with completed
reports)

a. Yes_________

b. No_________

c. Completed reports not available_________

9. What is the mechanism that your Hospital sends RRF report to the higher level?

a. Hand carried by facility’s staff _________

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b. Picked up by supervisor_________

c. Picked up by other higher level staff________

d. Sent via drivers__________

e. Sent through mail________

f. Other (specify)___________

10. Does the Hospital has a resupply schedule for dispensing units?

Yes__________ No________

If Yes, Check posted Schedule _____________

If No, specify the reason_____________________________

11. If yes, do the dispensing units follow their regular schedule?

Yes__________ No________

If yes, Observe filled IFRR with their schedule______________

If no reason______________________

12. How did you learn to complete the forms/records used at this facility?

Multiple responses are possible

a. Formal Trainings IPLS_______

b. Pre service Trainings_________

c. Other formal trainings (Specify)_________

d. On-the-job training (other staff from facility________

46
e. On-the-job training (someone outside facility________

f. Never been trained__________

g. Other (specify) ____________________

13. How many emergency orders have you placed in the last three months?

If available ask for documents to verify using RRF

a. None________

b. 1_________

c. 2__________

d. 3__________

e. More than 3_______

f. NA_______

14. What type of formats have you used to place emergency orders?

a. Using RRF________

b. Using letter________

c Through phone_______

d Orally________

e. Other (specify)_________

15. Who determines this facility resupply quantity?

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Multiple responses are possible

a. The facility itself________

b. Higher-level facility (Health Center, PFSA/Woreda/Zone/RHB)___________.

c. Other (Specify)___________________________

Section 3: supply chain analysis based on supply chain operation reference (SCOR) model

Choose only one level of agreement for each statement related to the current
pharmaceutical supply chain practice of BLSH. Tick (/)

Key =1-Strongly Agree (SA), 2- Agree (A), 3-Netrual (N), 4Disagree

(D), 5-Strongly Disagree (SD)

3.1 Supply chain responsiveness

Q.no Question 1 SA 2A 3N 4D 5 SD

1 The hospital rely on few dependable suppliers

2 The hospital rely on few high

quality suppliers

3 BLSH consider quality as number one criterion

in

selecting suppliers

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4 The hospital strive to establish long term
relationship with its suppliers
5 The hospital has continuous

improvement programs that

include its key suppliers

6 The hospital helps its suppliers to improve their
product quality
7 The hospital include its key suppliers in its
planning and goal setting activities of
pharmaceutical supply chain
8 Your organization frequently

interacts with customers to set its

reliability, responsiveness, and other standards

9 Your organization frequently measures and
evaluates customer satisfaction
10 Your organization frequently determine future
customer expectations

11 Your organization frequently evaluates the

formal and informal complaints of its customers

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3.2 supply chain reliability analysis

Q Question 1 SA 2 A 3N 4 5 SD
no DA

1 Supply chain performance results in higher Sales

rate
2 Supply chain performance results in higher Order
fill rate
3 Supply chain performance results in On time
delivery
4 Supply chain performance results in higher
Customer response time
5 Supply chain performance results in Customer
complain
6 Supply chain performance results in longer
Manufacturing lead time
7 Supply chain performance results in Shipping error

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3.3 Supply chain flexibility (agility)

Q no Question 1 2 3 4 5

The hospital has

1 Ability to respond to and Accommodate demand
variations, such as seasonality.
2 Ability to respond to and accommodate the periods
of poor delivery from supplier
3 Ability to respond to and accommodate the periods
of poor supplier performance
4 Ability to respond to and accommodate new
products, new markets or new competitors

3.4 supply chain cost test

Q no Question 1 2 3 4 5

Supply chain activities

1 Total cost of resources used
2 Total cost of distribution, including transportation
and handling cost
3 Total cost supply chain, including labor,
transportation and re-work cost
4 Cost associated with held inventory
5 Return on investment

Thank you for your time!

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