USAID | DELIVER PROJECT 2012: Using Inventory Turnover to Assess Supply Chain Performance

The system provides stakeholders with the information needed to respond effectively to client demand for contraceptives. To measure the performance of the new system, the project compared inventory turnover ratios in districts that use a web-based LMIS with ratios in districts that use the traditional paper-based system. Inventory turnover ratio is a common measure of performance within supply chains, measuring the number of units dispensed in relation to the average unit inventory. A higher turnover ratio, together with desired inventory availability, demonstrates the effective use of resources for distribution of products throughout the supply chain. The project analyzed data for goods issued from higher levels to lower levels in the supply chain for 2010 and 2011 and found that the web-based LMIS increases performance and efficiency into the supply chain, as measured through inventory turnover ratios. The project calculated the inventory turnover ratio on a monthly basis from quarter 1 of 2010 through quarter 3 of 2012 for male condoms, two-month injectables, three-month injectables, intra-uterine devices (IUDs), progestin-only pills, and combined oral contraceptives distributed through the Population Welfare Department (PWD) system. The analysis consisted of calculating the average and the variation in the monthly inventory turnover ratio per quarter for each of the commodities assessed. A comparison was then done, at both the district and facility levels, between those where the web-based LMIS was rolled out in July 2011 and those still using the paper-based system. The results show that for male condoms, there is no notable difference in the average inventory turnover trend between the pilot and the control districts. However, for three-month injectable contraceptives, the average inventory turnover ratio in the pilot districts increased by 12.5% compared to the control districts. Similarly, for oral contraceptives, the average inventory turnover ratio in the pilot districts increased by 10.3% compared to the control districts. These results suggest that the web-based LMIS has improved the efficiency of the supply chain, particularly for commodities that require more frequent replenishment. The project also analyzed the variation in the monthly inventory turnover ratio per quarter for each of the commodities assessed. The results show that the pilot districts have lower turnover variance compared to the control districts, indicating that the web-based LMIS has improved the ability to match commodity need in a timely manner. These insights from inventory turnover ratios analysis will assist any system redesign to reduce buffer stock and/or overall inventory pipeline within constraints of the system such as storage capacity and availability of transportation funds. The project's findings have implications for the improvement of public health logistics in Pakistan. The results suggest that the web-based LMIS has improved the efficiency of the supply chain, particularly for commodities that require more frequent replenishment. The project's analysis also highlights the need to streamline requisitioning, distribution, and reporting across important stakeholders to improve data quality and consistency.