5: Define scope & requirements

1. Detail scope of work

Clearly outline the scope of work for the LSP, including:

• Current logistics operations: provide an overview of your current logistics operations and – if you prefer – provide an overview of current logistics performance and your operating environment (e.g., poor infrastructure in remote areas) so LSPs can proactively propose solutions to resolve bottlenecks and/or improve performance

• Outsourced logistics services: include the logistics activities that will be outsourced, such as warehousing, transportation, inventory management, order fulfillment, and returns processing. Consider whether certain logistics functions will remain in-house while others are outsourced to provide a balanced approach that maximizes both internal strengths and external capabilities. For example, your organization might choose to retain forecasting in-house to maintain control over demand planning while outsourcing transportation to an LSP with a robust fleet for handling health commodities across multiple regions. Specify the boundaries of responsibility between your organization and the LSP to avoid any ambiguity

• Geographic scope & locations: provide information on the geographic scope, current locations in your network and your service delivery points (locations of e.g., hospitals, primary health clinics, pharmacy chains)

• Volume: provide information on the volume (in e.g., quantity, value, weight and/or volumetric weight) that have been processed in the past (i.e. past three to five years), are currently being processed, and what you expect to be processed in the future (e.g., three to five years ahead). Include relevant details such as the product portfolio and quality criteria (e.g., cold chain)

• Future network design options: you can decide to provide or withhold the information on the different network design options that you have evaluated, so LSPs can price out the specific option(s) of your preference, or have them propose solutions based on their own network

2. Detail service requirements

Provide a comprehensive breakdown of the service requirements for each logistics function. This should cover:

• Warehousing: Specify storage requirements, including temperature controls, security standards, and inventory turnover rates

• Quality control: Detail the standards for quality assurance, including inspections, audits, and compliance with local and international regulations

• Inventory management: Outline requirements for inventory accuracy, stock rotation policies, and reporting intervals

• Transportation: Specify transportation needs, including types of vehicles, delivery frequencies, handling protocols, and route optimization strategies. This is especially important for sensitive deliveries, such as transporting lap samples or cold chain products

• Returns management: Define the processes for handling returns, including timelines, inspection protocols, and restocking procedures

• Value-Added Services (VAS): Highlight any additional services required, such as packaging, labeling, or assembly

• Customer service: Establish expectations for customer service support, including response times, communication channels, and issue resolution procedures

• 4PL services: If considering a 4PL model, specify the need for strategic oversight and coordination across multiple logistics functions, integration of supply chain activities, and use of advanced technology solutions to ensure a seamless and fully integrated supply chain solution

Ensure that each requirement is aligned with your strategic logistics objectives and any specific health service mandates.

3. Establish performance management requirements

Define clear performance metrics and set targets to measure the effectiveness of the LSP. These should include:

• Strategic metrics: High-level indicators that align with your organizational goals, such as overall cost reduction, service level improvements, or customer satisfaction

• Tactical metrics: Measures that track the efficiency and effectiveness of specific logistics functions, such as order accuracy, inventory turnover rates, and on-time delivery

• Operational metrics: Daily performance indicators that monitor key logistics activities, such as pick-and-pack times, vehicle utilization rates, and real-time delivery tracking

For example, if one of your strategic goals is to reduce stockouts in remote clinics, a tactical metric could track on-time delivery performance to ensure health products reach those clinics as scheduled.

Develop a performance monitoring system that includes dashboards and real-time data integration to provide continuous visibility into logistics operations. This will enable you to quickly identify and address any issues, ensuring that the LSP meets agreed-upon service levels.

4. Detail technological needs

Clearly outline the technological infrastructure and capabilities required to support logistics operations. This includes:

• Order Management Systems (OMS): Software that tracks the coming and going of all inventory and the orders tied to it

• Warehouse Management Systems (WMS): Software and hardware needed to capture and record the day-to-day warehouse operations such as inventory management, receiving, picking & packing, and billing

• Transportation Management Systems (TMS): Solutions for planning, executing, and optimizing transportation operations, including route planning and proof of delivery (POD) functionalities

• Data exchange & integration: Requirements for data exchange between your organization’s IT systems and the LSP’s systems to ensure seamless communication and coordination

• Advanced tracking technologies: Consider integrating technologies such as GPS, IoT sensors, and RFID for real-time tracking and enhanced visibility of logistics activities

Ensure that any technological solutions align with your existing IT infrastructure and are capable of scaling to meet future needs. For example, if expanding cold chain logistics, ensure the TMS can monitor temperature compliance in real-time.