In this section you will learn:
- What performance management is
- How to use key performance indicators (KPIs) to regulate relationships between the ministry of health and the vendor service provider
Introduction to performance management
Performance management of outsourced third-parties relates to the application of processes, methods, metrics, tools, and technologies to create performance consistency for specified supply chain functions of strategy, demand planning, procurement, and logistics.
These tools typically measure four key outcomes:
- Quality of products and/or services provided
- Timely delivery to facilities and patients
- Availability of products and services
- Adherence to pricing
The ability to define and then measure the quality and service levels of a vendor is critical. Performance management is a tool to track and monitor vendor service delivery against agreed KPIs, prioritise ‘must-do’ tasks and activities for vendor performance, support continuous improvement within functional areas and ensure accountability of spending. When performance management is done well, it strengthens healthcare supply chains and builds trust and confidence to enable further investment and strengthening of supply chains.
Good practices for performance management
For effective performance management, it is necessary to:
- Align KPIs to performance to the contract objectives to regulate and guide service level deliverables, and drive good performance outcomes and behaviour by the vendor
- Ensure appropriate baseline requirements are clear with incentives for improved performances (and penalties for poor performance). It is critical that such bonuses and penalties are aligned to in-country Procurement Laws and do not create harmful payment practices.
- Conduct regular performance reviews (minimum every three months) to identify issues and course-correct performance as required.
Key performance indicators regulate supplier relationships between the client (ministry of health) and vendor service provider
KPIs are central to guide and regulate the contract performance and client-vendor relationship from the start. It is critical for the KPIs to be aligned to the functional and contractual objectives of the agreement as they are designed to provide a comprehensive perspective of supply chain performance to ensure full adherence to the service level agreement (SLA). It is important for the KPIs to be clearly prioritised between core and optional types so as to provide appropriate focus and collaborative effort for the senior management teams within the ministry of health and the outsourced vendor. KPIs must be aligned to the contract objectives to regulate and guide service level deliverables and drive good performance outcomes and behaviour by the vendor.
Two types of KPIs
These are ‘must-have’ KPIs that are central to supply chain performance of the vendor. They should be used to measure all the primary deliverables as laid down in the vendor contract.
These complement core KPIs and are appropriate for more developed public health supply chain systems, or more detailed analysis of specific performance areas. They may be adapted to country custom and practice.
How to select KPIs
KPIs affect the ministry of health's ability to effectively hold third-parties accountable to service delivery as defined in the outsourcing contract. Thus KPIs must be aligned and tailored to contractual and functional requirements to ensure effective management of third-parties. The ministry of health and vendor implementation team must engage to ensure full alignment with KPIs.
Good practice requires KPIs to be aligned to the SMART goals, procurement laws and functional outsourcing objectives.
SMART goals are Specific, Measurable, Attainable, Relevant and Time-bound
S = Specific
Be as clear and specific as possible with what you want to achieve.
Example: “Improve the availability of X medicine at all clinics and hospitals.” M = Measurable
Decide what evidence will prove you are making progress toward your goal. Set milestones along the way to give you the opportunity to re-evaluate and course-correct as needed.
Example: “Improve availability of X medicine at all clinics and hospitals by 75%.” A = Attainable
Decide whether it is something you can achieve now or whether there are additional preliminary steps you should take to become better prepared. Example: “As a result of capacity building in planning and forecasting, we will be able to improve the availability of X medicine at all clinics and hospitals by 75%." R = Relevant
Each of your goals should align with your larger, long-term goals. If a goal does not contribute toward your broader objectives, you might rethink it.
Example: "Increasing the availability of X medicine at all clinics and hospitals by 75% is relevant because without this medication patients have poor health outcomes and the cost per patient for treatment increases over time." T = Time-based Set a realistic time period to achieve the goal in.
Example: “It will take 24 months to increase the availability of X medicine at all clinics and hospitals by 75%.”
Examples of KPI tracking tools
- Source of funds
- Forecast accuracy
- Supply plan accuracy
- Vendor on-time and in-full delivery rate
- Percent of international reference price paid
- Percentage of orders placed as emergency orders
- Supplier fill rate
- Procurement methods employed
- Percentage of health products procured listed on the National Essential Medicine List
- Customer clearance time
Warehousing and inventory management
- Stocked according to plan
- Stock-out rate by tracer commodity by level in the system
- Stock accuracy
- Order fill rate
- The wastage from damage, theft, and expiry
- Cost of warehousing operation
- Stock turn per annum
- Number and duration of temperature excursion in a cold storage facility
- Stock-out rates of one or more tracer products by facility
- Order turnaround time
- Percentage of income batches tested for quality
- Percentage of products batches tested that meet quality standards
- On-time delivery to facility
- Cost of distribution operation
- Percentage of orders placed by health facilities as emergency orders
- Staff turnover rate
- Percent of supply chain positions vacant
Data and information
- Facility reporting rates on time
- Facility reporting rates-complete reports
Dashboards are designed to track performances of vendors against standards set in the contract. The format and mix of the KPIs can be adapted to measure activities (e.g. On-Time In-Full, cycle time, order frequency, availability, pricing adherence).
The KPI tracker example below is monitoring:
- Forecasting and supply chain accuracy
- Human resources