Case Study
Kenya
Download this case study in the following languages:
Executive summary:
In recent years, the most significant change to the governance of public health in Kenya has been the new constitution that devolved significant decision-making from a national level to the forty-seven counties. However, recognising supply chain as a critical enabler of public health, the Kenya Medical Supplies Authority (KEMSA) Act of 2013 appointed KEMSA as a centralised authority responsible for the procurement, warehousing and distribution of all acute, chronic and strategic medicines. The centralised role for KEMSA, and the environment established by the Kenya Health Policy 2014–2030, and the Public-Private Partnership in Health (PPPH) policy framework have enabled significant public-private partnerships.
KEMSA has undergone a significant organisation reform process to streamline and improve the functioning of the supply chain. This reform process required the initiation of a strategic change management program including:
- Technical assistance from the private sector: Following a national task force assessment, KEMSA was mandated to retain core supply chain functions and outsource customs clearance, freight forwarding, warehousing and transportation to the private sector. The appointment of departmental ‘change managers’. The availability of medicine was substantially improved across the country as a result.
- A new approach to contracting: well-constructed, mutually beneficial and commercially viable contracts with private sector partners have provided a cornerstone to Kenya’s success with regard to outsourcing. An example of this is an important contractual requirement set by KEMSA with outsourced transport partners to mitigate the risk associated with truck drivers. KEMSA insisted on having KPIs that ensure system-based tracking of vehicles, adherence to driver testing and compliance, a driver rotation policy, identification of issues associated with driver performance and timeframes to resolve such issues. This monitors fleet and improves delivery cycle performance between the district warehouses and last mile. The second example of successful outsourcing is illustrated by the partnering of the government of Kenya with DHL. DHL provide freight forwarding and customs clearance services to KEMSA in-country on a multi-year contract which has seen the benefits of improved performance and collaboration at the ports.
In-Sourced Functions:
- Forecasting
- Procurement
Out-Sourced Functions:
- Customs clearance
- Freight forwarding
- Warehousing
- Transportation
The examples from Kenya illustrate outsourcing good practice that informs the development of the Outsourcing Toolkit. These include best practice examples such as tools for policy alignment, communication and engagement, supply chain mapping, inbound logistics, primary distribution, last mile distribution, dynamic contracting, systems and technology, and change management.
Health sector policy
In 2013, as Kenyan reforms took effect and the government shifted to devolve supply chain decision-making to the 47 counties, the KEMSA Act of 2013 was the pivotal statutory act promulgated by the Parliament to appoint KEMSA as the centralised authority responsible for the procurement, warehousing and distribution of all acute, chronic and strategic medicines to these 47 counties. Specific policy evidence supporting outsourcing to the private sector as part of an overall strategic reform programme is found in the Kenya Health Policy 2014-2030. It articulates eight strategic objectives for the Kenyan health sector towards Universal Health Coverage as the overarching goal and details the Kenyan government’s willingness for increased and strengthened public-private partnerships towards the achievement of these objectives. The development of a Public-Private Partnership in Health (PPPH) policy framework is recommended to guide the public-private partnership process in Kenya, alongside appropriate legislative guidelines to regulate the private sector in line with existing laws, and reform incentive mechanisms that attract the private sector to under-served areas across the country. Within this framework, the Kenya Health Policy 2014-2030 encourages the private sector to invest in the provision of health care services and infrastructure to decrease the burden on the Kenyan government.
The Health Products and Technologies Plan of Action (2018-2022) was developed by the Kenyan Ministry of Health as an Action Plan based on the eight objectives outlined in the Kenya Health Policy 2014-2030 above. The establishment of an effective and reliable procurement process and supply chain system is one of the eight objectives that allow for improved management of essential medicines and other health products and technologies that enter Kenya’s health system. The Action Plan provides a basis for reforming the supply chain through policy changes that introduced innovations to service provision, management, and governance. These considerations are expected to appear in the soon-to-be developed and published the National Supply Chain Strategy.
The healthcare supply chain
The 2010 Constitution devolved the delivery of health services in Kenya to the 47 county governments for streamlining of the supply chain and better local representation, allowing the national government to retain oversight of health policy, standards and guidelines governing pharmaceutical commodities. Six key stakeholders comprise the supply chain system: (1) The Ministry of Health (MoH); (2) the Kenya Medical Supplies Authority (KEMSA) – the country’s central medical store that is an autonomous, self-financing agency authorised by the KEMSA Act 2013; (3) 47 county administrations; (4) Donors/Development partners; (5) Private Sector partners; and (6) Implementing Partners.
KEMSA has undergone a significant organisation reform process to streamline and improve the functioning of the supply chain. This reform process required the strategic management of change including technical assistance from the private sector and the appointment of departmental ‘change managers’. Following a national task force assessment, KEMSA is mandated to retain core supply chain functions and outsource customs clearance, freight forwarding, warehousing and transportation to the private sector. The availability of medicine was substantially improved across the country as a result.
3. PRIVATE SECTOR OUTSOURCING – EXAMPLES
This section shares examples drawn from a combination of desktop research and interviews of outsourcing to private sector partners. i. Reform and change management: KEMSA Context Pre-2013, the shift to outsourcing in Kenya started by the Ministry of Health and KEMSA acknowledging the need to change Kenya’s complex and unsustainable health supply chain operating model. There were at least ten parallel supply chains for different commodities that had to be integrated into one, a weak legal framework and poor governance structure. During the period 2008-2013, KEMSA had been facing challenges of a lack of funding or erratic funding flows, poor data visibility, a lack of infrastructure capacity, and diminishing public confidence in the agency to perform its mandate (UNICEF, 2017).
A national task force was appointed to determine the key functional areas of strength and weakness to streamline the supply chain, as described earlier, and it revealed that KEMSA had been providing services that were considered non-core. An urgent need arose to redefine KEMSA’s mandate – the resultant reform programme was enacted in the KEMSA Act 2013 and drawn up in the new organisational policy.
Outcomes and benefits
The impact of KEMSA’s reform programme resulted in:
- Increased accountability within the KEMSA operational unit
- Focus on core functions of demand planning, procurement, and central warehousing
- Hand-over of the regional warehouse's responsibilities to the private sector. This welcomed the advent of a warehouse management system, a modern infrastructure for fast processing, cold chain storage capabilities and well-trained warehouse staff
- The use of outsourced transport which brought a distribution fleet tracked by a GPS and integrated into a central planning system
- Greatly reduced wastage and stockouts at the facility level
- Substantially improved availability of medicines for patients with the ability to reach every facility nationally on a minimum 90-day cycle. After the reform, the availability of essential medicines is at 80% and specific programme medicines at 95% (UNICEF, 2017)
- County purchasing of medicines from KEMSA increased by 40-50 percent (UNICEF, 2017)
ii. Freight forwarding: DHL Context DHL is a leading international logistics company who provide freight forwarding and customs clearance services to KEMSA in-country. As described above, KEMSA approaches contracting in a centralised manner with a revised RFP process which has improved the tender process. DHL was put on 3-month trial by KEMSA to demonstrate capability and their ability to deliver measurable benefits. Thereafter, a multi-year contract with KEMSA was signed (up to 3 years). Outcomes and benefits The multi-year nature of contracts with KEMSA has permitted DHL to develop mutually beneficial outcomes. They have subsequently invested in systems and staff as a strategic freight forwarding supplier to the Kenyan government which has seen benefits of improved performance and collaboration at the ports. DHL has identified an opportunity for the government to have improved ‘early warning’ mechanisms for freight forwarders to go online and view, in real-time, the order details, volumes and timelines for delivery to Kenya. This could significantly optimise clearing timelines and enhance downstream supply. iii. Insight for a logistics glossary: DHL Context The logistics and supply chain sectors have a unique language and a vast set of terminology that has the potential to be misunderstood. DHL see the opportunity to develop a glossary that clarifies prioritised terminology (terms and definitions), weights, dimensions, and volumetric logistics relevant to the sector or functional area. Outcomes and benefits This would provide a strong foundational tool to ensure public sector officials and private sector partners are aligned to a common understanding before embarking on an outsourced partnership. It would act as a reference document as the partnership gets underway, thus enhancing communication between partners, and ensuring consistency from project planning to implementation phases. iv. Insight for supplier forums: DHL Context DHL are a private sector partner of the Kenyan government and when asked about ways to create more engagement opportunities with the public sector, such as Supplier Forums between government, counties, and the private sector, it was strongly supported. Supplier Forums present a platform for networking and structured, informative meetings between public officials and private sector partners centred around a health programme (e.g. HIV/AIDS) or a functional activity. Outcomes and benefits The observed benefits of Supplier Forums include good practice sharing from the private sector, opportunities for advocacy, enhanced planning and public-private collaboration for more sustainable working relationships, sharing of national regulatory updates or processes, and the collective opportunity to support government efforts to improve the supply chain system. DHL indicated that they would attend a Supplier Forum with their competitors to see these intended benefits come to fruition. v. Truck driver KPIs: KEMSA Context KEMSA having outsourced distribution fully to private sector service providers and focused on holding these partners accountable to KPIs. KEMSA has set a key contractual requirement of mitigating the risk associated with truck drivers. Instances of poor behaviour by truck drivers and health workers in the past have resulted in the resolution that contracts will be broken if transporters do not apply strict measures to monitor fleet and delivery cycle performance between the district warehouses and last mile. Outcomes and benefits The skills and capabilities of the truck drivers are pivotal to ensuring sound delivery of pharmaceuticals. The frequent driver changes during delivery cycles result in some drivers with poor understandings of important processes (knowledge of cold chain, delivery times for acceptance at a facility, administrative documentation). Some drivers drop stock without a receipt at the health facility which often leads to pilferage. KEMSA utilises KPIs to mitigate this. This has created a need for the private sector to assign officers and surveillance systems to run daily track and tracing of vehicles to optimise the quality and performance of final delivery to the last mile.
Conclusion
Kenya’s health supply chain system can be considered as being well-developed. The performance and success of this country’s reforms toward devolution and successful partnering with the private sector have been a function of six foundational elements. The first element is top-down support from MoH for the strategic plan for change within the supply chain system. The second element contributing to the success of the Kenyan health supply chain is the utilisation of supply chain mapping to provide an understanding of challenges and risks. The third element is appointing change management champions in every department. The fourth element to the development of a roadmap for the change programme including a clear action plan, accountabilities and timelines, budget sign-off, associated stakeholder involvement and cross-departmental participation. The fifth element is the identification of technical gaps and assistance requirements from small and medium-sized enterprises or the private sector. The sixth and last element is the transparency with private sector engagement through strong contracting and well-articulated KPIs.
This case study has unlocked significant good practices in the approach to outsourcing to private sector partners and assist governments in other African countries to drive improved outcomes for their health care supply chains.
References
Interview: Eliud Muriithi, Director of Commercial Services, Kenya Medical Supplies Authority (KEMSA), 18/06/2020. Interview: John Kabuchi, Supply Chain Officer within the Division of Health Products and Technologies, Ministry of Health, Kenya, 26/06/2020. Interview: Samira Low Head of Aid & Relief Sub-Saharan Africa, DHL Global Forwarding, 17/06/2020. Interview: Tim Smith Global Head of Aid & Relief, DHL Global Forwarding, 17/06/2020. Government of the Republic of Kenya. 2007. Kenya Vision 2030. Ministry of Health of the Republic of Kenya. Kenya Health Policy 2014-2030. National Council for Law Reporting with Authority of the Attorney General. 2010. The Constitution of Kenya. Parliament of the Republic of Kenya. Kenya Medical Supplies Authority (KEMSA) Act No. 20 of 2013. United Nations International Children’s Fund (UNICEF). May 2017. KEMSA After the Devolution: Financial Sustainability through a Supply Chain Strategy with a Strong Focus on Human Resources and Leadership. World Bank in Kenya