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09.25.12

Coke Applies Supply-Chain Expertise to Deliver AIDS Drugs in Africa

Coca-Cola CEO Muhtar Kent tells Daniel Gross his company is expanding a project that helps nonprofits deliver vaccines in rural Africa more quickly.

If the Coca-Cola company can deliver a bottle of soda to a village deep in the African countryside on a daily basis, why can’t governments and nonprofits figure out how to do the same with life-saving pharmaceuticals?

That was the question posed by philanthropist Melinda Gates a few years ago. After all, a lot of money is spent buying anti-AIDS drugs and vaccines in the West and shipping them to the developing world overnight. But in places like Tanzania, it could still take up to 30 days to get the drugs to patients. As a result, only half of those seeking vaccinations in the country would find the appropriate drug was available.

Gabriel Jaramillo, the general manger of the Global Fund to Fight AIDS, Tuberculosis and Malaria, saw an opportunity. “What we noticed was that Coca-Cola’s products always seemed to get to every remote region, and we thought that if they could get their products there, with their support, maybe we could, too,” Jaramillo said.

In 2009 the Global Fund asked Coca-Cola for that support, and at the 2010 Clinton Global Initiative summit, the company announced a pilot project in Tanzania, working together with the country’s Medical Stores Department (MSD), the Global Fund, the Gates Foundation, and Accenture Development Partnerships. Two years later, preliminary results are in.

According to a case study from the Yale Global Health Leadership Institute, while the delivery system doesn’t approach Coca-Cola-like efficiency, it has improved vastly. Data being released at the 2012 CGI on Wednesday show that delivery times have been cut from 30 days to five. When patients seek vaccination, they find the right one in 80 percent of cases, up from 50 percent two years ago. And the project’s partners tell The Daily Beast that the program will soon cover a larger chunk of Tanzania, as well as be expanded to Ghana and Mozambique.

But if the problem sounds simple, the solution has been less so. On the one hand, the profit motive can be a powerful motive to inspire just-in-time inventory and rapid restocking. On the other, it has taken Coca-Cola decades of experience and massive investment to build up the infrastructure that allows it to deliver products to 20 million retail points of sale every week.

How did Coke do it? The beverage maker quickly realized that improving delivery times wasn’t a simple matter of putting drugs on Coke trucks—as it had done before with anti-malarial bed netting and condoms. Unlike those products, expensive drugs need to be refrigerated, and they expire. Tanzania’s MSD had 5,000 customers, and 3,300 different drugs—far more product than Coca-Cola stocks. Like Coke vendors, the MSD had to contend with difficult roads and unpredictable weather conditions. In the end the company realized it could offer the most assistance by sharing knowledge from its supply-chain management.

Data show that drug delivery times have been cut from 30 days to five days.

“We’ re not lending our trucks or our fleet, or our motorcycles,” Coca-Cola CEO Muhtar Kent told me in an interview. “We’re lending our expertise.”

Kent noted that Coca-Cola serves 20 million retail points of sale each week—many of them in places where communications and transportation infrastructures aren’t up to Western standards. “By any measure, we believe that our system is the most effective, most expansive distribution system in the world for any industry and any product category,” Kent said.

So Coca-Cola and Accenture chipped in to help Tanzania’s public-health infrastructure develop the basics of supply-chain management: mapping out health facilities, using software to organize distribution, and implementing a new stock-management system. They also designed a training program in which workers visited Coke bottlers and piggy-backed on their online learning programs.

Today, instead of dropping off supplies at 500 warehouses, the MSD now delivers directly to 5,000 health facilities, whose managers are much more familiar with their customers’ needs and are trained to place their own orders, much as retailers do with Coke products. In doing so, the MSD had to adapt best-practices from around the world to local conditions. “Logistics management is more than just software,” the Global Fund’s Jaramillo told me. “It’s country-specific. You have to work around weather cycles, and get ahead of the rainy seasons, for example.”

The result highlights how logistics—the behind-the-scenes, unsexy plumbing of business—can make a meaningful contribution to the success of nonprofit organizations. “There’s a fair amount of operations research on how to make a supply chain work well,” said Elizabeth Bradley, faculty director of the Yale Global Health Leadership Institute. “But what gets less attention is making those models work” in different and challenging locations.

Focusing on logistics is not the splashiest way for a company to align its brand with development efforts, but Kent said that delivering AIDS medications isn’t a brand-building exercise. “This is about creating sustainable communities,” he said. Still, Coke has a great deal to gain down the road—if indirectly—by supporting programs like this. In Tanzania and many other countries, mortality rates from disease are a huge hindrance to economic development. Coca-Cola is the third-largest employer in Africa, so disease affects its employees. And seven of the 10 fastest-growing economies in the world in recent years have been in Africa, Kent said.

Many African countries are also plagued by a lack of infrastructure—roads, bridges, communications networks, and supply chains. In effect, efforts like Coca-Cola’s are laying down a new intellectual infrastructure that can be used for years into the future.