Outsourcing saves money: Using private operators to distribute medicines and other health commodities can reduce costs by as much as one-third or more.a | There is general reluctance by in-country leadership to give up government ownership of delivery systems and infrastructure. | Evaluate what lies within government’s core competency, and what lies outside of it. Through oversight and enforcement of strict service-level agreements, governments can maintain control over their supply chains even while outsourcing the logistics; government still owns and manages the process, even when non-government drives the trucks. |
Built-in performance incentives: Logistics operators are motivated to provide effective, efficient service and prevent stock-outs in order to win and keep their contracts. | There is insufficient capacity and expertise within governments to write and effectively manage contracts with private operators. | Assist governments with building effective contract management and enforcement teams. |
Medical staff at service delivery points are no longer responsible for restocking inventory and can focus on patient care; new jobs are created in the local private sector as local companies hire more employees and otherwise invest in their own growth to secure government contracts. | Outsourcing the logistics of health commodity distribution could threaten to eliminate some public-sector jobs. | Governments may need help restructuring their human resources and retraining and reassigning employees for oversight and supervisory roles; local private operators may need training and other support. |
In a government-run distribution system, employee working hours and staffing levels are fixed; private operators can be more flexible, so government pays only for what it needs and uses. | In some markets, it can be difficult to find private-sector operators trained and equipped to use state-of-the-art approaches to inventory management and to comply with strict requirements regarding storage and transport of medicines. | Private-sector donors or businesses, acting as fourth-party providers, can assist in the professional development of local private-sector operators. |
Contracting with multiple operators can help spread risk, so that the failure of one is far less likely to bring a whole system down. | Concerns exist about long-term financing and sustainability of the new health distribution system given the temporary nature of donor support. | Private-sector expertise can help with the necessary costing analysis, but top-level, in-country leadership must take ownership over the process—and the solutions. |