Monday, November 17, 2014

Outsourcing Public Health Logistics in Developing Countries


In many developing countries around the world, it has become an increasingly big challenge and high priority for supply chain managers in public sector health systems to appropriately outsource parts of a supply chain to private sectors. This is largely to major increases in funding and donor support for many health programs and limited available resources to expand internal capacity to manage, store and distribute efficiently.
The decision to either build up internal capacity or outsource to the private sector is not always clear, but there are limited resources available to guide managers through this decision-making process. One article that I came across offers guidance on three basic aspects of outsourcing decision: What, When, and How.


This first section talks about the “what” of outsourcing, such as the supply chain functions to consider outsourcing, types of service providers, and supply chain collaboration. This is followed by some specific examples of outsourcing logistics in public sector health systems. Some examples include the government of Bangladesh’s decision to gradually hand over control of its supply chain to the private sector, and the Democratic Republic of the Congo’s usage of 4PL in supply chain management. The decision criteria and lessons learned are also discussed in this section.


The next section describes basic analytical tools, such as cost-benefit and feasibility analyses, that are necessary in the decision process. Non-cost related considerations are also covered. For example, the political feasibility of outsourcing should be considered because the issue of job loss is involved. Furthermore, contracting and payment options also need to be wisely decided, as it will affect relationships with private sectors.


The last section centers on the topic of contract management, and lists common pitfalls and ways to avoid them. In addition, it provides guideline for building a project team to properly manage the outsourcing process.


The decision on whether or not to outsource is a tough one, and the process to reach it is just as complicated. At the end of the day, the benefits of outsourcing (such as reduced number of government functions in providing public health services) must be carefully weighed against the costs (such as different types of management, oversight, and funding). But regardless of these challenges, as technology advances in an ever increasing pace and the costs associated with maintaining pace with these advances keep climbing, many countries’ government systems may have little choice other than t to outsource some of its public health functions to private sectors. Now, the question I have been wondering is: Whether or not the U.S. government should outsource healthcare more, given the extremely expensive health system that we already have?

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