Integration of the UNICEF nutrition supply chain: a cost analysis in Kenya.

Abstract

Integration of parallel health commodities supply chains into one national supply chain is becoming more common globally as national health systems are strengthened and organizations realize the potential for increased effectiveness and cost reduction from integration. UNICEF conducted a 10-week pilot to integrate its supply chain for nutrition commodities into the national Ministry of Health supply chain for medical commodities. This paper is a cost analysis of the integration process in two counties, comparing four scenarios of cost structures before, during and after integration. It found as a result of integration, within the two counties involved in the 10-week pilot period, 14% cost savings were obtained on transport, warehousing and staff costs, when compared with the pre-integration total cost structure, and 37% when extrapolated out to a year as initial capacity development (training) costs were spread over a longer period. When looking only at recurrent costs and not one-time investments in capacity development, cost savings increased to 42%. More of the costs post-integration were invested in capacity building activities to strengthen the Kenyan health system, as opposed to pre-integration when more costs went towards higher transportation costs. Besides the positive impact on costs and savings generation, integration increased the reliability of forecasting and reporting, improved communication and coordination across stakeholders, decreased stock-outs and strengthened the capacity of the health system. This article also includes lessons learned and challenges of the integration process, useful to other country programmes considering similar integration. Because of the potential for a positive impact on health systems strengthening, combined with decreased costs and enhanced accountability, this is an exciting change not only for scale-up domestically, but for donors and implementing organizations to consider more broadly in other countries.