CASE REVIEW : PBULIC SECTOR HEALTHCARE SUPPLY

CHAIN STRATEGIC NETWORK DESIGN FOR KEMSA

ASSIGNMENT FOR SUPPLY CHAIN MANAGEMENT CLASS

MEMBER OF GROUP
1.
2.
3.
4.

KUSPRATAMA
29113021
FARIEZA QORIYANA
29113020
HALIFAH HAMZAH
29113069
DYAN SAPTURA
291130088
5. WILMAN NOVIYANDI29113054

YP 49

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
A. Case Overview

(Kenya Medical Supplies Agency) KEMSA is a body specifically established by the Kenyan
government to manage the circulation of drugs in the country. KEMSA is a state-owned

company that was given full authority to regulate the management of medicines in the
country of Kenya starting from the procurement, storage and distribution to the consumer.
The Kenya Medical Supplies Agency (KEMSA) is a specialized logistics providers for
medical Government Ministries of Medical Services / Public Health-supported health
facilities and Programmes in Kenya. KEMSA was established as a state corporation under
Cap 446, through the Kenya Medical Supplies Agency Order, 2000 (Legal Notice 17 of 11
February 2000) .It plays the role of procuring, storing and distributing commodities for the
public health sector. The role of KEMSA in healthcare industries is for:
1. Developing and operating a viable commercial service for the procurement and sale of
drugs and other medical supplies,
2. Providing a secure source of drugs and other medical supplies for public health
institutions,
3. Advising the Health Management Boards and the general public on matters related to
the procurement, cost effectiveness and rational use of drugs and other medical
supplies.
Along with the extension of the scope of activities undertaken by KEMSA, which is
responsible for distributing all drugs in Kenya region then comes the problem during the
process of implementation. Problems faced today by KEMSA is still not able to meet the
market demand for the drugs it supplies. KEMSA during the process of undergoing the
medicines supply chain, only able to meet the needs of the market as much as 21% of the
total demand in all regions of Kenya. It is definitely going to make a vacuum in the supply of
medication at hospitals and pharmacies are ordered directly from the warehouse inventories
of KEMSA
Seeing the problems occurred, KEMSA currently working with the team from the World
Bank to work together finding solutions to problems that are estimated occured in the supply
chain process that is implemented by KEMSA in distributing the medicine. As we have seen
that the problem of drug supply can not meet the market demand, it will have an impact on
the quality of health of the population in the country of Kenya where many residents who
need medication when it turns out they can not have it on when needed. It will also have an
impact on the public perception of systematic credibility and concern current government
goes. Things like this certainly can not be left continously, so that the handling of this issue
must be addressed seriously and become a top priority.

B. Case Diagnosis

In the process of conducting its business activities, KEMSA as the main actors in the
distribution of drugs throughout the region Kenya has a problem that has a significant impact
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on the sustainability of its business, which is not able to meet the needs of the market over the
circulation of drugs. KEMSA is only able to meet the needs of as many as one-fifth of the
total market demand in all regions of Kenya. This of course has the financial and political
impact as the state-owned company. The financial impact is the loss of the opportunity to
gain more sales bazaar and political impact is the decline in the credibility of the people of
Kenya on his government's performance.
KEMSA in collaboration with the World Bank team to find solutions to problems that arise at
this time. The weakness of the key points related to the supply chain process that is run by
KEMSA in the operations which resulted in case this problem arises. The weak points in the
supply chain include:
1. authorization process that is executed by supply chain KEMSA still centralized,
meaning that there is only one distribution center (DC) located in Nairobi, in charge
of organizing the flow of medicine distribution throughout the territory of Kenya.
2. Storage warehouses owned KEMSA drugs outside of Nairobi is used only to store
goods inventory turnover process is slow.
3. It took a long time to deliver drugs from warehouses up to the outskirts of large cities
because the access road is not as good as the urban area, especially during the rainy
season lasts
4. Transportation costs take a lot of proportion compared to most other operational costs.
Nearly 50% of the operational costs incurred by KEMSA used to finance the delivery
process of medicine to the consumers
C. Case Question
1. What are the main challenge of Kenya Healthcare Network System ?
The main challenges currently being faced by KEMSA is going to meet all
the needs of consumers of drugs-presumably the circulation approximately
90% of the total market demand in all regions of Kenya in urban, rural,
coastal areas and even border in all regions of Kenya. Until now KEMSA
can only meet 21% of the total market demand in all regions of Kenya, so
it means in every years the medicine in a several regions will be scare and
stocked out due of lack of the medicine inventory both in hospital and
pharmacies.
The other challenges are to overcome transportation costs were deemed
too big which reached 40% - 50% of the total costs incurred by KEMSA in
running their business. Another solution needs to be done to reduce this
massive transportation cost compared to the other expenses. The other is

how to distributed medical equipment also medicine to big city or rural areas so can
create distribution system more efficiently than before.
2. What the approach taken to solve the problem ?

The techniques taken by the team of analysts to identifying existing

problems and looking for alternatives to find solutions to existing problems
consist of :
Structural design of the network, the analysis team examines the
stages in the process of distribution that can be made possible bottlenecks
in the supply chain process of distributing drugs. Each of the stages in the
supply chain processes are reviewed in such a way that fairly significantly
the findings obtained in influencing the shortage of medicines at the
retailer level. If found the bottleneck in the supply chain process, the
analysis team then conducted a simple simulation by inserting various
alternative solutions and analyze which solution is best for implementation
in the field.
Supply & Demand Analysis, analyst team here make the process of
collecting data on the consumer, which is how much the amount desired
by the consumer demand and how many points the concentration of the
location of the consumer is seen of their geographic (see figure 1)
location. Any data that has been collected and then processed and
analyzed with the help of software so "Supply Chain Guru" to know, among
others:

The best point to determine the location of the new distribution

centers in order to meet the current market demand
Estimates of the number of medications that must be supplied in a
particular area refers to the point spread of consumers based on the
geographic condition
Estimate whether it should continue to use a centralized system or
switch to a centralized system was apparent from the current point
spread consumer

Demand profiling, variability and inventory, analysts expect the team

here is likely to change the policy of the supply chain system are:

inventory system that should be used whether it should use pull or

push inventory management systems
Determining safety stock return time limit lead time is used in
accordance with the conditions of both the point spread of
consumers in urban areas and in the urban fringe
Figure 1 : the consumer geographic position

3. What are the proposed alternative ?

Alternatives offered to solve this problem include such as :

Changing inventory management systems, especially in densely

populated areas or urban areas pull systems, given the number of
customers and the demand for drugs can be predicted with the help
of software "Geographic Information Systems". Then for an area
close to the border keep using push systems because each period
the demand for drugs is always changing and unpredictable.
Changing the system of centralized command center to
decentralized supply chain supply chain managed by each region or
province across the plains of Kenya. Headquarters (Central
Distribution Centre) do not need to send another medicine to
remote areas because it has been done by the regional office.
Changing any storage warehouse in each region into a regional
office (Regional Distribution Centre), so they are not only just as a
storage area but given the authority to regulate the distribution of
drugs into the hands up to the retailer, so the work load of the
central office (Central DC) becomes lighter. It can also make lower
transportation costs than previously though it will add to the extra
cost of storage (See figure 2).
Each drug fast inventory turnover, ie 100 of 1100 drugs
administered by KEMSA distribution process can be managed by the
regional office, given the number of sales and the inventory scarcity
problem occurred on the drug. (Pareto Chart Analysis)
Enlarge the warehouse capacity in each region, so it is not only able
to accommodate slow-moving inventory of drugs but the drugs that
can accommodate rapid inventory turnover.
Looking for investors who are willing to fund the repair process in
the supply chain system to change to a new model. Since KEMSA is
a government company can use the funds from the state budget
that has been allocated or seek funds from foreign banks.
Figure 2 : Impact of scenario financial

4. What criteria are used to choose the best solution ?

Every solution offered not everything can be implemented directly in the field. To
convince the decision makers will require a criteria as a benchmark to take the next step.
The criteria used so that the solution can be used as real is to include every solution
offered in the program "Supply Chain Guru". (See figure 3)
Supply Chain Guru is a software that can be the basis of a model to determine the path of
the point distribution of a product based on its geographic conditions and can also
perform a simple simulation of each input solution that is incorporated into the software.
There are also other advantages of the software "Supply Chain Guru" among others are:

Find Hidden Inefficiencies in the Current Supply Chain

Run Scenario Analyses to Answer the Question, "What If ...?
Test Outcomes Using Simulation Technology

Although each solution can be made inserted into a simulation, but the results of these
simulations are not pure true, because there are many other criteria that may affect the
results of the field or in fact events beyond the control of the company. (Out of control
dimension)
(Figure 3 : Supply Chain Guru Interface)

5. How do you do that the proposed solution will work or fail ?

The best solution is to change according to our group that initially supply chain system is
centralized to decentralized. This will certainly change the inventory system and the
authority of the inventory policy dramatically. therefore to ensure that the desired results
can be achieved, every human resources are in the supply chain system must be prepared
to face the massive changes as well as possible but if the human resources inside the
supply chain system is not ready to accept the change, in the end result will be same as
before or even worse.
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