Kathleen McDonald asks for my views on INGOs who set up their own (parallel) supply lines for medical supplies, as opposed to using the country’s normal supply lines.
Let me start with a truism: horses for courses. When deciding to use the local supply chain or set up your own, you will need to take into account your programme needs as well as your environment; and that means that it is impossible to make any sweeping statements about which way to go is better.
Reasons to set up a parallel supply chain
Some of the reasons that INGOs give for setting up a parallel supply chain:
- Specific supplies are not locally available. Some programmes are so far ahead of what happens locally, that they use supplies that cannot be gotten through the national supply chain. This happened quite a lot in the early years of the international HIV response, when it was hardly ever possible to source antiretrovirals locally. It is still a consideration in some programmes.
- Local supplies are of unproven quality. An INGO that takes its duty of care towards its patients seriously, will want to ensure that medications and other medical supplies qualitatively sufficient. This is not always easy: local producers and distributors are not always open to audits by customers, especially not if they cannot be guaranteed a certain minimum amount of custom. National regulatory agencies in ‘weak’ nations often lack the means to adequately ensure quality.
- Local suppliers cannot scale up sufficiently. This can be a consideration in very large programmes or responses, especially in case of outbreaks/epidemics.
- Local supply chains have broken down (temporarily). This will often be the case after large disasters or areas that are prone to violent conflict.
- Local supplies are (much) more expensive than imported ones. It might be surprising, but in quite a number of cases imported supplies – even factoring in transport, taxes and import duties, clearing costs, and other incidental costs – can be cheaper than locally bought ones, sometimes by a large margin. This usually happens when only a small number of suppliers have a stranglehold on the market.
Reasons not to set up a parallel supply chain
Of course, there are some very good reasons not to set up a parallel supply chain too:
- Parallel supply chains damage local structures. If local suppliers are pushed out of business due to our parallel supply chain, the long-term damage to the health of the population might actually be worse than what is gained by our programme.
- Parallel supply chains send the wrong message. In the long term, the goal of every INGO should be to restore the population’s own capacity. Note that I am not saying here that every organisation, even emergency responders, should do developmental work – but I do maintain that we should always do our best to keep that long-term goal in mind and should select solutions that (at the very least) damage it as little as possible. Parallel supply chains send a message that is diametrically opposed to this: ‘only what comes from abroad has sufficient quality’.
- Using local supply chains is a great way to find out where and how to help. If we know first-hand what are the strength and weaknesses of the local supply line, we are in a prime position to offer support to address those weaknesses.
- Local suppliers can be great sources of information. Any supplier worth their salt (in fact, any entrepreneur worth their salt) knows their markets well. Build up a good and lasting relationship with your supplier, and they might be the first one to flag that sales of ORS in a certain district have gone through the roof – your first indication of that cholera outbreak that the local government desperately wanted to keep under wraps. Do you think you would ever get that information if you are undermining their position?
- Local supplies sometimes are more appropriate. Your European-made oxygen concentrator might work perfectly well in a hospital in Berlin, but will it work in the hinterlands of whatever dusty, hot, voltage-challenged country you find yourself in? You are more likely (although by no means certain) to find something that works at your friendly local medical supplies salesman.
So what’s best?
As always, you will need to weigh the pros and the cons as they apply to your situation. There is no set ‘best’ model that is valid always and everywhere, and you will need to do some serious and active fact-finding to be able to find what’s best in your situation. It will probably mean that you will need to set up more than one supply chain, procuring some supplies locally while importing others. And what’s worse: you will need to do so again and again as circumstances change: in many developing countries, local markets can change dramatically over the course of as little as a year. But then, nobody said our work was easy.
Having said all this: many INGOs do not do their due diligence and set up parallel supply chains by default, without considering whether this is the right thing to do. While this is perfectly reasonable in an emergency response situation in which we don’t have time to research all pros and cons, and could even be acceptable in the first phases of a project while we scope out the local situation, I would say that this is not acceptable in the long term. If you work in one of these organisations, or in a programme in which these decisions are not regularly examined and re-examined, you could do worse than to start a discussion whether you are really doing the right thing.