logistics step by step

7/31/2019 Logistics Step by Step

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Logistics Step by Step

What Is Logistics?

Saturday night finds you as the host for a special

birthday celebration for a friend at a local

restaurant. You carefully planned everythingahead of timethe number of guests, the

expected cost of the dinner, and the menu.

Unfortunately, by the end of the evening,everyone agrees that the restaurant experience

was a disaster. Your food arrived late, the

specials were sold out, the wrong meal wasserved, the food was cold, and the wait staffs

were unresponsive. You will never return to this

restaurant. How did this happen?

A dining logistician would say that the cooks,servers, and managers in the restaurant used

poor logistics practices. The cooks did not

determine the volume and lead times from

ordering to delivering the goods, the servers didnot communicate the order to the cooks, the staff

did not follow quality assurance procedures, and

the management did not communicate clearly with the customer.

Logistics is similar to dining at a restaurant. Simply put, logistics is the flow of material,

information and money between consumers and suppliers (Frazelle 2002)1. It

incorporates the planning and execution of activities to move products from origin todestination. Logistics is often calledsupply chain managementbecause a chain ofpartners, products, money, and information ultimately delivers the food (supply) to the

patron (customer).

Figure 1, a distribution plan or pipeline for a typical supply chain, shows the many

partners, facilities, and shipments that can make up a supply chain. Products arrive at adestination port by an ocean vessel, plane, or truck carrier; then a customs broker clears

them through customs. Depending on the terms and service of the transportation, which

defines who is responsible for what, another carrier transports the goods to a centralwarehouse, also called a distribution center. From there, products move through the

distribution system until they reach the client.

Even before the shipment reaches the port, many transactions; negotiations; and steps that

include product selection, forecasting, financing, and procuring the products; must becompleted efficiently. All the steps involve a number of stakeholders.

Why Is Logistics Important?

Figure 1. Pipeline for a typical supply

chain.
http://deliver.jsi.com/dhome/topics/supplychain/logistics#_ftn1http://deliver.jsi.com/dhome/topics/supplychain/logistics#_ftn1


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If the people who attended the disappointing dinner party were asked why logistics isimportant, they might answer that the correct logistics in the restaurant would probably

have resulted in better customer service. In fact, logistics and customer service are

mutually dependent. Customer service drives logistics practices, and logistics practices

impact customer service. In the field of public health, without product availability, aprogram or campaign will not be successful. Although customer service may be defined

differently between corporate logistics and public health or disaster relief logistics, alllogisticians operate according to the same six rights.

The Six Rights

The right product

In the right quantities

And the right condition

To the right place At the right time

For the right cost.

The Logistics Cycle

A variety of supply chain functions are part of the pipeline (see table 1.)

Table 1. Standard Supply Chain Functions and Their Purpose

Supply Chain Function answers the following sample questions

Network designHow many warehouses do I need in my supply chain? How

many trucks? How often should I deliver goods?

Demand forecasting How much product will be consumed next year?

Supply demand planning

How much should I manufacture to meet demand? When

should I manufacture to meet demand?Product procurement From whom should I source the product?

Transportation procurement Who should transport my product?

Transportation planning

Can I group together different products into a single

shipment? How should I route the trucks? What facilityshould I stop at first, last?

Transportation management How much will transportation cost? Where is my


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shipment?

Trade complianceWhat documents must travel with this shipment through

customs? Are export licenses required?

Warehouse managementWhat product is available in my warehouse? Where is itlocated?

Inventory management How much product should I store in my warehouse? Howmuch product should I distribute around my network?

Order management What is the status of my order?

Customer management Am I providing good service to my customers?

Its clear that each supply chain function ultimately serves the customers six rights.

Remember that any one of the functions listed in table 1 could be divided into many

additional functions. This document, however, focuses on a subset of supply chainfunctions. Figure 2 displays elements of the supply chain grouped into a logical logistics

cycle.

Figure 2. Logistics Cycle

The circular shape is the first thing you notice about the cycle; this shows the

interdependence of the various elements in the cycle. Each activityserving customers,

product selection, forecasting and procurement, and inventory managementdepends on

the other activities.

Major Activities of the Logistics Cycle

Serving Customers


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Everyone working in logistics must remember that their job is to select, procure, store, or

distribute products to meet customer needs. For example, storekeepers do not store drugs or

other health products simply for the purpose of storing; they store products to make themavailable for use when neededcontraceptives for family planning or drugs to treat

illnesses. Each activity in the logistics cycle contributes to providing excellent customer

service by ensuring the six rights. Clients in a health facility setting should expect to beserved by well-trained, caring professionals who follow supportive policies and have the

resources to deliver the necessary care and treatment. Because serving a customer is not a

logistics activity (it could be a medical activity), this document describes all the logisticsactivities that ultimately serve the customer.

Product selection

Any logistics system that procures and distributes goods must select individual products. In

a health logistics system, a national formulary and therapeutics committee, pharmaceutical

board, board of physicians, or other government-appointed group make select those

products. In a decentralized setting, health service delivery points may have a list ofproducts based on the services they offer, but these selections are guided by national and

professional standards.

Quantification and procurement

After products are selected, managers must determine the quantity needed for each product,

for a specific time periodthis is called quantification. This process ensures that product

selections are made using standard guidelines and regulatory requirements that consider thecost and timing of procurements. Quantification depends on accurate forecasting. You may

base your forecasts on the previous quantities of products dispensed or on services

provided. You can also use population, service, or sales targets. To refine and improveforecasting over time, enter the data and assumptions you used to prepare a forecast andcompare them to actual performance. Procurement regulations are often written in great

detail; but there must be trained personnel and a system of documenting, maintaining, and

auditing procurement records at every level of the procurement function. See section 4 formore detail about quantification and procurement.

Inventory management

After an item is ordered and received, it must be stored until the customer needs it. A

programs inventory control strategy specifies how much stock to store and where to store

it. Enough stock should be available to meet customer needs until a new order is received;but not so much that stocks expire or are wasted or that you exceed storage capacity.

Storage has two purposes for products: (1) to ensure the quality or condition, and (2) to

make them available for distribution. A transportation strategy is critical to managinginventory. For example, a transportation strategy may suggest larger loads less often or

smaller loads more often.

Quality monitoring


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Quality monitoring appears between each activity of the logistics cycle. For example, you

should ensure that you carefully monitor the quality of

Product decisions (Serving Customers a Product Selection)

Procurement proficiency (Product Selection a Procurement)

Forecast accuracy (Forecasting a Serving Customers) Products while they are being stored and distributed (Inventory Management a

Serving Customers) Product aging (Forecasting a Serving Customers)

Customers experience (Inventory Management a Serving Customers)

Internal Influences

For different supply chains, the logistics cycle may look the same, but how different groups

and processes interact varies, depending on the supply chains requirements.

Ordering

In logistics, placing orders is a routine activity. In some logistics systems, the person

placing the order determines the quantity to be orderedthis is apullorrequisition system.

In other systems, the person who fulfills the order determines the quantity to be issuedthis is apush orallocation system.

You can use both push and pull approaches in one system. However, you should not

combine two systems at the same distribution level, because the same personnel would

need to rule on parallel sets of logistics decisions. You should use only one system withinany given level. Imagine the confusion at the regional warehouse if some clinics are pulling

supplies while other clinics need supplies pushed to them. However, between levels, you

can use a pull system effectively: for example, between the central level and the regionallevel. At the same time, you can use a push system from the regional level to service

delivery points. Select a system that is defined within your inventory control strategy; it

must be supported by policies, personnel, and resources.

Vertical versus integrated supply chains

Many countries have several logistics systems for selecting, procuring, and distributing

health supplies to clients. Often, programs such as family planning, maternal and childhealth, malaria control, tuberculosis control, and nutrition, all manage and distribute

supplies for their programs. Called vertical programs, they have historically been managedby separate management units, often from the central level.

Many countries, however, have been moving away from several vertical logistics systems

toward one integrated system that distributes supplies for all programs. For example, a

system that manages contraceptives for the family planning program might also manage


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oral rehydration salts (ORS), vitamin A, and other products for the maternal and child

health program.

Vertical and integrated systems each have advantages and disadvantages. Valid technicalreasons, often reflecting changes in the environment, make integrating a logistics system

more advantageous or feasible, including the following:

improved transportation infrastructure

improved data management

improved communications system coverage

new customer service requirements

Increased storage and transportation efficiency.

When moving toward an integrated logistics system, to ensure that all products aremanaged efficiently, you must consider the specific needs of the various products and

programs. The system may need to be segmented by product category to protect products

with a short shelf life from expiry and to ensure appropriate storage and transport forproducts that require cold or cool chain.

External Influences

The logistics cycle, a valuable diagram, highlights the relationships and dependencies

between the partners and processes in a standard supply chain. However, the logistics cycle

does not exist apart from the real world, which is rarely simple, static, or free of external

motivations and influences.

Government policies

Government regulations and procedures affect all elements of the logistics system. Many

governments have established policies on the selection of medical products, how items are

procured, when items are distributed, where and how items are stored, and the quantitiescustomers receive (often called dispensing protocols). Logistics managers can influence

these policies but they may not be able to change them. Logistics managers should stay up-

to-date with current policies and complete them as specified. Government policies mayalso influence what group performs certain logistics functions and where these functions

are performed. The classic example is the deconcentration of health budgets to peripheral

levels and the impact that has on the drug procurement practice. The logistics cycle needs

to support a variety of partners who control separate parts of the process.

Dynamic conditions

Politically volatile regions, changing governments, natural disasters, and displaced

populations are not represented in the logistics cycle, but the structure of the logistics cycle

must be flexible enough to respond to these dynamic conditions. Additionally, the logisticssystem needs to be flexible not only to negative changes, it must also be responsive to

positive changes, such as the increase of existing products as more funding becomes


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available, the introduction of new products, program expansion, or new campaigns. A

flexible yet resilient logistics system will be able to meet a variety of challenges without

sacrificing the availability of the product at the customer or client level.

Quantification and Procurement

The goal of the quantification and procurement exercise is to estimate and supply the

quantities of each product that a program will dispense to users for a specific period of time

in the future. Quantification helps to mobilize and allocate financial resources to procureproducts; it is often an advocacy tool for supply chain improvements. For example, based

on a forecast of HIV/AIDS tests over the next 12 months, a program can plan for the

procurement of test kits. Based on the expected cost of the test kits, the program cancompare the cost of projected procurement against available funds to determine any

funding gaps. Likewise, a program could compare projected procurement against the

service delivery capabilities. An imbalance between the two may show deficiencies and

underscore necessary changes to the program.

Forecasting

As one of the most important activities at the central level of a service delivery system,

forecasting is done before procurement. A variety of personnel participate in the

forecasting, including logistics managers, management information systems (MIS)

managers, demographic specialists, and program managers.

Do not confuse forecasting with routine ordering, which is a short-term response to an

inventory position, such as a clinic running low on condoms when the manager has alreadyordered a resupply shipment. Forecasting is differentit projects longer-term trends in theuse of products. For example, over the last three years, condom usage may have increased

by 3 percent each year. Based on this information, a manager could forecast an increase in

usage over the next year by 3 percent. In another example, the Ministry of Health (MOH)

may be planning a condom usage campaign for next year that will reach 10 percent more ofthe population. This means that the 3 percent trend of the last three years is expected to

jump to increase 1013 percent.

Forecasting must also consider the logistics system. Does the system have the necessary

transportation, storage, handling, and personnel to manage the forecasted products? Does

the forecast push enough, or too much, inventory into the system? Forecasting has anenormous impact on procurement planning and the entire logistics systems ability to fulfill

the customers six rights.

Sources of Data for Health Product Forecasts

Different data sources tell a different story about expected demand. For example, logistics

data can be used to show the quantity of products that have been dispensed to users in the


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past, but it does not show why the product was used. Alternatively, service statistics

communicate health practices, which could forecast future demand, but it may not follow

the same strict reporting guidelines as the logistics data.

Logistics data: This includes dispensed-to-user data (consumption or usage) from

the service delivery level. It is the easiest to use for future forecasts and requires theleast interpretation.

Service statistics: These include all data collected about clients and their visits toservice delivery points. To use service statistics for product forecasting, you need to

understand standard treatment protocols dispensing practices, so that you can relate

the service statistics to dispensing or consumption.

Demographic data: This data, which describes features about a specific population,

are collected through surveys and censuses; for example, the Demographic and

Health Surveys (DHS), sponsored by USAID, are conducted in selected countriesabout every five years. Because this data are independent of routine MIS collection,

it can be compared with logistics and service statistics data.

Morbidity data: These include information about disease patterns andepidemiological data, including incidence and prevalence. The data may come from

the DHS, other surveys, or sentinel site surveillance. Forecasts based on morbidity

data look at specific diseases separately, but still consider the standard treatment

guidelines or protocols.

Distribution system capacity: This forecast measures the volume of the pipeline

(i.e., storage facilities and transportation links) to determine the volume of supplies

that the system is able to transport and store. It is often recommended that you usethe capacity forecast results to verify the accuracy of forecasts using the other

sources of datasufficient storage and transport resources must be available to

manage the forecasted amounts. Quantities procured should never exceed the

forecasted capacity.

Procurement

You can use forecasting and quantification to estimate future consumption. Procurement

consists of purchasing needs, but the process does not stop there. The pipeline would be

flooded if managers only used their estimated consumption to procure and did not consider

what is already in the system and what may be on order. Therefore, procurement plans arebased on requirements estimates that are determined mathematically for each product,

using the following data:

forecasts stock on hand at all levels of the distribution system

previous procurement quantities ordered and dates expected

losses expected to occur due to damage or expiry

transfers to or from another logistics system

Desired stock at the end of each planning period (including safety stocks and

working stocks at all levels).


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In a well-functioning supply chain, logistics data are routinely recorded and then reported

by the logistics management information system (see section 7). After procurement

quantities are determined, most programs must follow specific procurement processes,determined by their government or donors.

Inventory Management

Warehouses, clinics, and any facility that stores products, including your food pantry at

home, uses an inventory management system to determine when to order products, howmuch to order, and how to maintain an appropriate stock level for all products to avoid

shortages and oversupply.

For example, when you drive your car, you periodically check your vehicles fuel gauge to

maintain the level of fuel. The maximum stock (or fuel) you can have is when the gaugereads full. While driving, you monitor your fuel consumption from time to time and decide

when to purchase (order) more fuel. By assessing the supply status of the tank, you can

calculate when to refill the tank (order) and how much fuel to add, depending on yourdestination (and sometimes your budget). You may use the red zone on the fuel gauge to

decide when to buy more fuel, or you may fill the tank on a specific day. Whatever system

works, you are using a type of inventory control.

Inventory Levels

Inventory management focuses on the amount of inventory that should be held at different

levels within the system. Important considerations include the following:

What is the maximum amount of inventory that my facility can or should hold? The

actual maximum level may be smaller and more inflexible than the potentialmaximum stock level. For example, an inventory manager may determine that afacility can hold 100,000 units of a given product, but because of the products

expiration date, known consumption rates, and expected receipts, it is most efficient

to store only 50,000 units.

What is the minimum amount of inventory that my facility should hold? Aware thatthe customer should be served according their six rights, how much inventory is too

little? Is it OK to run out of a given product? How long does it take to replenish the

product?

How much product should I hold in my facility as reserve? This is usually called

safety stock. This buffer, cushion, or reserve stock is kept on hand to protect against

stock outs caused by delayed deliveries, markedly increased demand, or otherunexpected events.

Managing the Logistics Cycle

In some ways, the logistics cycle is similar to a human bodyorgans function both alone

and with other body parts to maintain life. In the logistics cycle, many people perform a

variety of functions for a common goal, although the activities are often based on


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individual motivations and seemingly independent, elemental activities. Managing the

logistics cycle requires dedication and persistence. Ensuring good customer service

requires system evaluation. Evaluation requires accurate, complete, and timely data.Individual tasks that spin the cycle require staff, supervision, and a budget.

Evaluation

Proper monitoring of the logistics cycle begins with evaluating its activities. Constant

assessment or evaluation of the logistics system performance will ensure that logistics

activities are completed as efficiently and effectively as possible. Drugs and consumablesrepresent a significant percentage of health budgets. Activities designed to ensure quality,

reduce waste, and improve accountability should be designed with measurable, quantitative

performance indicators to determine changes in efficiency after improvement activities areintroduced. Product availability at the service delivery point and reduced stock outs are

strong indicators of logistics effectiveness. An improved system should impact customer

service by increasing the availability of affordable, high-quality health products at the

service delivery level; this, in turn, will have an impact on health program outcomes.

Management Information Systems

To effectively evaluate a system, a manager needs relevant information. Information drivesthe logistics cycle; without it, the logistics system cannot run smoothly. Managers gather

information about each activity in the system and then analyze that information to make

decisions. For example, information about inventory levels and consumption must be

collected to ensure that a manager knows how much product to procure. See theInformation Systems section for more detail on this subject.

Organization and Staffing

A logistics system can only work when the staff are well-trained and operate in a

supportive environment. They must have the right tools to do their jobs, whether they place

orders, coordinate shipments, oversee deliveries, or keep a warehouse functioningeffectively to ensure that the right product, in the right quantity, is shipped to the client. To

ensure that goods are available for clients, all tasks are important. Health programs must be

organized to provide the appropriate resources (for example, supervision authority andtechnical knowledge) to complete logistics activities. Organization and staffing, therefore,

are an important part of the cycle. All staff involved in logistics functions must understandthe six rights and make them a top priority.

Supervision

If the logistics system is carefully watched, it will run smoothly and staff will anticipate

any needed changes. The effective supervision of logistics activities minimizes problemsand/or resolves them quickly before any one problem becomes a crisis.


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Budget

Budgeting affects the product selection, quantity of products procured, amount of storage

space available, transport, and number of staff working in logistics. To have the entire

system operating effectively, logistics activities must be included in operational planning

and receive sufficient funds.

Information Systems

Information is the foundation for making sound logistics decisions. Logisticians use a

logistics management information system (LMIS) to collect the information they need to

make informed inventory control choices about how much to procure, store, and order;where and when to ship; and other questions. However, like the health products, you can

also assess information in terms of thesix rights. You can ask, Does my information

system collect the right data for decision making? Is it timely? Does my investment ininformation management provide a good return on my investment? The final decision

depends on whether or not a particular piece of data is going to be used to make decisions.Only collect information that you will use; you would not store a product that you do notdispense.

Essential Data for Decision Making

If you collect data for decision making, you need to know how much data and what data tocollect. To determine what data to collect, look at the decisions you must make. What

information would you need?

How long will current supplies last? Do you need to order more supplies now?

Where are your supplies in the pipeline? Do you need to move supplies from higherto lower levels?

Where is consumption the highest? Do those facilities need more resources?

Are losses from the system forcing you to take action?

Are supplies flowing regularly through the pipeline? Do you need to adjust your

pipeline to account for bottlenecks in the system?

Are any products about to expire? Should you remove them from the pipeline? Canyou distribute them before they expire?

The right data can help you make intelligent decisions. Although you may make good use

of other data items in logistics, the following four data items are required to run a logistics

system.

1. Stock on handis the quantity of usable stock available within the system. Unusableitems are not considered part of stock on hand; they are reported as losses to the

system.

2. Rate of consumption is the quantity of stock dispensed to users during a particulartime period.


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3. An expected arrival is the quantity of stock expected to enter the system at a

specific time in the future.

4. Losses and adjustments is the quantity of stock removed from the system for anyreason other than clients consumption (expiration, theft, damage, and so on).

Adjustments are made when quantities are issued to or received from other facilities

within the system. Also, adjustments can explain administrative changes. Forexample, when you count stock, you may find a different amount than the quantity

listed on the bin cards. Therefore, adjustments may cause either positive or negative

changes to stock.

Assessing Stock Status

Stock on hand and the rate of consumption are the two primary indicators of stock status. Ifyou were asked to assess the stock status of a supply of aspirin in a clinic, and you found

100 usable tablets, would you know if the clinic had too much aspirin, not enough aspirin,

or just enough aspirin? The amount of aspirin is not important, but how long will the

supply of aspirin last. When you know that, you can describe the stock status.

If you know that the clinic dispenses about 25 aspirin tablets a month, you can use the

following simple formula to determine that the aspirin supply will last approximately four

months.

How much we have of a certain product How much weuse during a given period = How long that product will last

or, in this case,

100 tablets on hand 25 tablets used per month = 4-months supply of tablets

You have just assessed stock status!

After your assessment, you may need to place an order or, in some cases, place anemergency order. Or, your assessment may show that you do not need an order, your

supplies will last until your next regular order.

The USAID | DELIVER PROJECT uses specific terms when stock status is assessed. The

amount of product at the time of the assessment isstock on hand. The amount you use is

the rate of consumption.

The formula for assessing stock status is

Stock on hand Average monthly consumption =

Months of stock on hand


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Essential Records for Decision Making

Supplies in a system can be (1) stored, (2) moved [in transit], (3) consumed [used], or (4)

adjusted. To report on the data elements described in the previous section, you need threetypes of records.

Stock keeping records: Hold information about products in storage and losses and

adjustments.

Transaction records: Hold information about products being moved.

Consumption records: Hold information about products being consumed or used.

You may have a collection of data on products dispensed or sold. Each record type has a

distinct form and use. Good supply management demands accurate records and the ability

to communicate that data for decision making. At any level of the system, managers should

be able to report the stock on hand for any item.

Reporting

Stock keeping, transaction, and consumption records hold data. To make the collected datauseful, it must be in a form that managers can use to make decisions. Therefore, decision

makers receive essential data from reports.

Summary reports must include all essential data items for a specific facility and time period

(usually monthly or quarterly). A simple summary report lists the name of the facility,reporting period, beginning stock on hand, receipts, quantities issued or dispensed, losses

and adjustments, and ending stock on hand.

Managers can use feedback reports to inform lower levels about their performance and, in

some cases, provide information about reporting from other facilities. Feedback reportsalso inform managers at higher levels about how the system is functioning.

Information Systems


logistics management information system (LMIS) to collect the information they need tomake informed inventory contrInformation Systems ol choices about how much to

procure, store, and order; where and when to ship; and other questions. However, like thehealth products, you can also assess information in terms of thesix rights. You can ask,

Does my information system collect the right data for decision making? Is it timely? Doesmy investment in information management provide a good return on my investment? The

final decision depends on whether or not a particular piece of data is going to be used to

make decisions. Only collect information that you will use; you would not store a productthat you do not dispense.


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If you collect data for decision making, you need to know how much data and what data to

collect. To determine what data to collect, look at the decisions you must make. What



Where are your supplies in the pipeline? Do you need to move supplies from higher

to lower levels?




pipeline to account for bottlenecks in the system?

Are any products about to expire? Should you remove them from the pipeline? Can

you distribute them before they expire?

The right data can help you make intelligent decisions. Although you may make good useof other data items in logistics, the following four data items are required to run a logisticssystem.

1. Stock on handis the quantity of usable stock available within the system. Unusable

items are not considered part of stock on hand; they are reported as losses to the

system.2. Rate of consumption is the quantity of stock dispensed to users during a particular

time period.

3. An expected arrival is the quantity of stock expected to enter the system at aspecific time in the future.

4. Losses and adjustments is the quantity of stock removed from the system for anyreason other than clients consumption (expiration, theft, damage, and so on).

Adjustments are made when quantities are issued to or received from other facilitieswithin the system. Also, adjustments can explain administrative changes. For

example, when you count stock, you may find a different amount than the quantity

listed on the bin cards. Therefore, adjustments may cause either positive or negativechanges to stock.


Stock on hand and the rate of consumption are the two primary indicators of stock status. If

you were asked to assess the stock status of a supply of aspirin in a clinic, and you found100 usable tablets, would you know if the clinic had too much aspirin, not enough aspirin,

or just enough aspirin? The amount of aspirin is not important, but how long will thesupply of aspirin last. When you know that, you can describe the stock status.


following simple formula to determine that the aspirin supply will last approximately four

months.


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How much we have of a certain product How much we

use during a given period = How long that product will last

or, in this case,



After your assessment, you may need to place an order or, in some cases, place an

emergency order. Or, your assessment may show that you do not need an order, your

supplies will last until your next regular order.

The USAID | DELIVER PROJECT uses specific terms when stock status is assessed. Theamount of product at the time of the assessment isstock on hand. The amount you use is






Supplies in a system can be (1) stored, (2) moved [in transit], (3) consumed [used], or (4)adjusted. To report on the data elements described in the previous section, you need three

types of records.


adjustments. Transaction records: Hold information about products being moved.



distinct form and use. Good supply management demands accurate records and the abilityto communicate that data for decision making. At any level of the system, managers should

be able to report the stock on hand for any item.

Reporting


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Stock keeping, transaction, and consumption records hold data. To make the collected data

useful, it must be in a form that managers can use to make decisions. Therefore, decision






some cases, provide information about reporting from other facilities. Feedback reports

also inform managers at higher levels about how the system is functioning.

Information Systems


logistics management information system (LMIS) to collect the information they need tomake informed inventory control choices about how much to procure, store, and order;

where and when to ship; and other questions. However, like the health products, you canalso assess information in terms of thesix rights. You can ask, Does my information

system collect the right data for decision making? Is it timely? Does my investment in

information management provide a good return on my investment? The final decisiondepends on whether or not a particular piece of data is going to be used to make decisions.

Only collect information that you will use; you would not store a product that you do not

dispense.


If you collect data for decision making, you need to know how much data and what data tocollect. To determine what data to collect, look at the decisions you must make. What



Where are your supplies in the pipeline? Do you need to move supplies from higherto lower levels?




pipeline to account for bottlenecks in the system? Are any products about to expire? Should you remove them from the pipeline? Can

you distribute them before they expire?

The right data can help you make intelligent decisions. Although you may make good use

of other data items in logistics, the following four data items are required to run a logistics

system.


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1. Stock on handis the quantity of usable stock available within the system. Unusable

items are not considered part of stock on hand; they are reported as losses to the

system.2. Rate of consumption is the quantity of stock dispensed to users during a particular

time period.

3. Expected arrivals are the quantity of stock expected to enter the system at a specifictime in the future.

4. Losses and adjustments is the quantity of stock removed from the system for any

reason other than clients consumption (expiration, theft, damage, and so on).Adjustments are made when quantities are issued to or received from other facilities

within the system. Also, adjustments can explain administrative changes. For

example, when you count stock, you may find a different amount than the quantity

listed on the bin cards. Therefore, adjustments may cause either positive or negativechanges to stock.


Stock on hand and the rate of consumption are the two primary indicators of stock status. If

you were asked to assess the stock status of a supply of aspirin in a clinic, and you found

100 usable tablets, would you know if the clinic had too much aspirin, not enough aspirin,or just enough aspirin? The amount of aspirin is not important, but how long will the

supply of aspirin last. When you know that, you can describe the stock status.


following simple formula to determine that the aspirin supply will last approximately fourmonths.

How much we have of a certain product How much weuse during a given period = How long that product will last

or, in this case,



After your assessment, you may need to place an order or, in some cases, place an

emergency order. Or, your assessment may show that you do not need an order, yoursupplies will last until your next regular order.

The USAID | DELIVER PROJECT uses specific terms when stock status is assessed. The

amount of product at the time of the assessment isstock on hand. The amount you use is




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Supplies in a system can be (1) stored, (2) moved [in transit], (3) consumed [used], or (4)

adjusted. To report on the data elements described in the previous section, you need three

types of records.


adjustments.

Transaction records: Hold information about products being moved.



distinct form and use. Good supply management demands accurate records and the ability

to communicate that data for decision making. At any level of the system, managers shouldbe able to report the stock on hand for any item.

Reporting

Stock keeping, transaction, and consumption records hold data. To make the collected datauseful, it must be in a form that managers can use to make decisions. Therefore, decision






some cases, provide information about reporting from other facilities. Feedback reportsalso inform managers at higher levels about how the system is functioning.

logistics step by step

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