Laboratory Commodity

Management

1
 What is Health Commodity
management?

 Commodity management is a set of activities

and procedures that ensure health
commodities are available, accessible and of
high quality.

2
 Commodity Management Cycle
 Commodity management can be described as a cycle
made up of various components.
 These components are:
– Product selection
– Procurement
– Inventory management (with storage &
distribution)
– Use

3
Commodity Management Cycle… contd’

Product
selection

Use Management Procurement

Support

Inventory
management, Storage
& Distribution

Laws, Regulations &

Policies

4
Product Selection
 Product selection is the process by which the
required commodities are chosen for the program.
 Product selection helps health workers to make
decisions such as:
– which commodities should be procured based on
the disease condition being treated, e.g.
HIV/AIDS;
– which commodities are needed to manage changing
patient needs over time
– the number of current or expected patients, etc.

5
 Purpose of product selection
 Factors that need to be considered when selecting
commodities:
– Technical criteria of test sensitivity and specificity
– Cost and available financing
– Storage requirements
– Shelf life
– Compatibility with existing instrumentation

6
 Procurement
Product
selection

Use Management Procurement

Support

Inventory
management, Storage
& Distribution

Laws, Regulations &

Policies

7
Procurement

 Procurement means acquiring affordable

commodities of good quality, either by

– purchasing or

– through donations

8
Procurement….cont’d

 The key objectives of procurement are that the

commodities must be:
– the right ones

– in the right quantities (full supply)

– of good quality
– and at the lowest possible or affordable price
9
 Forecasting
 The term “forecast” simply means estimating
what will happen in future.
 Therefore, forecasting in procurement simply
means the ability to estimate the future needs
of a program based on certain assumptions, so
that we can plan to meet those needs.
 The period of forecasting may be short-term (1
year or less), medium-term (1 to 3 years) or
long-term.
10
 Good forecasting requires
– Technical skills
– Financial resources
– Well-informed policy makers
– Political will
– Good management systems in place at all
levels

11
Inputs used in forecasting for
HIV/AIDS commodities
 HIV prevalence data, i.e. the estimated number
of people infected with HIV/AIDS in a population.

 Policy changes, e.g. change in Guidelines for ART;

 Number of facilities offering HIV care and ART in
a region

12
Inputs used Contd’…
 Service statistics, e.g. number of clients seen
in a given period;
 Commodity consumption data from health
facilities offering ART;

 Stock status (at the central store and at the

health facilities offering ART).

13
 Quantification

 Quantification refers to the process of

calculating the quantities of specific
commodities required for a health program
for a given amount of resources available,
– e.g. for a given budget

14
 Why do we need to quantify
 We quantify in order to determine:
– If the commodities will be adequate for the
number of patients targeted to be put on
treatment or maintained on treatment.
– The cost of commodities required thus
enabling budgeting
– To justify need for funding to donors
– If storage space for the commodities is
available and adequate
15
Process in Quantification
 In order to quantify, you should:
–  Define the program for which quantification is
being done (e.g. VCT, ART, etc)
– Collect the data required
– Forecast the demand
– Adjust the estimated demand quantity for
products that may be lost (expiry, wastage,
breakage, etc), and those taken out for quality
control purposes

16
Process Contd’….
– Estimate the quantities required
– Calculate the cost of procuring the quantities
required (budget)
– Adjust the budget to match the available funding
(this may mean adjusting the quantities that will be
ordered)
– Present findings to decision-makers to determine
the quantities to procure
– Update and revise the quantification as new more
accurate data becomes available

17
 Quantification Methods
 There are 3 main quantification methods.
 These are:

– Adjusted consumption method

– Morbidity method

– Consumption method
18
 Adjusted consumption method
 This method uses data from other regions or
programs, and adjusts it to meet the needs of
a specific program or health facility.

 It is used where there is no reliable

information on past consumption or morbidity
patterns in an area.

19
 Consumption method:
 Uses the data of previous test kits or reagents
consumption in order to predict future needs
 Data needed
 Data on consumption of the commodities
 Reliable inventory / stock records
 Details of supplier lead times (that is, the time
taken for suppliers to deliver the commodities
once the order has been given to them)
 The projected test kit or reagent costs
20
Morbidity method

 This method forecasts the quantity of health

commodities needed for diagnosis and
treatment of a specific disease condition,
based on the projection of the incidence of
that disease.

21
Morbidity method…
 Data needed
 The prevalence of the disease

 Actual or projected incidence of disease in the area

being quantified for
 Estimated test kit/reagent costs

 The target number of patients per region and per

health facility
22
Signs of good quantification
 Uninterrupted reliable supplies of
commodities

 Patients and users have access to the

commodities whenever needed

 Good Commodity Quantification means no

over- or under- stocking

23
Procurement Methods

Open tender

 This is a formal procurement process in which

local or international suppliers (or their
representatives) are invited to submit bids for
the supply of commodities under the terms and
conditions stipulated in the tender.
24
Procurement methods…

Closed or Restricted tender

 Similar to open tender but here the bidding is
limited to suppliers meeting certain
conditions,

– e.g. suppliers of a certain financial capacity,

suppliers producing commodities of a
certified quality.
25
Procurement methods…
Competitive negotiation
 Here, the buyer selects a small number of
suppliers and negotiates prices with them
directly.

 It is useful for bulk procurements or for

emergency supplies.

26
Procurement methods…
Direct purchase
 The product is purchased directly from one
supplier.
 This is the simplest method but usually very
expensive since the buyer does not seek
better value by checking out other suppliers.
 It’s useful for small procurements or for
emergency supplies
27
Signs of a good procurement process

 A good procurement process should be:

– Flexibile

– Transparent and accountabe

– Good Quality of the products procured

28
Inventory Control, Storage & Distribution

Product
selection

Use Management Procurement

Support

Inventory
management, Storage
& Distribution

Laws, Regulations &

Policies

29
 Inventory management
 Inventory is the items (drugs, medical supplies,
etc) used in health facilities.
 Inventory management comprises the activities
related to ordering, receiving, storing,
distributing & issuing, and re-ordering stock of
commodities.
 All these activities are tracked with appropriate
documentation, thus good record-keeping is
critical.

30
Components of Inventory Management

 Ordering (and re-ordering)

 Receiving and issuing commodities

 Storage

 Distribution

 Record-keeping

31
Issuing & Receiving Commodities
 A health facility may receive commodities
from:
– The central / national store

– Directly from suppliers

– From other health facilities

– As donations from donors

32
Issuing & Receiving Commodities contd’

 A health facility may issue commodities to:

– The central / national store – return of
commodities, e.g. those returned for re-
distribution to other sites
– Suppliers – returns
– To other health facilities
– Within the health facility: from the main
drug store to the dispensing area
33
Issuing & Receiving Commodities contd’
 During the issuing process, verify or make sure that the
issue and receipt/ voucher is correct and complete in
terms of:
– Commodities being issued

– Quantity being issued

– Facility being issued the commodities

– Date of issue
– That the commodities are issued according to FEFO
34
Issuing & Receiving Commodities contd’

 The same process applies when receiving

commodities.
– When a facility receives new commodities, it
is a great opportunity to conduct a visual
inspection.
– Visual inspection is the process of examining
products and their packing by eye to look for
obvious problems with the product quality.

35
Record-keeping
 Record-keeping in inventory management
involves creating and regularly updating
inventory records.

 Good record-keeping is a necessity in inventory

management.

 Records must be kept accurately and

completely and filled on time.

36
Record-keeping contd’
 The records used in inventory management
include:
– Stock-keeping records, such as Bin cards,
Stock Ledgers
– Consumption records, e.g. dispensing
records such as Daily Activity Registers
– Stock movement records, e.g. Issues and
Receipt vouchers.

37
 Important terms in Inventory management
 Stock on Hand
– This is the physical count of the usable quantity of a
commodity present.
 Safety / Buffer stock
– The minimum stock kept to protect the health facility
against stock-outs.
– The stock-outs may result from delay in delivery of re-
supplies or from unexpected increases in demand for the
commodities.
 Order quantity
– The quantity ordered by a health facility
38
 Important terms Contd’
 Re-order period
– The normal time taken between the orders placed by
a health facility for more stock.
 Lead time
– The time taken between when an order is placed by a
health facility and when the ordered commodities
are delivered and available for use.
 Stock on order
– The stock ordered by a health facility that has not yet
arrived.
39
Storage
– Storage is the keeping of inventory in a
safe, secure, accessible location while it is
awaiting use.

– The quality of the products is maintained in

good storage.

40
Good Storage of commodities
 Security: The storage space should be a secure,
lockable area
 Location: This location should be accessible to the
people needing the commodities
 Adequate space: It is important to have enough space
in case you want to scale-up the number of patients on
treatment
 A clean, dry, organized location
 The use of shelves and pallets to raise the products
from the ground
41
Good Storage Contd’
 Ventilation, e.g. via air conditioning;
 Adequate light (Note: this does not mean sunlight!);
 Availability of cold storage for any commodities
requiring refrigeration, and of cold chain during
transportation;
 Availability of fire safety equipment;
 Separation of expired, damaged or obsolete
commodities from usable ones;
 The location should be kept free of harmful insects
and rodents.

42
 Distribution
 This is the process of supplying commodities, including
activities such as transportation and shipping.
 Good distribution of commodities ensures that there
are:
– Constant uninterrupted supplies
– Commodities stay in good condition until they are
used
– Minimizes losses due to spoilage and expiry
 

43
Distribution contd’
 Prevents theft and fraud
 Maintains accurate stock
 Uses storage locations that allow for on-time
delivery
 Efficiently uses transport resources
 Enables collection of Accurate information for
forecasting

44