1. Intelligent Supply Chain Design Definition, Importance & Impact Noel Watson PhD Principal, OPS MEND USAID | DELIVER PROJECT Critical Issues Series The Future of Pharmaceutical Supply Chain Management: Intelligent, Integrated and Informed Design July 30, 2012

2. Intelligent Supply Chain Design • Definition: • Increased sophistication in how supply chain (SC) features are chosen and, • when appropriate, as a result, increased sophistication in the SC features themselves. • Examples of increased sophistication in design process • Use of decision support tools, e.g., optimization models, to help recommend potential supply chain features • A more constructive collaboration between relevant stakeholders during the design process. • Examples of increased sophistication in SC features • Use of outsourcing • Use of vendor managed inventory models

3. Sophistication in Design Process • More proactive design rather than reactive, e.g., R&D, well defined SC design planning stages, planning to react (to grow, provide additional services, or accommodate additional commodities). • Design process driven by • Clear health strategy that the SC design is expected to support • Health reform direction, e.g., privatization, decentralization, etc. • Type of performance expected from SC, e.g., efficiency, equity, types of sustainability. • Capabilities to be developed • Clear understanding of the causes of dysfunction in the current SC. • Design process features • Good information collection and sharing to design process participants • Sound analysis, e.g., multiple perspectives/validation, SC modelling • Coordination across relevant stakeholders and decision-makers • Sound principles for situations where SC design requires compromises.

4. Why important? • SC management is non-trivial; even in a fully-integrated, narrow product focused, private sector based organization. • Developing countries introduce additional challenges • Low infrastructure, resources and capabilities • High demand • Country/cultural diversity • Product diversity (critical, non-critical, special SC needs) • But, many options exist for SC design • Therefore how we choose is crucial. • Intelligent design principles and practices are needed to match right solution to particular context and needs. • Some elements of sophistication in SC design are missing from current planning processes, e.g., proactiveness, sound analysis, principles for compromise.

5. Examples of Impact • Private Sector Examples • Walmart (e.g. of intelligent SC design: cross-docking, MIS, trucking fleet) • Opened first store in 1962; currently $444B in sales • Ranked #7 on AMR Research Supply Chain Top 25 • Ranked #11 among Fortunes Global most admired companies • P&G (e.g. of intelligent SC design: Vendor Managed Inventory) • Ranked #3 on AMR Research Supply Chain Top 25 • Ranked #5 among Fortunes Global most admired companies • Public Sector Examples • Logistics Design (Local SC Design) • Zimbabwe Delivery Truck Topping Up (DTTU) Systems • Resulted in 98% coverage and <5% stockouts • Procurement Coordination (Global SC Design) • SCMS, CHAI in ARV market (2005-2011) • Increase in generic ARV use (now 90% by volume of use); dramatic reduction in ARV prices ($1500 down to $88-$200)