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Assessment of Inventory Management Practices at The Ethiopian Pharmaceuticals Supply Agency
Assessment of Inventory Management Practices at The Ethiopian Pharmaceuticals Supply Agency
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Bekele Boche Background: Maintaining an adequate level of inventory is critical since an enormous
Tidenek Mulugeta amount of capital tied up with it. Having excess inventory leads to wastage. On the
Tadesse Gudeta contrary, insufficient commodity leads to stock out. Hence, this study aimed to assess
inventory management practices of program commodities at Ethiopian Pharmaceutical
Department of Social and Administrative
For personal use only.
Background
Pharmaceutical inventory management is about planning and controlling inventory levels
to meet customer demand. Maintaining an adequate level of inventory is critical since an
enormous amount of capital tied up with it. Having excess inventory leads to wastage of
resources. Pharmaceutical stock loses its utility beyond some specified period. So,
carrying over stock opens up the chance of losing thousands of dollars on expired,
Correspondence: Tidenek Mulugeta
Email tidenek11@gmail.com unsaleable items. Once pharmaceuticals pass their expiry date, no one can utilize them.
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DovePress © 2020 Boche et al. This work is published and licensed by Dove Medical Press Limited. The full terms of this license are available at https://www.dovepress.com/terms.
http://doi.org/10.2147/IPRP.S269421
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On the contrary, having too little inventory leads to stock-outs Studying the inventory management practice at the
leading to diminished quality of patient care.1 upstream supply system is an anchor to systematically identify
The pharmaceutical supply chain involves complex and solve inventory management problems of the country as
systems that consist of interrelated and interlocking sub a whole. Despite this, limited information is available in this
systems. Inventory management, as a component, plays regard. Majority of previous studies so far evaluated inventory
a prominent role in the overall performance of the supply management practices at service delivery points like hospitals
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system. Improving inventory management practices rea and health centers. The focus of this research, therefore, was to
lizes significant advancement in the supply system.2 understand the inventory management practice of program
The continuous supply of pharmaceutical commodities commodities at the upper supply chain unit of Ethiopia,
can be guaranteed only through an appropriate inventory EPSA. To achieve the objective of the study, metrics like
management practice. Little mistakes in stock administra order fill rate, wastage rate, frequency of emergency order,
tion can rapidly lead to disarray, expanded turnaround acceptable storage condition met, and the stock-out rates were
times, unnecessary costs that endanger patient health.3 measured. The challenges of inventory management were also
With a well-managed inventory, uncertainties in demand among the examined once. As a study executed at the core
order cycle become less likely. The best management of organization responsible for pharmaceuticals supply through
pharmaceutical inventory involves monitoring expiration out Ethiopia, it has a great significance in implying the need
dates, inventory levels, unexplained losses, and storage for system improvement. Besides, the finding serves as base
line evidence for future works.
conditions.4
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Inclusion and Exclusion Criteria viewed face to face. Each interview, on average, lasted for 20
Having plenty of experience in the logistics management minutes. The interviews were conducted by the principal
of program commodities was the inclusion criteria. We investigator to maintain consistency. The records were lis
excluded staff of the agency who were not present at the tened several times and transcribed from the voice recorder.
time of data collection and incomplete documents.
Measurements
Sample Size Determination and Sampling The following measurements were used in the current
study.16
Procedure
The study included all program commodities (17 HIV,31
1. Order Fill Rate: it measures the percentage of all
TB,12 MCH, and 10 malaria) managed by EPSA.13 The
customer orders placed to a distribution source over
sample size determination of RRF took the schedule of
a period that is filled correctly in terms of items and
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B fulfilled critera C chases. However, the total purchase orders evaluated are
¼B C � 100
@ Total no: of warehouses A 39 in number. Since 11 of the ordinary purchases had 36
visited orders (one purchase divided into many delivery sche
dules), the total number of purchase orders evaluated was
5. Value of unusable stock as percentage of total
39 in number.
inventory value: it measures the value of a stock
Out of seventy program commodities included in the
that was unusable due to damage and expiry as
study, the agency purchased 17 (24.29%) with emergency
a percentage of total items purchased during
a defined period orders at least once in the past year. A higher frequency of
emergency order record was for levonorgestrel
Value of unusable stock as % of total (D-Norgestrel) - 0.75mg – Tablet (Table 2).
� �
value of unusable stock
inventory value ¼ � 100
total inventory value
Wastage of Program Commodities
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Table 1 Central EPSA Order Fill Rate of Program Commodities April 2019
No. of Orders Mean Standard Minimum Maximum Orders with Acceptable (>80%)
Evaluated Deviation Fill Rate N (%)
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Storage Conditions of Central EPSA conditions reduces damage and simplifies tracing and track
ing. If that is so, officers can identify nearly expiring and
Warehouses
From the ten warehouses assessed, only 6 (60%) ware lasting commodities without difficulty. It’s also easier to
houses met acceptable storage conditions (fulfilled 80% of identify seasonally consumed products. In this study, how
the criteria or more) (Figure 1). ever, the informants reported that some of the warehouses
do not possess adequate facilities to manage large inven
tory. In some of them, storage spaces were insufficient.
Challenges for Inventory Management of
Warehouse managers store the products in different ware
Program Commodities houses where vacant space is available. Some warehouses
The analysis of the in-depth interviews identified three
are old designs and not suitable for storage. Most of the
themes related to warehouse adequacy, demand informa
warehouses have no appropriate dock. Some of them did not
tion, and capacity building.
have the required storage equipment. One of the store
Warehouse Adequacy-Related Challenges managers explained the problems as follows,
An adequate and well-managed warehouse ensures speedy Some warehouses have no racks and other necessary
and complete service whenever customers place their handling equipment. As a result, we face difficulty to
orders. Besides this, unlike other ordinary goods, pharma zone the warehouses implementing FEFO (First Expiry
ceutical warehouses require special care for maintaining the First Out). Some of the products are stored on pallets
quality of products. Moreover, maintaining proper storage making the physical tracing difficult. Due to this,
sometimes, though there is sufficient stock, products are or excess stocks. Despite this, the interviewees pointed up
considered as stock out. Consequently, they expire. a lack of clear and accurate demand reports. As a result,
the agency usually faces an imbalance between demand
Demand Information-Related Problems and supply.
Estimating future demand is one of the most critical activ One of the interviewees explained the problem as
ities an organization involved in the supply chain can follows:
undertake. Precise demand information from customers “The major problem we encounter in managing our
on different levels is the primary decision-making factor. inventory is unclear and inaccurate demand reports from
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If demand data arrive incomplete, inaccurate, or delayed, our customers. Sometimes this obliges the agency to store
the order management relies on assumptions and experi excess/small amounts. At last, this ends up with stock out or
ence. Improvements in the quality of demand data can expiry. ”
produce a ripple outcome. Significant reduction of inven Capacity Building- Related Challenge:
tory buffers, obsolete products, and storage space deficit Building capacity of staff is a key to the success of any
are among the mentioned outcomes. In turn, these organization. The lack of qualified individuals is a threat
improvements lead to higher-order fill rates. In general, that results in ineffective role performance. In this respect,
effective demand planning allows an institution to be more several organizations overlook supportive staff like dri
proactive and puts it in a better position to avoid stock outs vers. Adequately trained staff is not only more capable
100
Percentage of storage condition critera met
90
80
85 86
84 82
81
80
70
74 73
60
62 63
50
40
30
20
10
0
WAREHOUSE1 WAREHOUSE 2 WAREHOUSE 3 WAREHOUSE 4 WAREHOUSE 5 WAREHOUSE 6 WAREHOUSE 7 WAREHOUSE 8 WAREHOUSE 9 WAREHOUSE 10
EPSA Main branch Warehouses
Figure 1 Percentage of acceptable storage condition met by EPSA warehouses, April 2019.
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but less likely to cause costly mistakes. A well-trained The finding is almost near to the target wastage rate of the
employee is better accustomed to the particulars of their Ethiopian health sector development program.18 Though the
job and will require less supervision. Aside from this, aggregate wastage rate was acceptable, individual evaluation
interviewees mentioned a lack of sufficient training on of the wastage rate of program commodities shows significant
pharmaceutical handling among drivers and loading- wastage. For example, the wastage rate of malaria (13.18%)
unloading professionals. As to the informants, providing and TB commodities (4.1%) were more than a hundred times
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adequate orientation to those supportive staff is a possible the acceptable standard. The key informants’ interview
solution for this. One of the EPSA inventory officers high revealed that failing to apply FFEO and damages due to
lighted the problem as follows; mishandling during delivery and loading-unloading might
“drivers sometimes transport other non-pharmaceutical have contributed to the wastage.
products together with pharmaceuticals exposing products The availability of drugs largely influences the quality of
to physical damage. Furthermore, some of the individuals healthcare and patient satisfaction. Despite this, in the current
executing loading and unloading have inadequate aware study, program commodities were out of stock on average for
ness of pharmaceutical handling. Owing to this, disar 8.5 days with a higher duration for malaria commodities. The
rangement and damage to the products occur. ” finding is comparable with a study conducted in Kenya
which reported significant malaria commodity stock out.19
Discussion Regarding MCH products, out of 12 MCH products assessed,
An effective inventory management system fully satisfies 5 (41.7%) were out of stock on average for 5.83 days. The
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customer orders in the correct quantities and type. In finding is in agreement with the study conducted in Kenya,
Ethiopia, the fulfillment of orders of at least 80% is where 40% of MCH priority commodities were out of
acceptable.16 In the current study, 16 (14.81%) orders stock.20 Concerning TB commodities, 11 (35.48%) were
fulfilled above 80% with a mean order fill rate of 52.9%. out of stock on average for 8.39 days. This result is better
The finding is comparable with the Benin national supply than the audit report of global fund grants in the Republic of
chain assessment.17 However, it was far below the accep Niger, where TB drugs were out of stock for several
table Ethiopian standards. Evidence from the key infor months.21 The discrepancy might be associated with differ
mants showed that because of storage space deficit, store ences in disease demography between the two countries.
personnel maintains products at any vacant space avail Non-availability of such essential program commodities at
able. Owing to this, tracking and tracing of products the upstream supply chain system means a lot. It potentially
became difficult leading to lower-order fill rates. The find results in service interruption at the downstream supply chain
ing implies that there is a need for extensive reform in the system. Besides, stock out of such vital items threatens the
order processing system of the agency. Effortful evaluation survival of many.
is needed to identify potential areas of intervention. According to the Ethiopian standard, warehouses
The finding revealed that from 14 purchases of pro should fulfill at least 80% of the storage condition
gram commodities, three (21.43%) emergency orders were criteria.16 In the present study, however, only six ware
issued for 17 items. As a result of this, the possibility of houses met acceptable storage conditions. The qualitative
stock out and supply interruption was higher in the agency. result also revealed challenges like insufficient storage
Usually, emergency orders are needed to cope with pro spaces, old warehouse designs, and a shortage of ware
duct stock out. However, emergency orders are ruinously house equipment. According to WHO, maintaining proper
expensive as compared to regular once.1 The finding sug storage conditions for health commodities is vital to ensure
gests that EPSA has incurred additional costs that could be their quality and accordingly serve customers. The design
prevented by adequate inventory management practices. of large storage buildings should take into account the
As evidenced by the in-depth interview, the inefficient storage conditions required for different products. Unlike
demand planning and forecasting emanating from inade other ordinary goods, storage conditions can easily
quate demand information contributed a lot to the occur damage health commodities. Recommended storage con
rence of emergency orders. ditions should be maintained to maintain product quality.22
A resilient inventory management system results in a well- Thus, in the agency, there is a critical need for regular
maintained stock level and lesser wastages. Promisingly, the evaluation of the adequacy of storage facilities, layout, and
wastage rate of program commodities in the agency was 2.1%. stock arrangement.
Abbreviations References
3TC, Lamivudine; AIDS, Acquired immune deficiency 1. Management science for health. MDS-3: Managing Access to
Medicines and Health Technologies; 2012.
syndrome; ART, Antiretroviral treatment; AZT,
2. Kritchanchai D, Meesamut W. Developing inventory management in
Zidovudine; EPSA, Ethiopian Pharmaceuticals Supply hospital. Int J Supply Chain Manag. 2015;4(2):11–19.
Agency; HCMIS, Health commodity management infor 3. USAID/DELIVER project. Guidelines for managing the laboratory
supply chain: version 2. Arlington, Va: USAID | DELIVER
mation system; HIV, Human immune deficiency virus, PROJECT, Task Order 1 [Internet]; 2008:1–86. Available from:
LIAT, Logistic indicator Assessment Tool; LMIS, logistics https://www.jsi.com/JSIInternet/Inc/Common/_download_pub.cfm?
id=11109&lid=3. Accessed May 12, 2019.
management information system; LSAT, Logistic System
For personal use only.
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18. Federal Democratic Republic of Ethiopia Ministry of Health. Health 21. Global Fund. Global Fund Grants In The People’ s Republic of
sector development programme IV plan 2010–2015; October Niger; September 2017:1–19.
2010:1–141. 22. John Snow, Inc./DELIVER in collaboration with the World Health
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misguided competition policies. Malar J. 2009;8(1). doi:10.1186/ Other Health Commodities. 2003:114
1475-2875-8-305
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Chains and the Role of KEMSA. Arlingington: DELLIVER/John
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