Are you involved in any program that includes provision of commodities? Or is your business involved holding inventory? The principles of Procurement and supply management cut across but I will focus on the health sector for now. This could be pharmaceuticals, laboratory supplies, bed nets or any other commodity necessary in health care. At one time, you have been or will be asked to provide any of the following: quantification, forecast, supply plan, procurement tables or something else related to this. You may also have noted that these words are used interchangeably. However, the proponents of using these terms as synonymous tend to underplay the differences between them. But in doing so, they miss the value in each of them and this has kept procurement and supply management (PSM) an abstract concept for most of the practitioners especially in the health care industry. These misconceptions could be contributing to wastages through expiry of very expensive medicines (http://goo.gl/mp2iBD) and loss of lives because of avoidable stock outs of health commodities. I am of the opinion that understanding and differentiating between the concepts is the gateway to the logic, art and science behind procurement and supply planning and could go a long way in ensuring that you keep stock levels within a safe range that ensures health commodity security for your target population. However, in practice quantification refers to the process covering demand forecasting and supply planning.
Quantification – Quantification is the process of quantifying. Quantifying involves determination of quantities but quantities of what? If you do not specify the quantities that you refer to then it could mean everything. This is the basis for the argument that quantification includes forecasting and supply planning. Unfortunately, this approach undermines the logical flow and keeps PSM as an abstract science. I would restrict quantification to mean what your target population will need over the selected planning period. This is therefore the external information that will drive your PSM. At the end of this activity, you should know what your target population needs and take this with you to the forecasting table.
Forecasting – According to CIPS (UK) http://www.cips.org/, Prediction is concerned with future certainty; forecasting looks at how hidden currents in the present signal possible changes in direction for companies, societies, or the World at large. According to my English dictionary, this is synonymous with foretelling, prediction, divination, insight and foresight. Based on these synonyms, you could note that this is the step where the hard science may be needed. At this point we tell what is likely to happen in view of the quantities needed and what we have on hand. At this stage we use different modeling approaches that may utilize simple excel sheets or more advanced software to help us look into the future. At this point, you should predict what your stock position will be over the selected planning period (before planned interventions) and you should be able to identify risks of stock outs and excesses/expiry. Most practitioners focus on forecasting and produce beautiful predictions of what the situation will be like. But stakeholders rarely buy into divinations; through supply planning, you may have to propose solutions to the risks of stock outs and expiry.
Supply planning – Develop a plan to counteract the identified risks of stock outs and excesses/expiry. At this point, you should tell which quantities you will have delivered and when in order to avert the risk of stock outs and excesses / expiry identified in your forecast. Incase your system is suffocating with excess stock at risk of expiry; this is the time to identify entities outside your target population that could be in need of such commodities. You will then agree with them on a mutually beneficial loaning arrangement. In case of a donor supported national program, this process also includes identification of funding sources / suppliers. The result of supply planning is a supply plan. The supply plan shows what you have planned to do in order to maintain your stock levels within the accepted minimum – maximum levels. You may note that supply planning is more of an art and very interactive and continuous process that requires more of stakeholder management skills. Most efforts at procurement and supply planning fail at this stage.
Procurement Tables – This is a table extracted from the supply plan. It should specify the funding source/supplier, items to be supplied, quantity to be supplied, and preferred delivery date for each supply. This table should be shared with your funding sources/suppliers so that they can also plan at their level following the same logic as above: quantification, forecasting, supply planning and procurement tables.
In conclusion, procurement and supply management should not be an abstract science. It should be a logical process flowing from quantification to forecasting and supply planning aimed at producing procurement tables that guide procurements. You may not draw clear lines between each of them and you may find yourself moving back and forth on each of them but it helps you to appreciate how they logically flow and relate to each other. Finally, PSM should not be a one off activity but a continuous management function.