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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 everything ahead 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 was served, 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 did not communicate the order to the cooks, the staff Figure 1. Pipeline for a typical supply did not follow quality assurance procedures, and chain. 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 to destination. Logistics is often called supply chain management because a chain of partners, 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 a destination 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 central warehouse, 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 be completed efficiently. All the steps involve a number of stakeholders. Why Is Logistics Important?

If the people who attended the disappointing dinner party were asked why logistics is important, 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, a program or campaign will not be successful. Although customer service may be defined differently between corporate logistics and public health or disaster relief logistics, all logisticians 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 How many warehouses do I need in my supply chain? How Network design many trucks? How often should I deliver goods? Demand forecasting How much product will be consumed next year? How much should I manufacture to meet demand? When Supply demand planning should I manufacture to meet demand? Product procurement From whom should I source the product? Transportation procurement Who should transport my product? Can I group together different products into a single Transportation planning shipment? How should I route the trucks? What facility should I stop at first, last? Transportation management How much will transportation cost? Where is my

Trade compliance Warehouse management Inventory management Order management Customer management

shipment? What documents must travel with this shipment through customs? Are export licenses required? What product is available in my warehouse? Where is it located? How much product should I store in my warehouse? How much product should I distribute around my network? What is the status of my order? 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 chain functions. 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

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 them available 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 be served 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 logistics activities 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 of products 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 the cost 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 improve forecasting over time, enter the data and assumptions you used to prepare a forecast and compare 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 for more 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 managing inventory. For example, a transportation strategy may suggest larger loads less often or smaller loads more often. Quality monitoring

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 a pull or requisition system. In other systems, the person who fulfills the order determines the quantity to be issued this is a push or allocation 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 within any 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 regional level. 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 child health, malaria control, tuberculosis control, and nutrition, all manage and distribute supplies for their programs. Called vertical programs, they have historically been managed by 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

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 technical reasons, 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 are managed 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 for products 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 quantities customers receive (often called dispensing protocols). Logistics managers can influence these policies but they may not be able to change them. Logistics managers should stay upto-date with current policies and complete them as specified. Government policies may also 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 logistics system 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

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 procure products; 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 can compare 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 already ordered a resupply shipment. Forecasting is differentit projects longer-term trends in the use 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 of the 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 an enormous 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

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 the least interpretation. Service statistics: These include all data collected about clients and their visits to service 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 countries about 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 and epidemiological 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 use the 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 are based 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).

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, how much 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 gauge reads 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 your destination (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 potential maximum stock level. For example, an inventory manager may determine that a facility 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 that the 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 other unexpected 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

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 consumables represent 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 are introduced. 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 drives the 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 the Information 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 functioning effectively 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 and technical knowledge) to complete logistics activities. Organization and staffing, therefore, are an important part of the cycle. All staff involved in logistics functions must understand the 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 problems and/or resolves them quickly before any one problem becomes a crisis.

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 the six 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 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 not dispense.

Essential Data for Decision Making


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 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 higher to 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? 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. 1. Stock on hand is 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 a specific time 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 negative changes to stock.

Assessing Stock Status


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. 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 we use during a given period = How long that product will last or, in this case, 100 tablets on hand 25 tablets used per month = 4months supply of tablets You have just assessed stock status! 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. The amount of product at the time of the assessment is stock 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

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 three types 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 data useful, 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 reports also inform managers at higher levels about how the system is functioning. 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 contrInformation Systems ol 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 the six 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 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 not dispense.

Essential Data for Decision Making


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 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 higher to 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? 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. 1. Stock on hand is 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 a specific time 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 negative changes to stock.

Assessing Stock Status


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. 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 we use during a given period = How long that product will last or, in this case, 100 tablets on hand 25 tablets used per month = 4months supply of tablets You have just assessed stock status! 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. The amount of product at the time of the assessment is stock 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

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 three types 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 data useful, 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 reports also inform managers at higher levels about how the system is functioning. 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 the six 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 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 not dispense.

Essential Data for Decision Making


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 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 higher to 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? 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.

1. Stock on hand is 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 specific time 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 negative changes to stock.

Assessing Stock Status


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. 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 we use during a given period = How long that product will last or, in this case, 100 tablets on hand 25 tablets used per month = 4months supply of tablets You have just assessed stock status! 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. The amount of product at the time of the assessment is stock 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

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 three types 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 data useful, 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 reports also inform managers at higher levels about how the system is functioning.