Nepal

Cost-effective manufacturing in the field: An economic study of Field Ready's work in Nepal, January 2018

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Summary

This paper compares the cost of essential relief items manufactured by Field Ready in Nepal with the best available alternatives.

Local manufacturing of aid supplies – using both high-tech and low-tech methods – provides an opportunity to create business models that can realise substantial cost savings compared to conventional procurement of finished products via international supply chains.

Our analysis suggests that items locally manufactured by Field Ready realise cost savings of up to 90%:

Fetoscope
A simple, re-usable medical device
The cost of manufacturing is marginally higher than buying an imported item in Kathmandu. However, if it can be produced in the field in remote areas through a fixed or mobile capability, then the overall cost can be lower.

Otoscope
A more complex medical device
The cost of manufacturing is 75% lower than the cost of buying an imported item. The item can also be maintained more easily, using locally available parts.

Cookstove knobs
Spare part for a high value device
The cost of manufacturing is similar to the cost of buying and shipping replacements from the manufacturer. However, in a situation where the normal supply chain had been completely disrupted a costly delay could be avoided.

Vacuum pump part
Spare part for a high value device
The cost of manufacturing is 90% lower than buying replacement parts, which can be difficult or impossible to source through conventional means.

Aid agency staff we interviewed indicated that there is demand for locally manufactured relief supplies. However, they also raised concerns that in their experience there is rarely the capacity within local markets to deliver quality items consistently.

We also spoke to local and international merchants and, whilst in theory some merchants would lose out if aid agencies bought more items locally, they saw a number of potential benefits. Individual merchants saw potential opportunities to supply new items to their customers, or to deliver value in new ways.

To raise interest in supporting the local manufacturing of essential relief supplies, aid agencies and donors suggested to us that there is a need for more evidence to help them to understand how the approach can produce value for money over the medium and long term.

Field Ready will use this analysis as the basis for further economic modelling and to inform strategies for developing the capacity of local businesses and NGOs to manufacture essential relief supplies when and where they are needed, saving money, time and lives.