Transcript Outsourcing to 3PLs for improving workforce effectiveness

Critical Issues Series: Strengthening Human Resources for
Supply Chain Management of Health Commodities
Panel: Increasing Workforce Effectiveness
Outsourcing to 3PLs for improving
workforce effectiveness
Noel Watson, MIT-Zaragoza Program
Zaragoza Logistics Center, Spain
Oct 6th, 2010
(Work here is joint with VillageReach, USA and Transaid, UK)
Challenges for 3PL outsourcing in
Government-run Drug distribution systems
• Sources of resistance for governments and
policy makers
– the operational dynamics of government run drug
distribution systems are still mostly a mystery.
– poor understanding of the performance potential
for 3PL providers
– not trivial to combine government run distribution
systems and 3PL providers for targeted
performance.
Our Approach
• Addressing the mystery of SC performance:
– Understand the key drivers of the multi-dimensional performance of
a government run drug distribution system
– Determine the current costs of distribution in the sample country
• Performance potential for 3PLs - Cost Simulations (not focus of this
presentation)
– Create a cost model for the study to accommodate general
performance prediction.
– Estimate the potential costs and performance of distribution using
outsourced models (including selectively outsourced hybrid models)
• Execution of Outsourcing
– 3PL screening and engagement
– Public Sector Development: How should they learn to manage 3PLs?
Addressing the mystery: Conceptualizing
Supply Chain Performance and Drivers
• Basic Operational
Capabilities
– Capacities
– Discreet Activities
• Storage, etc
• Advanced Oper.
Capabilities
– Service offering
• Product +
– Problem Solving
– Connectivity
– Ease of monitoring
• 3PL related
– Managing 3PL
– 3PL managing client
4
Supply Chain Costing
• Challenges
– Sampling methodology [1],[2],[3],[4]
– Data Availability
– Costing Analysis specific to the situation [2]
• Incremental cost, cost recovery, cost allocation
– Estimating costs for collection system with varying transport options is
difficult [1]
– Estimating timing of wasted stock [1]
– Resistance to costing [2]
• Our approach
– Handles collection system settings
– Incorporates cost of time of non-SC personnel involved in SC activities
– Comprehensive; transportation, inventory, commodity, management
etc.
Supply Chain Improvement Opportunities:
3PL Contribution & Cautions
Supply Chain
improvement
Opportunities
3PL contribution
Improve basic
capabilities
3PL agent replace base
activity
• Why not use 3PL
•
•
Base’s Skill
Atrophy/Retardation
Increase Complexity
–
Economies of scale Assign tasks to 3PL agent
in task aggregation
Better support for
decision-making
3PL agent has better basic
capabilities
3PL agent has contributive
advanced capabilities
Economies of scale 3PL agent provides
in expansion
additional capacity quicker
SC structure
redesign
3PL agent provides
specific capacity quicker
•
Adds another tier to decision
chain requiring coordination
and 2-way information
sharing
Risk of poor service
–
–
Poor oversight by base
Inappropriate or lacking 3PL’s
experience
» with current or
redesigned management
approach
» with current or
redesigned SC structure
Base focus on more 3PL agent assumes non
critical activities
critical tasks
6
Executing 3PL engagement
• Major Challenge: Developing 3PL Management Capability
– Requires appreciation for good basic and advanced capability in
order to appreciate/recognize it in 3PL
– Management at a distance
– A capability like that of basic/Advanced
• Time; Mentorship (Toyota Example)
• Visualizing improved performance – case studies, site visits
• Explicit Capability Development plan, e.g., starting small, planning
• Initiating 3PL Relationships: 3 step Screening process
– Experience Screening
– Capability Screening
• Basic, advanced, 3PL related
– RFQ screening
• Needs description
Our approach to 3PL Outsourcing in
Public Sector
• Sources of resistance
– Understanding SC dynamics
• Focus on distinguishing capabilities
• Meeting costing challenges
– Understanding performance potential for 3PL providers
• Cost-simulation modelling (Not focus of this presentation)
– Complexity of incorporating and managing 3PL
• Challenges & recommendations for developing 3PL management
capabilities
• Recommendations for initiating 3PL engagement
• Piloting ideas in Kano, Nigeria
– Results will be available later this year
Bibliography
1.
2.
3.
4.
Huff-Rousselle, M. and S. Raja, Ghana: Estimating the Cost of
Logistics in the Ministry of Health Supply System. 2002, Family
Planning Logistics Management (FPLM)/John Snow, Inc., for the
US Agency for International Development.
Vian, T., Uganda: Assessing the Costs of Distribution to Health SubDistricts. 2003, John Snow, Inc/DELIVER and Boston University, for
teh US Agency for International Development: Arlington, VA.
Vian, T., Zimbabwe: Assessing the Cost of Transporting HIV/AIDS
Commodities: A Case Study in Financial Analysis. 2003, John Snow,
Inc/DELIVER and Boston: Boston University, for the US Agency for
International Development: Arlington, VA.
Baruwa, E., M. Tien, and D. Sarley, Zambia ARV Supply Chain Costs:
A Pilot of the Supply Chain Costing Tool. 2010, USAID | DELIVER
PROJECT, Task Order 1: Arlington, VA.