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Society of Family Health (SFH) was founded in 1985, and today is the largest Nigerian-managed non-profit organisation working in Nigeria’s health and development sector. SFH implements social marketing programmes in reproductive health, HIV & AIDS, maternal and child health, malaria and water and sanitation. SFH specialises in bringing public health commodities and messaging the last mile to improve the lives of Nigerians by successfully navigating Nigeria’s challenging supply chain management environment.
SFH has two key approaches to improving the lives of Nigerians: conducting behaviour change communication (BCC) activities that lead to informed choices and providing health-promoting commodities and services, widely. These two approaches are implemented through skilled staff with concrete knowledge of costing structures (cost recovery, subsidized and free), making SFH a business leader in Nigeria.
Social marketing, the foundational concept to SFH’s business plan, increases access and demand to various public health products through the application of marketing concepts to influence behaviour in order to benefit society. The integration of social marketing in all of SFH’s work for more than two decades has increased SFH’s capacity to:
• Maintain and manage product margins to enhance trade
• Build capacity among health providers and other frontline workers thereby increasing commodity access to the most vulnerable populations
• Apply BCC techniques to increase demand of ethical and non-ethnical products
• Conduct monitoring and evaluation for constant improvement in programmers
In order for products to be accessible, there must be a logistics system in place to get products from port to door. Mastery of the health sector supply chain in the Nigeria context has made SFH successful where others have failed.
SFH has been able to successfully navigate the growing and dynamic Nigerian health and logistics landscape in order to take health commodities from manufacturing to the end user.
This success can be attributed to two key factors
• StrategicOrganisational Management combining logistics and sales into one Operations department responsible for both demand creation and improving access
• Leveraging an established system of Nigerian distribution channels, then filling gaps
This document primarily focuses on how SFH has been able to successfully navigate the growing and dynamic Nigerian health and logistics landscape in order to take health commodities from manufacturing to the end user. Through the application and mastery of social marketing, investing in smart warehousing, trade marketing and consumer marketing SFH has become a leader in addressing the needs and market potential of customers, consumers and end users.
Nigeria, the largest country in West Africa spanning over 910 thousand square kilometres and covering all variations of terrain, has an estimated population of 175.5 million inhabitants1. This makes Nigeria the largest population on the continent with 50% of inhabitants living in rural areas, which are primarily located in the northern parts of the county. Much of Nigeria’s estimated 193 thousand kilometres of roads are unpaved or poorly maintained making commodity distribution a dynamic and taxing endeavour.
Although Nigeria is a sub-Saharan powerhouse for import and export all manner of commodities, ranging from natural resources such as gas and oil, to health products and food, the country continues to underperform regarding logistics capacity as compared to many other West African nations. Logistically, Nigeria is very difficult to navigate. For example, The World Bank’s Logistics Performance Index (LPI2) measures logistics “friendliness” based on a global survey of logistics operators who provided feedback on the logistics within the countries they operate in and conduct trade with. The LPI is made up of six components: customs, infrastructure, international shipments, logistics competence, tracking and tracing and timeliness. According to this LPI, Nigeria is ranked 121 out of 151 countries, ranking lower then fellow ECOWAS members and neighbouring Benin (67th), Niger (87th) and Cameroon (106th). Despite a less than accommodating environment, SFH is succeeding in providing health products down to the last mile, ensuring lifesaving commodities reach the underserved.
There is also a significant burden of disease in Nigeria. Nigeria has the second largest population of people living with HIV at 3.4 million with only one-third of treatment-eligible individuals receiving HIV treatment3. As of 2010, one Nigerian woman in 29 died during childbirth. The contraceptive prevalence rate for married women between the ages of 15 and 49 years old in 2011 was a depressing 15%4. Nigerians are also exposed to malaria, diarrheal diseases, pneumonia and tuberculosis, which impact the quality and longevity of life.
Although morbidity and mortality are directly related to prevention and treatment of illness, they are also related to health commodity distribution systems and availability. In order to contribute to long term improved health outcomes in Nigeria, both the private and public sectors must meet the varying needs of Nigerians.
Improved and continued availability of medical commodities, both ethical and non-ethical products, such as condoms, reproductive health products, anti-diarrheal treatment, malaria treatment and treated mosquito nets are essential to reducing both mortality and morbidity in all segments of the Nigerian population. Commodities are not only crucial for saving lives, but also for reducing unintended pregnancies, improving quality of life, and advancing economic development and improving productivity. With the broadening of commodity needs to address increased burden of disease, a burgeoning population as well as limited public sector capacity, the management of a larger and more diverse palate of commodities and reliable commodity logistics providers are necessary.
Key Challenges to Doing Business in Nigeria
There is no doubt that the size of Nigeria, with a low ratio of roads per square kilometer and a scattered population with long distances between urban areas creates logistical and public health challenges. It is not surprising then that 80% of SFH’s business is derived from the southern 45% of Nigeria, where many of Nigeria’s populous cities and urban areas can be found, including Lagos.
Along with weak infrastructure to link distant cities of the North to the resources of the South, Nigerian supply chains face a number of other problems, ranging from inadequate skills and training, insufficient access to technology, and high prices for transport and warehouse rental due to limited competition. In addition, if the commodities that are being transported have temperature control requirements like Artemisinin-based Combination Therapies (ACTs) to treat malaria or antibiotics to treat pneumonia, electricity in warehouses and cold chain logistics become challenges as well. Finally, there are expected and understandable barriers to dealing with ethical products in particular. For example, the country governing agencies responsible for pharmaceutical distribution and pharmacist licensing set certain standards for drug and commodity distribution. These standards must be respected and like any bureaucracy, can cause delays.
To address these issues, SFH places a premium on transparent financial processes, a zero credit policy, diversity of commodities and partners and nearly three decades of experience that builds on and improves an already established channel of distribution. Additionally, SFH interfaces directly with the regulatory agencies of Nigeria such as the National Agency for Food and Drug Administration and Control (NAFDAC) and the Pharmacists Council of Nigeria to register new products and ensure adherence to federal pharmaceutical laws. As Nigeria’s capacity and infrastructure develops, partially due to rising urbanisation, and assimilation of new technological advances (such as information and communication technologies), SFH will continue to leverage these improvements to impact its logistical capacity creating an even stronger platform for sustained growth.
The evolution of the SFH distribution system is closely tied to the history of condom distribution in Nigeria. In 1991 a pilot distribution of Gold Circle Condoms began in the southwest of Nigeria. That year, a humble volume of 1.9 million units were sold but climbed to an all-time high of about 200M in 2012. During these twenty years, the SFH condom distribution strategy evolved from simple distribution, to a brand focused marketing and distribution approach applying BCC driven strategy to the present, commercial approach. In the early stages, emphasis was on brand advertising, but starting in 1998, the programmes increasingly focused on BCC to counter stagnating sales. This approach, which draws on the model used by Population Services International (PSI), promotes safe sex practices and condom use in non-marital relations using a mixture of generic mass media and interpersonal communication (IPC).
SFH: Position To Date
In the early days of Nigeria’s drug distribution, all commodities were located in Lagos which meant that they all needed to be moved up country. This required logistics; a complicated, coordinated process involving many players in order to get a product from point A to point B. Over time medium scale enterprises/entrepreneurs realised that not only could they sell consumables such as food, paper and beauty products, but there was also a market for over-the-counter medicines as well. Currently, with increased knowledge, changes in health-seeking behaviour and increased demand, vendors are regulated by the Pharmacy Council of Nigeria to sell certain pharmacological items. This regulation enables Vendors to distribute non-ethical products and refill certain contraceptives.
Very early on in the early 1990s, SFH analysed the Nigerian pharmaceutical channels in order to identify areas where they could build on existing structures in the private sector to get their health products to the end user economically and efficiently.
Hubs were identified where the market was larger, more diverse and with more capacity to be distribution points for a larger network of sales. Predictably, Lagos was identified as a hub along with other regional centres such as Ibadan, Kano, Onitsha, Aba and Jos. SFH placed staff at these sites to support their wholesalers and retailers. At this point SFH began a partnership with West African Drugs (WAD), which had offices nationwide. Effectively, after SFH imported the commodities and stored them in a rented warehouse in Lagos, WAD would move the products to their satellite warehouses and then both WAD and SFH would distribute the commodities to their retailers. This created a synergistic environment where both the WAD and SFH sales team created demand for SFH products at the point of sales making SFH and WAD co-marketers for the same products.
In 1997, after WAD left the market, SFH partnered with Manufacturers’ Delivery Services (MDS), exclusively for logistics, not marketing and sales. MDS had warehouses across the country, which SFH would rent. During this period SFH was renting 7 warehouses from MDS all over Nigeria as well as a larger main warehouse in Lagos.
SFH began to handle more of their own logistics as well as transportation, resulting in a development of capacity for enhanced distribution. During this same period, SFH determined that pharmaceutical wholesalers were willing and able to play a greater role in the distribution process and began the process of actively engaging them in the distribution of products. This led to a gradual decline in SFH personnel involvement in wholesale product distribution from 100% to about 10%. The system has undergone numerous modifications in recent years to address the changing political and social environment in Nigeria, but the framework remains the same. In addition to the private sector commercial market, over the last 10 years, SFH has built internal capacity in the distribution of free commodities especially nets, as well as in the marketing of cost recovery/ commercial products, including emergency contraceptives, point of use safe water systems and condoms.
In addition to old fashioned hard work and commitment to its strategic goals and missions, SFH has continually improved due to growth and development in the following four areas; social marketing, warehousing, trade marketing and consumer marketing.
Social marketing is the application of marketing concepts and techniques to influence behaviour among a target audience in order to benefit themselves and society. Sometimes the behaviour may include the use of a product or service (e.g. using a condom or getting tested for HIV), and sometimes it may not (abstaining from sex). Social marketing is based on the systematic collection and analysis of target audience data that guides the design, implementation, monitoring, and evaluation of each project. It is also the bedrock of SFH’s business strategy.
Social Marketing has several key characteristics, but most pertinent to commodity logistics is the development of the 4P’s of marketing: Product, Price, Placement Strategies and Promotion to encourage behaviour change. Product refers to an actual product or service or a non-product / service related behaviour. Price goes beyond just monetary considerations to include emotional or psychological incentives and barriers for both wholesalers and end users.
Placement refers to where the customer can practice the behaviour or purchase the product or service and the intermediaries or partners who can facilitate the exchange. Promotion consists of the integrated use of multiple channels including below the line communication such as interpersonal communication (IPC) campaigns and above the line strategies such as mass media. The focus is on creating and sustaining demand for a product. Determinants of behaviour often includes factors outside the control of an individual, such as availability of a product or service, and therefore, social marketing’s use of the full marketing mix (4Ps) is essential to behaviour change.
SFH believes in the power of social marketing and communication to achieve high levels of community education, positive behaviour change and sustainability. The 4Ps approach is integrated into SFH’s strategy at every level from product purchase and eventual placement to applying above the line and below the line media and merchandising techniques to elicit behaviour change and increase demand. Through the social marketing approach, SFH has become a leader; improving health and development in Nigeria.
As SFH manages and controls every stage of the supply chain once the health products arrive at the Nigerian port, it was a natural next step to invest in a central storage point for all SFH commodities. In May 2013, the SFH central warehouse in Ota, Ogun State, became operational, after a number of years of renting warehouse spaces from 3rd parties. It is over 7,500 square meters, housing ethical and non-ethical products, with a cooled room for sensitive products and space for future growth as well as third party storage. Additionally, this warehouse is a staging area for product repackaging and in some cases quality assurance testing. This is an example of where SFH identified growth potential that mitigates risk using a value for money approach. The warehouse ensures that SFH can handle and monitor increasing quantities of all their products.
It is also noteworthy that the warehouse creates hundreds of jobs in the local community and provides much needed tax revenue to the Ogun state government to reinvest in the local infrastructure.
The commodities are first received into this warehouse from the port of entry or from the local supplier, repackaged and then moved to other third-party warehouses spread across the country. From these in country warehouses, wholesalers have access to the products. The SFH warehouse has the capacity to store two years’ worth of approximately 75% of Nigeria’s current condom needs; that’s over 260 million condoms!
1. RepackagingAnd Testing. Most commodities from donors are received in bulky packs, which require breaking down and repackaging. These smaller packs will often include additional product information usually produced in country. This product information could be user guides in local language or pictorial demonstrations, which benefits the user. The culturally relevant and attractive re-packaging increases the appeal of these commodities, which impacts sales. The repackaging of these commodities is done by over 350 temporary staff, mainly young people who live in the communities adjoining the warehouse, many of whom are awaiting admission into institutions of higher learning on a part or full time basis. The idea is to get these residents engaged in productive endeavours while they wait for their next education step.
Also within the warehouse, certain commodities, like Gold Circle Condom®, one of SFH’s earliest and most widely distributed products, undergo a quality assurance test. These tests are conducted by an independent laboratory situated within the warehouse manned by trained laboratory assistants from the Federal Ministry of Health (FMOH) in Lagos. The internationally certified condom lab ensures that each batch of these condoms shipped into the country for SFH social marketing programmes undergoes a rigorous test even after pre-shipment inspection and testing from the country of origin. Only batches that pass this external evaluation by the FMOH test are permitted for repackaging and subsequent distribution.
2. Using Technology to Monitor the Supply Chain. SFH believes that for a successful supply chain, information technology is as vital as the knowledge of customer demand, both propelling the movement of products. The Lagos warehouse uses an internationally certified management information system, which enables SFH to go beyond just warehousing to applying technology to address business needs. This system ensures that distribution operations are efficient, effective and not running over capacity, thus avoiding overstock as well as stock outs to the greatest extent possible. Data collection and tracking at the warehousing level is also important in order to respect product specific needs as well as provide a measure of security.
For example, ethical products such as ACTs need private storage space and are only distributed to licensed pharmacists and doctors. The SFH warehouse management information system can ensure that these guidelines are respected and track product distribution. The supply chain management system at this warehouse is fully integrated with the upcountry third party warehousing as well as with SFH staff at field locations and offers full supply chain visibility, including daily intake, stock and shipping information.
• Over 200 million condoms distributed annually
• Over 60% of people in rural areas can obtain an SFH product within 5 minutes’ walk of where they live
• Over 40,000 PPMVs trained by SFH on provision of non-ethical products and referral
• Over 5,000 health workers have been trained over the last five years
• Distributed over 3 million malaria Rapid Diagnostic Test kits
• Over 6 million Disability Adjusted Life Years (DALYs) averted in 2013
Although some countries in West Africa struggle with a fragmented or nonexistent pharmaceutical supply and distribution channel, this is not the case for Nigeria. As mentioned above, supply chain management in Nigeria is challenging, but the channels are strong and driven by available incentives and modes of product transport as well as the location for dispensing outlets, including pharmacies, patent and proprietary medicine vendors (PPMVs), private clinics, hospitals and other service delivery points. It is this very system that SFH has built upon and improved, making it a leader in public health commodity supply chain management. The strength of SFH’s model lies in the fact that products can reach consumers all over the country through over 300,000 small commercial retail outlets. The key distribution functions of transportation, warehousing, payment, invoicing and the provision of goods are outsourced to third party organisations with competencies far exceeding SFH’s in these areas. By doing so, SFH leverages the cost effectiveness and efficiency associated with the private sector.
SFH takes advantage of the vibrant and diverse distribution network for pharmaceuticals in Nigeria to work towards achieving their goal of delivering health promoting products to millions of poor and vulnerable people throughout the country. Using a distribution model with low overheads and wide product reach, SFH establishes relationships with local distributors (known as wholesalers) that sell an often diverse set of products in a defined region to increase access. Products are transported from SFH’s central warehouse in Ogun State to 30 MDS depots in different parts of the country.
The wholesaler’s responsibilities include
• Purchasing a monthly minimum quantity of approved SFH products for the sales area
• Providing adequate shelf space for display of approved SFH products in the outlet
• Selling approved SFH products at the prescribed SFH wholesalers’ price to retailers
• Not engaging in speculation by hoarding products and committing to “in-time” sales
• Maintaining inventory level of approved SFH products high enough to service retailers’ orders at all times except in exceptional circumstances
• Abiding by the sales conditions of cash and carry; SFH does not make provision for credit sales
SFH has selected over 60 dedicated wholesalers to lift products from MDS depots. Upon proof of payment for products, the wholesalers are issued products by MDS personnel. The wholesalers in turn service the over 300,000 retail outlets (pharmacies, non-traditional outlets (NTO), supermarkets, hospitals, clinics, community distributors, etc.) from where consumers eventually obtain products. In addition to wholesalers, SFH also works with sub-recipients (SR) who are engaged through specific donor projects in order to supply certain commodities for a fixed period of time, especially to rural and semi-urban areas that have fewer traditional facilities to ensure products reach the last mile. These SRs also have access to both ethical and non-ethical products with the same restrictions as a wholesaler would have.
The Push SFH, using sales teams and social marketing, creates a one-two punch that increases earnings for the private sector and increases SFH’s public health impact by increasing access to health commodities.
To best understand how SFH has increased access to public health commodities, the structure of the Operations department is pertinent. At SFH, one team is responsible for tracking commodities from the start of the process to the end. The Operations Director of SFH is engaged in supply chain management as soon as the procured items arrive at the main warehouse in Ogun State and there is no handover of responsibilities until the end user receives their products. The operations department is not only responsible for monitoring commodity storage and distribution, but also costing, sales promotion, detailing and performance monitoring.
“SFH does not create parallel channels; the commercial sector is very efficient and they distribute tons of material every day. We can outsource activities to them. For example, a decade ago mosquito bed nets could be bought at two places; Bedding sales points and Agricultural sales points. Although the relationship between mosquito nets and bedding/agricultural products is understandable it isn’t intuitive and it doesn’t make for a highly visible product. SFH introduced nets into pharmacies and into supermarkets who were already selling other SFH products with the goal of creating a new market. The delivery method of nets did not change and SFH did not start selling nets themselves, but instead identified a weakness in the distribution channel and built upon it by working within an already efficient channel.” —Damola Ogunbowale, Director of Field Operations, SFH
Additionally, SFH has optimised their services by engaging pharmacists at every level of the logistics and sales process. From the Director of Operations to sales detailers, most SFH sales and distribution staff are pharmacists. Although it is mandated that some positions are filled by pharmacists based on Federal regulations of ethical product handling, SFH has realised the advantage of engaging pharmacists in many positions as they understand health commodity’s indications. By drawing on the talents of trained pharmacists, wholesalers, retailers, health centres, doctors and end users are provided with the best training and current information related to whatever product they choose to purchase.
To address legal responsibilities associated with ethical products like injectables and intra-uterine devices which can only be legally distributed, prescribed and applied by a certified pharmacist or doctor, SFH has engaged medical detailers into the logistics system. Detailers, as licensed pharmacists, can lift products from the wholesalers and sell to clinics or pharmacy outlets directly or link providers directly to the wholesalers/ retailers. These detailers (about 20 nationwide) also improve the quality of services and increase coverage of these products spending about 50% of their time working with trained health providers: nurses, pharmacists and doctors, to create demand through clinical meetings medical detailing and interpersonal communication). They also co-facilitate workshops with SFH Sales Representatives for PPMVs and other providers in order to introduce a product, its use and benefits, discuss reproductive health issues such as child spacing, clear up any bias as well as sign people up for a trial supply or additional shipments.
In sum, the logistics team is connected to the sales team so that the information that impacts sales, such as stock levels, new buyers, changes in ordering size, etc., are shared across the organisation. At SFH the sales team is an integral part of the commodity port to door system because of their relationship with
wholesalers and other product dealers as well as for their supporting role in IPC agent demand creation, discussed in the next section.
Pricing Apart from increasing access to products and achieving set sales targets, the sales teams are also responsible for monitoring channel members to make certain that recommended prices are adhered to, that there is adequate stock at any one distribution point, and ensuring wholesalers know when to pick up product at their MDS depot in order to have consistent product availability across Nigeria.
As noted, SFH’s business framework is based on social marketing. The flexibility and applicability of this framework allows different pricing structures to be utilised depending on SFH’s partner or donor. SFH deals with subsidised, cost recovery and free product distribution. Although entry market price at the wholesale level is always controlled, SFH can influence the pricing between wholesalers and retailers while expecting that retailers respect the recommended consumer prices. This speaks to SFH’s capacity to balance margin versus volume. In order for wholesalers and retailers to make a profit, there must either be a margin sweetener or incentive for them to make a profit, or the item SFH is distributing must be needed in such a high volume that the item becomes a trip driver for the retailer’s clients. Either way, SFH ensures that the product remains affordable to the majority of Nigerians as well as profitable for those who invest in the product sales. This creates an effective product push, which is obligatory to increase access contributing to an effective supply chain management system.
SFH also deals in sales that recover the cost of producing, storing, marketing and selling the product, creating a self-sustaining structure. SFH is able to create a margin for all market players, ranging from 10-50%, which means that both large and small volume wholesalers and retailers can participate in SFH’s distribution and sales plan with an incentive for continued distribution. Patent and Proprietary Medicine Vendors PPMVs play an integral role in increasing access for commodities. PPMVs are lower cadre health providers who are mostly found in semi urban and rural areas. There are an estimated 100,000 of these dealers in Nigeria who are registered by either the Pharmacists Council of Nigeria or by the state government where they reside. These providers are often the first place a client will stop when seeking treatment or health seeking behaviour information.
As PPMVs are very popular in Nigeria, SFH has leveraged their value add by incorporating them into their nationwide supply chain management system. For example, SFH trains PPMVs on appropriate sales and distribution techniques using applicable tools from social marketing. SFH also trains PPMVs on the use and application of health commodities such as condoms, contraceptive pills, ORS and any new products entering the market. SFH is currently conducting various forms of research among PPMVs including mapping their locations in a number of states as well as operations research on use of RDTs in the retail sector as a pilot study. By understanding the way channels move and how those channels are different for each commodity, SFH is able to adapt their needs in an economical way.
Through the use of social marketing, SFH listens to the Nigerian population to discover their real needs and desires. This is done by applying research and analysis to identify the factors that influence people’s behavioural choices and create exchanges that are more satisfying (offer more benefits for the costs) than those provided by the risky behaviour. This business to consumer practice ultimately increases demand for SFH products at the community level and from retailers. Demand or Consumer marketing is complementary to Trade Marketing efforts with a focus on below the line activities such as merchandising creating in-store visibility. The Pull As previously noted Sales Representatives work with detailers and wholesalers to increase access, but they also build the capacity of IPC agents by providing product knowledge and social marketing skills. These IPC agents are active in fast moving consumer goods (FMCG) markets, schools and NTOs such as kiosks and hair salons where they educate communities on various health interventions and products. Through repeated visits within pre-identified at-risk groups, audiences are encouraged to make changes in their behaviours that will improve their health and drive them to invest in particular SFH products. This means that IPC agents and the BCC programmes are important demand creators for SFH programmes.
There is a synergetic relationship between BCC programmes and sales stemming from promoting and
ensuring that products, especially over-the-counter products, are available at all intervention sites in shared territories. In short, both components of consumer marketing feed the pipeline and represent very important components of the distribution system
. They also serve as focal points for SFH’s very simple, yet highly effective feedback system.
SFH also uses mass media and below the line materials to build awareness and create demand for health products and services. To effectively manage the high cost of media campaigns in Nigeria, SFH has communication professionals as staff who are able to identify best value for money options depending on target groups.
No Credit Policy
SFH takes to heart the idea that a business deal is not concluded until money is paid. SFH does not accept credit. For all products that are moved, cash is exchanged. The cash policy is applicable at the time of procurement through to the end user. There are many reasons why this policy works well for SFH and keeps their commodities moving to the end user. First, without credit, the accounts receivables or advances are almost zero. This not only reduces risk, but also paperwork and manpower which would be necessary to follow up on lines of credit as well as contract language addressing credit limits, terms, payments, documentation etc.
Without credit, there is no risk of default or delayed payments, which could have serious impact on overall supply and future sales. Additionally, there is no one size fits all credit policy that SFH could apply to its partners. In the case of default the Nigerian legal system may not be able to efficiently respond in order for SFH to recuperate loss. For all these reasons, SFH ensures that any item that leaves the main Lagos warehouse is considered sales. This makes SFH a good steward for donor funds and a responsible business in that they only buy what they can afford and what they know they can sell.
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Future Opportunities and Growth
As a versatile organisation cognizant of the dynamic landscape of health in Nigeria, SFH intends on expanding their reach into new markets. Growth potential exists in the following areas
• Increase rural access: Despite the various outlet types, access to medicines and public health commodities in rural areas remains low as there is an insufficient amount of service delivery points and in many cases there are no “last mile” distribution facilities available. At the same time, all Nigerians have the right to health products, so SFH will continue to identify points of entry into this market by
• Using a sub-wholesaler system where the sales and distribution team identifies sub-wholesalers further upcountry and links them with their closest wholesaler.
• Covering the non-traditional channels such as rural FMCG stores for non-ethical products when the closest PPMVs are still too far away.
• Exploring m-sales: With the growth of online channel of distribution, SFH has begun discussions with indigenous providers of mobile trade channels for distributions of our premium products such as the LifeStyles® and Gold Circle flex® condoms.
• Use of weekly market days: SFH continues to engage the private sector system as it folds into the larger outdoor market sales. Often populations in far flung villages are used to travelling a bit farther to buy and sell products at a larger market. It is at these larger markets that they can also find a wholesaler or potentially a sub-wholesaler with whom to gain access to SFH commodities. In addition, SFH is exploring the use of Community Based Distributors with small margins and seed stock to increase product reach to rural, distant communities. The fact remains that increasing access to rural areas requires a considerable investment of time and effort.
• The development of a management information system that will have the ability to consistently track commodities down to consumer in a cost efficient way
• Exploring the use of PPMVs, pharmaceutical chains and health service franchises to increase reach and quality of products and services.
Technology, customer needs, supply chain disruptions and more, all affect supply chain performance, thus, it is crucial to keep accurate measurements of your supply chain resources, output and flexibility.
What is the purpose of supply chain performance management? While you might currently have an effective supply chain, you have no doubt noticed the ever-changing nature of SCM. Technology, customer needs, supply chain disruptions and more, all affect supply chain performance, thus, it is crucial to keep accurate measurements of your supply chain resources, output and flexibility. All of these factors can impact efficiency and profitability in some manner, and as you probably can imagine, most businesses find that very important. Because of this, many organisations develop performance-oriented supply chain frameworks.
Here, you will explore some of the measures, frameworks and technologies utilised for measuring supply chain performance in an effective manner. Through your Shared Activity, you will analyse and evaluate these performance measures more explicitly and also recommend a framework for a performance-oriented supply chain. As you will discover though, measuring performance first requires the development of key performance indicators (KPIs). You will develop your own KPIs for your selected organization to be more performance oriented.
However, there are a variety of potential measures, frameworks and technologies used for assessing supply chain performance. With such a diversity of options, how do you know which ones are best for your organisation? In order to remedy this issue, the Supply Chain Council established the supply chain operations reference (SCOR) model. This framework is the foundation of all SCM, focusing on industry-to-industry commonalities such as reliability, responsiveness, agility, cost and assets as the basis of performance measurement. These foundational elements can then be amended with organization-specific factors for measurement (e.g. KPIs).
There are other standardised tools in frequent use beyond SCOR as well. Examples include total quality management (TQM) and ISO 9000 quality management. In general, these perspectives consider supply chain network performance over the long term. With TQM, all members of the supply
chain work to improve processes in order to better deliver products or services to customers. ISO 9000 is newer and more commonly used nowadays, providing similar perspectives as TQM but also guidance and tools for organisations seeking to make improvements. Here, you will explore all of these tools and more.
You will focus on the SCOR model and you will incorporate TQM, ISO 9000 and the balanced scorecard approach.
Analyze best practices and major barriers of performance-oriented supply chain framework implementation
Evaluate supply chain performance measures, frameworks and technologies
Create key performance indicators for strategic objectives
Apply the supply chain operations reference model (SCOR)
Compare perspectives on total quality management (TQM) and ISO 9000 quality management
Apply the balanced scorecard approach to supply chain performance
Among the most popular sayings in management is the phrase, ‘You can’t manage or improve what you don’t measure’. Basically, it means performance measurement is critical for organisations in order to inform decisions. According to Neely et al. (2005), performance measurement builds upon the notions of efficiency and effectiveness and for these, it attempts to offer quantifications. Effectiveness measures the level of customer requirements while efficiency refers to a business’s ability to economically fulfil those required levels for customer satisfaction. Moreover, the efforts to measure SCM performance have been underpinned by various labours and perspectives. Shepherd and Günter (2006) have attributed measures according to the following:
Their qualitative and quantitative nature
Their concentration (e.g. cost and non-cost; quality, cost, delivery and flexibility; cost, quality, resource utilization, flexibility, visibility, trust and innovativeness; resources, outputs and flexibility; supply chain collaboration efficiency; coordination efficiency and configuration; and input, output and composite measures)
Their strategic, operational or tactical focus
The process in the supply chain they relate to
With these points in mind, the next challenge for performance measurement is to identify KPIs which will enable the realisation of a specific or blend of measurement perspectives adopted by organisations. A tremendous amount of academic, practitioner literature is proliferated with measures and metrics. Variability is due to industry specificity (e.g. automotive versus retail), management’s priorities for measurement, as well as the measurement framework that is being adopted (e.g. Balanced Scorecard versus SCOR) (Butilica and Ilieş 2011).
Moreover, performance measurement is not only a prerogative of SCM; it underpins various organisational practices and interventions as a means of deepening understanding and achieving stronger improvements.
Several measures of supply chain performance do exist. Kaplan and Norton (1992) have been among the strongest (and possibly the first) advocates for the need to have appropriate measures as a prerequisite for driving firm performance and improvements. In this direction, they have devised the balanced scorecard (BSC) approach. This specific model was not aimed at SCM but was rather intended to fulfil wider organisational requirements for performance management, in a more strategical way.
The conception of this approach was based on four perspectives
The financial perspective: ‘How do we look to shareholders?’
The customer perspective: ‘How do customers see us?’
The internal process perspective: ‘What must we excel at?’
The innovation and learning perspective: ‘Can we continue to improve and create value?’
In the following table, you can identify the most important KPI to be considered in BSC for evaluation of supply chain performance, in integration with other organizational functions.
Supply Chain Balanced Scorecard (Ross, 2011:376)
In this video, you can review how to elaborate a Balanced Scorecard and how it can be used.
Another foundational framework for measuring supply chain performance is the SCOR model. SCOR stands for ‘Supply Chain Operations Reference’ and comprises a world standard for SCM developed by the Supply Chain Council. According to the APICS Supply Chain Council (2014), SCOR is a model that provides a unique framework for defining and linking performance metrics, processes, best practices and people into a unified structure (Figure 3.2). The SCOR model has been used extensively by both manufacturing and service firms and has evidently demonstrated its contribution in the improvement of supply chains. The SCOR model is analysed to five supply chain processes: plan, source, make, deliver and return. Through these, it enables integration among supply chain partners, while creating the basis for considerations about information sharing and coordination functions in the supply chain (Zhou et al., 2011).
SCOR is only a single approach to the management of SCM performance though. Businesses tend to adopt more specialised quality standards (e.g. ISO 9000) to maintain the quality of the supply chain processes (Li et al., 2011) and as a means of serving their customers better. Certified management standards are proven to be beneficial in coping with information asymmetries as the ones observed in supply chains (Terlaak & King, 2006). Despite the positive relationship between ISO 9000 and total quality management (TQM), however, many believe that ISO 9000 is only the start of total quality management (Han et al., 2007).
Adoption of a performance measurement system or framework is not just about metrics; this is only one level of consideration. Another level of consideration involves the adopting perspective (Otto and Kotzab, 2003). In this vein, a perspective is defined as a unique view of SCM for a specific organisational instantiation. The understanding of supply chain endeavours to overcome shortages from the purely technological treatments by putting the emphasis on the role of management, culture, policies and processes (Stewart, 1995), thus rendering best practices non-imitable due to their deep and sometimes historical connection with firms’ proceedings. This is what helps firms gain a competitive advantage.
Although organisations have widely exploited technology, information and measurement systems as enablers of supply chain performance, they still cannot achieve the prescribed value. The multidisciplinary nature of SCM and the continuous theoretical and industrial developments, as well as the new quality management doctrines dictate the holistic management of SCM performance (Chen and Paulraj, 2004; Figure 3.5). A trend that paves the way in the modernisation of the SCM field and practices is the holistic environmental treatment across supply chain processes as a means of fulfilling low-carbon economy mandate. A new version of the popular SCOR model, the GreenSCOR was developed to support the effective integration of environmental management with SCM (Cash and Wilkerson, 2003).
Enablers and Obstacles to Measuring Performance
The volatility of customer behaviour and needs coupled with the rampant growth of technology and the virtualisation of business has put SCM at the centre of attention for many organisations. These businesses need to be able to adapt and change based on customer needs and changes and technology, and even creating a lean, agile and customer-centric supply chain is not quite enough.
You need to amend these supply chains to be performance oriented. In other words, you need to have ways to frequently measure their performance in order to best adapt them when necessary and make informed decisions.
With that said, what makes for a good performance measure? What frameworks or technologies are most effective in facilitating that measurement? Though the nuances may vary from industry to industry, there are several best practices regarding both of these questions utilised by existing organisations for implementing performance-oriented supply chains. However, there are several common barriers as well. For this Project, you will analyse these best practices and barriers and use this information to evaluate potential performance measures, frameworks and technologies for measuring performance for an organisation you work for or with which you are familiar.
Supply Chain Operations Reference (SCOR) Model
Consider a scenario in which you begin work as a supply chain manager in a new industry other than the one you work in now. Your first task is to measure and report on the performance of the existing supply chain, recommending new KPIs as necessary. If this is a new job and industry for you, how would you go about determining applicable metrics for performance measurement?
There are general factors that most organisations consider when measuring performance (e.g. resources, output and flexibility). However, the Supply Chain Council advocates a more flushed out foundation for measuring performance called the SCOR model’. Using this model, it is easier for managers to identify applicable KPIs and priorities by focusing on things such as reliability, responsiveness, agility, cost and the assets of a supply chain. Also for this Project, your challenge is to use the SCOR model, to measure the performance of the entire supply chain network of the selected organisation (the same from past works) and provide a report on changes you would make to improve it.
Managing and Measuring Supply Chain Performance
Effectively managing supply chain performance means that you need to ensure high performance across the entirety of the supply chain. In order to accomplish this, the TQM approach was once a favoured method with which to better improve an organisation’s abilities to produce high quality products and services to meet the ever-changing needs of their customers. However, in recent time, ISO 9000 quality management has often overshadowed the usage of TQM in terms of preferred quality standards. Regardless of preference, both perspectives hold their share of benefits and weaknesses.
By utilising TQM or ISO 9000, you can further assess the capabilities of your supply chain and subsequently improve it. But, there are also other measurement approaches such as the balanced scorecard approach. Taking all of these tools into consideration, you will also apply the
perspectives/tools of TQM, ISO 9000, SCOR and at least one other performance measuring approach to the supply chain (e.g. Balanced Scorecard).
To prepare for this
Review your weekly Learning Resources.
Identify best practices and barriers that are most relevant to your organizational strategic success (the same from past works), that are related to implementing a performance-oriented supply chain network.
Identify the business strategies, goals and priorities of your selected organisation.
Identify potential performance measures, frameworks and technologies for implementing and measuring a performance-oriented supply chain network effectively.
Research on how the application of the SCOR model could be applicable to the selected organisation (the same from past works).
Research the perspectives of TQM and ISO 9000 and why organisations may use one over the other.
Compare the benefits and weaknesses of both TQM and ISO 9000 quality management.
Research the balanced scorecard (BSC) approach to measuring supply chain performance.
Provide a brief summary of the organisation’s strategies, goals, objectives, products and services, processes and functions, as well as current supply chain systems and technology.
Based on your analyses of best practices and barriers for implementing a performance-oriented supply chain, and the evaluation of potential performance measures, frameworks and technologies for measuring performance after implementing a performance-oriented supply chain network, recommend at least one performance measure framework and at least one technology (for measuring performance) for your organization. Justify your selections.
Based on your evaluations and recommendations, explain the KPIs you will use for measuring and managing your supply chain’s performance. Justify why you selected these KPIs. (You will integrate the recommended KPI into SCOR model and BSC.)
Apply the SCOR model to measure the performance of your entire supply chain network.
Apply the balanced scorecard (BSC) approach to measure your supply chain’s performance, from a strategical point of view.
Based on the comparison of the benefits and weaknesses of TQM and ISO 9000 quality management, apply one of these perspectives to evaluate the level of quality on the selected organization (TQM or ISO 9000). Justify your selection.
Fully state and justify any choices or assumptions that you make using the suggested resources for this as well as your own research. Include references to any sources you have used. All
sources should be cited using Harvard Referencing Style.
Word count: the suggested word count for this assignment is 2,000 words.
Advice on word count: Submissions that range from 10% below to 10% above the recommended word count are acceptable. Students should recognise that assignment submissions that fall outside these parameters may be marked down. This restriction encourages the development of a concise writing style, as assignment quality is likely to suffer given the potential for overly verbose submissions.
Product code: Operation Management-QA458
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