Tanzania’s supply chain system is a complicated web of integrated and vertical systems, covering essential and vertical programs health commodities, laboratory and diagnostics, equipment, and supplies. Despite significant improvement in the supply chain over the decades, the availability of medicines has remained uneven. Therefore, identifying the cost of operating the supply chain is vital to facilitate allocation of adequate finances to run the supply chain. We adopted a three-step approach to costing, which included i) identification, ii) measurement, and (iii) valuation of the resource use. Two levels of the Tanzanian supply chain system were examined to determine the cost of running the supply chain by function. These included first the Medical Stores Department (MSD) central and zonal level, secondly the health service delivery level that include National, Zonal and regional hospitals and the Primary Health Care (District Hospital, health center and Dispensary). The review adopted the health system perspective, whereby all resources consumed in delivering health commodities were considered, resource use was then classified as financial and economic costs. The costing period was an average of two financial years, 2015/16 and 2016/17. The cost data were exchanged from Tanzania Shillings to 2017 US$ and then adjusted for inflation to 2020 US$. The study used the total sales reported in audited financial accounts for throughput value. The average annual costs of running the supply chain at the central MSD was estimated at USD$ 15.5 million and US$ 4.1 million at the four sampled MSD Zonal branches. There is a wide variation in annual running costs among MSD zonal branches; the supply chain’s unit cost was highest in the Dodoma zone and lowest in the Mwanza zone at 26% and 8%, respectively. When examined on a cost-per-unit basis, supply chain systems operate at sub-optimal levels at health facilities at a unit cost of 37% per unit of commodity throughput value. There are inefficiencies in supply chain financing in Tanzania. Storage costs are higher than distribution costs, this may imply some efficiency gains. MSD should employ a "just in time" inventory model, reducing the inventory holding costs, including the high-expired commodities holding charge, this could be improved by increasing the order fill rate.