[e-drug] Waste as share of procurement cost - what is acceptable? (3)

["Michael Keizer" <gnm7-uva6@spamex.com>]

E-DRUG: Waste as share of procurement cost - what is acceptable? (3)
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Hello Beverley,

'Acceptable' waste is a function of circumstances. From a logistics point of view, 'waste' actually is not waste, but the oil that lubricates the
process. To give one example: the larger the buffer stocks, the smaller the
chance of stock-outs in case of unexpectedly high consumption or of delivery delays; however, large buffer stocks will usually also lead to higher losses due to expiry. You need to weigh the pros and cons of high buffer stocks on a case-by-case basis; e.g., for ART drugs in a country that experiences frequent delays with importation, they need to be much larger than in for paracetamol in a country with a smooth flow of nationally produced drugs; but in the former case you can expect much higher losses than in the latter. This is one reason why I prefer to speak about 'losses' rather than 'waste'; it indicates that it is part of a normal process, not something to avoid at all cost.

This issue of buffer stocks is just one example of factors that affect the
relative magnitude of losses. A more extended (but by no means exhaustive)
list:
- Scale (the larger the scale, the smaller the losses will be *relative to
the full flow*)
- Nature of the material (how essential is it not to experience stock-outs,
can it be (temporarily) replaced by something else, etcetera)
- Nature of the program (e.g. how badly would a stock-out affect the
outcome, what are the options of adapting the programme to available
materials instead of vice versa)
- Logistics of the material (procurement, importation, transport, etcetera)
- Dependability of the supplier
- Nature of the material (e.g. for some materials expiry is only six months
after production, which could impact on losses in case the logistics and
programme cycle is close to or even longer than that)
- Circumstances in which the programmes works (e.g. insecurity could lead to much higher losses due to theft)
- Climate and infrastructure (e.g. drugs that are kept at 40 degrees C will
usually expire before the 'official' expiry date, but this might still be
cheaper than having to air-condition your storage).
- How well can you predict consumption
- Etcetera, etcetera

So you can see that there is no hard and fast rule on what is acceptable.
Five percent sounds a bit high for an ongoing programme in most countries,
but there have been circumstances in which I have not blinked at losses that were as high as 25 percent. Admittedly this was in a very special case in very special circumstances, but it illustrates my central point here: nobody can quantify 'acceptable' losses without knowing much more about the context of the situation.

Michael Keizer 
(student, La Trobe University, Australia)
gnm7-uva6@spamex.com