global humanitarian supply chains - part b - system design and node analysis

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Logistics system design for global humanitarian supply chains,

PART B: Logistics system design and node analysis

Dennis Bours,[email protected]

BSM523 Supply Chain Management (A) (6 May 2013)
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Executive summary

The focus of this report will be on logistics system design for humanitarian organizations operating

global supply chains with a focus on post-disaster emergency interventions. The operational context is

marked by a partial or total breakdown of infrastructure and authority, and emergency response may be

compromised by the disaster or conflict, internal and external political objectives, insecurity and other

external factors. This report covers the second step of the USAID logistics system design model:

Each step of the logistics system design is crucial and leads into the next phase. The second step has

been adapted into the following logistics system design model, further discussed in this report.

Step 1 has been detailed in a separate report titled Logistics system design for global humanitarian

supply chains, PART A: Pre-design assessment(Bours 2013). It should be understood that the logistics or

supply chain function in globally operating humanitarian organizations is seen as a support function

towards its main humanitarian activities and receives its funding as a percentage of funding for

humanitarian activities, impacting its ability towards longer term strategic thinking and development.

Pre-design

assessment

Logistics system

design

Logistics system

implementation

LOGISTICS SYSTEM DESIGN STEPS

Logistics system

designOrganisational structure

Supply chain structure

Linkages and partnerships

Drivers of supply chain performance and cost efficiency

-

Inventory InformationTransportFacilities


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Organizational and supply chain structure

The humanitarian organizational structure is often developed around regional offices or regional logistics

centers (RLCs) with their specific functional specialists, resulting in a geographical matrix structure in

which individuals have one boss in the hierarchical line, but often have reporting responsibilities towards

functional lines. This structure allows for flexibility if the humanitarian response phase demands a switch

in supply chain type. In post-disaster settings, line management often moves from HQ level down to

regional level, to make decisions closer to the operations. The operational focus in the supply chain

structure highly depends on the humanitarian response phase and corresponding supply chain type.

Beneficiary needs, needed lead time, total supply chain responsiveness, available funds and the implied

uncertainty of the working environment will impact the supply chain type and structure deemed most

appropriate for each response phase.

1. Developmental intervention, pull supply chain: Taking place in relatively stable environments, limited

uncertainty, reliable demand information and no need for high responsiveness. RLCs as supply chain

nodes mainly support programmes with supply information and (technical) specifications. There is

limited inventory, limited distribution nodes and operational focus is on main in-country warehouse(s)

and local warehouse nodes, the in-country supply chain structure and the formulation of specifications.

2. Disaster risk management, preparedness supply chain: The focus is on pre-positioning of standardized

emergency items, either within the organizations nodes, as part of regional stockpile s of coordinating

bodies/donor partners or through blanket pre-purchase agreements (BPAs) at suppliers. In-country pre-

positioning is limited unless the area is known for seasonal disasters, or pre-positioning takes place

because of a developing slow-onset disaster. Operational focus is on the RLCs, HQ and international

warehouse nodes and the flow of goods and information between them and suppliers.

3. Post-disaster emergency intervention, push supply chain: Emergency items are pushed down the

supply chain into a disaster area from pre-positioned stocks and supplier level BPAs. Distribution point

nodes are set up and local warehouse nodes are increased. Responsiveness is high, as is uncertaintyconcerning needs and operational context. Coordination often moves down the chain. The operational

focus is two-fold; on the pre-positioned items and on delivery. The main warehouse node is often used

for transhipment and local warehouse nodes are the central point of activity, also depending on security.

4. Transitional response, call forward supply chain: Characterized by a call forward supply chain the

needs and the operational environment will be better known after a while and with a lower level of

uncertainty distribution will be matched more to specific needs, limiting the distribution of emergency

kits and/or developing kits adapted to the situation. Operational focus moves up from the distributionpoint nodes to local warehouse nodes, country office and main warehouse(s).


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Responsiveness, efficiency, product segmentation

Humanitarian supply chains must be both responsive and efficient, but will never be able to get the

efficiency found in commercial supply chains because of the higher degree of flexibility humanitarian

operations and their uncertainty require. The lower efficiency in itself is not an issue if the resulting

increase in responsiveness matches the strategic fit regarding priorities, strategies and capabilities.

Product segmentation supports integration across commodity categories and programmatic sectors.

Each segment of products is managed differently to accommodate their characteristics, including

different maximum and minimum stock levels, different supply chain types in parallel and alternative

procedures. As a result, the supply chain structure designed must be able to cope with various supply

chain types within one structure that transform and possibly also overlap in the course of operations.

Other critical design decisions to take into account, depending on the specific characteristics of the

various supply chain types, are visualized inTable 1.

Supply chain performance drivers

Four drivers of performance within the supply chain have been identified and Chapter 3 focuses on their

roles, being the supply chain role, strategic role, decision components and trade-off. A short recap:

1. Inventory: Inventories are mostly about managing risks and increasing responsiveness. Most strategicis the use of a three-tier approach, reserving stocks at suppliers through BPAs and partner organizations

through MoUs increasing agility, and pre-positioning stocks in the organizations supply chain nodes.

2. Facilities: Decisions on the location of facilities have a significant impact on the supply chain

performance because they determine the supply chain configuration and set constraints within which

other performance drivers can be used. Choices made depend on the response phase, product

segmentation, expected future changes in that respect and local security situations. The trade-off is

between cost of the number, location and type of facilities and the level of responsiveness they provide.

3. Transport: There is a clear trade-off here in cost vs. speed. It is recommended to outsource routine

transport logistics and focus on specialized humanitarian logistics and supply chain tasks and last-mile-

logistics. Choice on transport modes and networks should be made on a case by case basis.

4. Information: Information is most important towards linkages between all elements of the supply chain

design and related stakeholders. Different roles and levels of information are inter-related. The use of

humanitarian logistics management information systems (H-LMIS) and stakeholders access to

information are discussed, and supply chain performance monitoring and related indicators are shortly

touched upon.


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Table of Contents

Executive summary ....................................................................................................................................... 3

List of abbreviations ...................................................................................................................................... 9

List of figures ............................................................................................................................................... 11

List of tables ................................................................................................................................................ 11

Introduction ................................................................................................................................................ 13

Chapter 1: Organizational and supply chain structure ............................................................................... 19

1.1 Organizational structure ................................................................................................................... 19

1.2 Supply chain structure ....................................................................................................................... 20

1.2.1 Developmental intervention, pull supply chain ......................................................................... 21

1.2.2 Disaster risk management, preparedness supply chain............................................................. 22

1.2.3 Post-disaster emergency intervention, push supply chain ........................................................ 24

1.2.4 Transitional response, 6-months to 1 year onward: call forward supply chain ......................... 25

Chapter 2: Supply chain design ................................................................................................................... 27

2.1 Responsiveness and efficiency .......................................................................................................... 27

2.2 Product segmentation ....................................................................................................................... 28

2.3 Other specific characteristics to take into account ........................................................................... 29

Chapter 3: Supply chain performance drivers ............................................................................................ 31

3.1 Inventory ........................................................................................................................................... 32

3.2 Facilities ............................................................................................................................................. 34

3.3 Transport ........................................................................................................................................... 36

3.4 Information ....................................................................................................................................... 37

Chapter 4: Linkages and partnerships ......................................................................................................... 39

Chapter 5: Supply chain performance......................................................................................................... 43


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Annex 1: Humanitarian geographical matrix structures ............................................................................. 45

Annex 2: Humanitarian product segmentation .......................................................................................... 46

Annex 3: Agility in humanitarian supply chains .......................................................................................... 48

Annex 4: Roles of inventory in supply chain performance ......................................................................... 50

Annex 5: Roles of facilities in supply chain performance............................................................................ 53

Annex 6: Warehouse checklist .................................................................................................................... 54

Annex 7: Roles of transport in supply chain performance .......................................................................... 56

Annex 8: Elements and reach of a H-LMIS .................................................................................................. 59

Annex 9: Actors in the humanitarian supply chain ..................................................................................... 60

Annex 10: Supply chain performance indicators ........................................................................................ 61

References ................................................................................................................................................... 63


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List of abbreviations

3PL 3rd Party logistics

BSC Balanced Scorecard

BPA Blanket pre-purchase agreement, interchangeable with FA

(FA is used in the European Union, BPA in the United States)

CAP Consolidated Appeal Process

CERF Central Emergency Response Fund

CHF Common Humanitarian Fund

DART Disaster Assistance Rescue Team

DRR Disaster risk reduction

DRM Disaster risk management

ERU Emergency response unit

FA Framework agreement, interchangeable with BPA

(FA is used in the European Union, BPA in the United States)

FAFA Financial and Administrative Framework Agreement,

ECHO donor agreement with UN agencies and the FAO.

FAO Food and Agricultural Organization

FPA Framework Partnership Agreement,

ECHO donor agreement with NGOs and IOs like ICRC and IFRC

H-LMIS Humanitarian logistics management information system

ICRC International Committee of the Red Cross

IFRC International Federation of the Red Cross

INGO International non-governmental organization

IO International Organization, not part of the UN structure

LMIS Logistics management information system

MoU Memorandum of understanding


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NGO Non-governmental organization

NFI Non-food item

OECD Organisation for Economic Co-operation and Development

PAHO Pan-American Health Organization

RCRC Red Cross and Red Crescent

RLC Regional logistics centre

SOP Standard operating procedure

TOC Theory of constraints

ToT Training of Trainers

UNHCR United Nations Higher Commissioner for Refugees

UNICEF United Nations International Children's Emergency Fund

UNJLC United Nations Joint Logistics Centre

USAID United States Agency for International Development

WASH Water, sanitation and hygiene

WFP World Food Programme

WHO World Health Organization


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List of figures

Figure 1: USAID logistics system design model ........................................................................................... 13

Figure 2: Expanded logistics system design model ..................................................................................... 14

Figure 3: Logistics system design ................................................................................................................ 17

Figure 4: Example of a humanitarian geographical matrix structure ......................................................... 19

Figure 5: Response phases and supply chain types .................................................................................... 20

Figure 6: Developmental intervention: pull supply chain ........................................................................... 21

Figure 7: Disaster risk management intervention: preparedness supply chain ......................................... 23

Figure 8: Emergency response: push supply chain ..................................................................................... 24

Figure 9: Transitional phase: call forward supply chain .............................................................................. 25

Figure 10: Responsiveness vs. efficiency trade-off ..................................................................................... 27

Figure 11: Responsiveness, efficiency and (implied) uncertainty ............................................................... 28

Figure 12: Example of product segmentation ............................................................................................. 29

Figure 13: Drivers of supply chain performance ......................................................................................... 31

Figure 14: Roles of inventory in supply chain performance ....................................................................... 33

Figure 15: Roles of facilities in supply chain performance .......................................................................... 34

Figure 16: Responsiveness vs. total supply chain cost ................................................................................ 35

Figure 17: Roles of transport in supply chain performance ........................................................................ 36Figure 18: Information roles versus - levels ................................................................................................ 38

Figure 19: Humanitarian supply chain actors.............................................................................................. 40

Figure 20: H-LMIS, partnerships and linkages ............................................................................................. 40

Figure 21: Lead time and material flow time .............................................................................................. 51

Figure 22: Elements and reach of a H-LMIS ................................................................................................ 59

List of tables

Table 1: Supply chain types and critical design decisions ........................................................................... 30

Table 2: Transport modes and their specific criteria .................................................................................. 57


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Introduction

The primary humanitarian objective is to save lives, alleviate suffering, and maintain and restore human

dignity, without regard for race, ethnicity, religion or political affiliation (IFRC 2002). Humanitarian action

should facilitate the return to normal lives, seeking to lessen the destructive impact of disasters and

complex emergencies.

The focus of this report will be on logistics system design for humanitarian organizations operating

global supply chains with a focus on post-disaster emergency interventions. The operational context is

marked by a partial or total breakdown of infrastructure and authority, and emergency response may be


external factors. (PAHO 2001; Cassidy 2003; Beamon 2004; Van Wassenhove 2006; Kovcs and Spens

2007; Ergun et. al. 2009; Agrollo da Costa, Campos and Albergaria de Mello Bandeira 2012)

The text message came in at midnight on 12th January 2010. It simply read ERU info: Haiti: 7.3

EQ off coast. Tsunami alert. You dont know how bad things might be, but you prepare for the

worst. It was to become the biggest single country response the Red Cross Movement had ever

responded to. Claire Durham, Logistics Manager at International Red Cross1

This report covers the second step of the USAID logistics system design model (Figure 1), being the

logistics system design phase (Owens and Warner 2003; USAID 2009):

Figure 1: USAID logistics system design model

The three steps have been adapted into a specific logistics design model visualized inFigure 2on the

next page. The expanded logistics system design model has been informed by an extensive literature

1Article and interview available from:http://www.supplychaindigital.com/global_logistics/crossing-the-line

Pre-design

assessment

Logistics system

design

Logistics system

implementation

LOGISTICS SYSTEM DESIGN STEPS
http://www.supplychaindigital.com/global_logistics/crossing-the-linehttp://www.supplychaindigital.com/global_logistics/crossing-the-linehttp://www.supplychaindigital.com/global_logistics/crossing-the-linehttp://www.supplychaindigital.com/global_logistics/crossing-the-linehttp://www.supplychaindigital.com/global_logistics/crossing-the-line


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Figure 2: Expanded logistics system design model

Current situation Desired situation

ASSESS DEMAND

ASSESS CONSTRAINTS IN

OPERATIONAL ENVIRONMENT

Transport; Infrastructure; Logistical bottlenecks;

Security; Access restrictions.

ASSESS CONSTRAINTS

IN INFORMATION

Nature and use of information; Communication infrastructure;

Information environment;

Information reliability.

ASSESS CONSTRAINTS

IN RESOURCES

Donors and requirements; 3rd Party logistics (3PL);

Suppliers and availability;

Human resources.

Pre-design

assessment

Logistics system





-


Implementation

planning

Supply chain

design

(Human)

resources

Implementation

quality control(Implementation)

budget

Logistics system

implementation

SOPs

Training

material

Communication

plan

Information

andToT

Full

roll-out

SOPs

Training

material

Communication

plan

Information

andToT

Full

roll-out


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review on the topic2, combined with and tested during 10+ years of experience of the author in the field

of humanitarian logistics, supply chain and emergency pipeline management in post-disaster settings for

humanitarian actors like Doctors Without Borders, the Red Cross and Save the Children International.

The focus of humanitarian supply chains is on scale-up (or build-up) speed in case of increase of

beneficiary demand, i.e. in case of disasters, reflected in the speed of switching between supply chain

types to support changes in humanitarian response phase (Figure 5). Post-disaster settings demand close

to zero lead times, low response time, high supply chain throughput capacity, proper management of

pre-positioned emergency stocks and a high level of flexibility towards last-mile-level logistics.

Humanitarian organizations mainly talk about logistics management, defined as the management of the

flow of goods, information and other resources, including people, between the point of origin and the

point of consumption in order to meet stakeholders requirements, including both beneficiaries and

donors. Supply chain management would involve longer-term coordination and integration of logistics

management among companies and suppliers (Lysons and Farrington 2006; Van Weele 2010), which is

often impossible within humanitarian organizations due to the way the logistics function is financed; The

logistics / supply chain function in global humanitarian organizations is seen as a support function

towards its main humanitarian activities and often receives its funding as a percentage of donor funding

or pledges for the implementation of humanitarian activities. Van Wassenhove (2006) notes that for

years humanitarian supply chain management has been struggling for recognition as there has been a

lack of understanding of the benefits as well as acknowledgment of the importance. Recent interest in

the area is largely practitioner based which has led to calls for greater academic interest and debate on

how supply chain management can be applied by humanitarian aid providers.

Step 1 of the logistics system design model is further explained in a separate report titled Logistics

system design for global humanitarian supply chains, PART A: Pre-design assessment(Bours 2013).

The reference to use for this publication is the following:

BOURS, D.P., 2013. BSM523. [Coursework 1] Logistics system design for global humanitarian supply

chains, PART B: Logistics system design and node analysis. Supply Chain Management. The Robert

Gordon University, MSc Purchasing & Supply Chain Management, Aberdeen Business School.

2 PAHO (2001), Cassidy (2003), Owens and Warner (2003), Thomas (2003), Beamon (2004), Prentice (2004), Russell (2005), Akkihal

(2006), Blanco and Goentzel (2006), Kovcs and Spens (2007), Agrawal (2008), Agrawal and Perrin (2008), Ergun et. al. (2009), Kovcs

and Spens (2009), USAID (2009), Balcik et. al. (2010), Cassidy (2010), Dos Santos et.al. (2010),Duran, Gutierrez and Keskinocak

(2011), Suarez and Tall (2010A and 2010B), Pedraza-Martinez, Stapleton and van Wassenhove (2011), Srinivasan (2011), Holgun-

Veras et. al. (2012), Bours (2013).


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PART B: LOGISTICS SYSTEM DESIGN AND NODE ANALYSIS

Figure 3: Logistics system design

The design process will be a systematic and iterative approach linking the different components of the

logistics system and performance drivers inventory, facilities, transport, and information through the

supply chain structure, linkages and partnerships to ensure the system flows. Boundaries of the system

design as indicated during pre-design assessment (Bours 2013) ensure that the logistics system design

will be realistic, each supply chain activity is linked and the design phase produces a coherent and

feasible system.

Designing the logistics and supply chain system is only the beginning of a range of activities.

Implementing a logistics system is a dynamic process that requires ongoing training, monitoring,

evaluation, and adjustments to ensure the system is functioning within set performance indicators.

Logistics system





-



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Chapter 1: Organizational and supply chain structure

The humanitarian organizational structure is often developed around regional offices or regional logistics

centers (RLCs) with their specific functional specialists, resulting in a geographical matrix structure

(Mintzberg 1993; Sy and dAnnunzio 2005) as presented inFigure 4.

1.1 Organizational structure

As is desired in humanitarian operations, there is a high level of sectoral specialization (i.e. food, non-

food, WASH, medical, shelter, education, etc.). Since each country team is in close contact with its area,

it can easily identify and adapt readily to changing humanitarian demands in their country. The matrix

structure organizes activities along two lines of authority per region; Hierarchical vertical lines with a

direct impact on decision making and functional horizontal lines, which have an advisory role.

Figure 4: Example of a humanitarian geographical matrix structure


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Contrary to the corporate matrix structure, individuals only have one boss being the hierarchical line, but

often have reporting responsibilities towards functional lines. This structure allows for flexibility if the

situation demands a switch in supply chain type from preparedness to push. In post-disaster settings,

line management often moves from HQ level down to regional level, to make decisions closer to theoperations. The geographical matrix structure is further explained inAnnex 1 (Mintzberg 1993; Sy and

dAnnunzio 2005; Appelbaum, Nadeau and Cyr 2008A, 2008B and 2009).

1.2 Supply chain structure

The supply chain structure highly depends on the humanitarian response phase and corresponding

supply chain type, visualized inFigure 5. Although the focus of this report is on logistics system designfor humanitarian organizations operating global supply chains with a focus on post-disaster emergency

interventions, other humanitarian response phases need to be taken into account given that

organizations may already have a presence in the area with developmental interventions resulting in a

need to scale up, and post-disaster supply chain structures need to be designed to be able to scale down

into transitional and later developmental interventions.

Figure 5: Response phases and supply chain types

Beneficiary needs, beneficiary delivery time, total supply chain responsiveness, available funds and the

implied uncertainty of the working environment will impact the supply chain type and structure deemed

most appropriate for each humanitarian response phase (Bours 2013). Within each supply chain type the

organization strives to work in or close to the zone of strategic fit, hence finding the optimum situation

to balance beneficiary needs against supply chain capability and balance programmatic and supply chain


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strategies to one another to guarantee (cost) efficiency (Cohen and Roussel 2005; Sunil and Meindl

2009). Each response phase has its preferred supply chain type and corresponding structure.

1.2.1 Developmental intervention, pull supply chain

Humanitarian programmes focusing on capacity development, agriculture, livelihoods, education,

improvement of basic healthcare facilities, etc. are seen as developmental interventions. They take place

in relatively stable environments with limited uncertainty, reliable information on demand and end

users/beneficiaries, and no need for high responsiveness, pictured on the next page inFigure 6 (Paho

2001; Beamon 2004; Blanco and Goentzel 2006; Bourne 2009; Ergun et. al. 2009; Howden 2009; Kovcs

and Spens 2009; Scholten, Scott and Fynes 2009; Balcik et. al. 2010).

Figure 6: Developmental intervention: pull supply chain


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Characteristics of the developmental intervention and related supply chain (Figure 6) are as follows:

- The supply chain is in pull-mode in the sense that humanitarian supplies are only delivered upon

request by the end user, often project staff in field locations. Distribution is demand driven

- International and regional suppliers often deliver directly to the in-country program, but payments

go through head office as does order information, specifications and requests

- Regional offices and RLCs as supply chain nodes mainly support programmes in informing them

what items are for sale and developing their (technical) specifications for order requests

- There is limited inventory and international orders go straight to the head office supply unit

- With limited (need for) inventory, the number of local warehouse nodes is limited and supply to

beneficiaries sometimes comes directly from the country programmes main warehouse

-

Distribution point nodes are limited to food-for-work programmes and distribution is often donedirectly from local warehouses, given the limited number of distribution locations

- Operational focus is on the main in-country warehouse(s) and local warehouse nodes, the in-

country supply chain structure and formulation of specifications responding to in-country needs.

1.2.2 Disaster risk management, preparedness supply chain

Disaster risk management (DRM) interventions focus on minimizing vulnerabilities and disaster risks

throughout a society, to avoid (prevention) or to limit (mitigation and preparedness) the adverse impacts

of hazards, within the broad context of sustainable development. (UNISDR 2004, p.17) For humanitarian

organizations the focus is either on hard measures (e.g., dams, flood barriers, tree planting on hillsides),

soft measures (awareness raising, preparedness planning with communities, policy development, etc.) or

preparedness (a.o., agricultural diversification, new construction techniques and the pre-positioning of

emergency items). The focus is on the latter, given the strong role of supply chain management in supply

preparedness and pre-positioning of stocks, either at supplier or operational level (Russell 2005; Akkihal

2006; Amin and Goldstein 2008; Cassidy 2010; Balcik et. al. 2010; Duran, Gutierrez and Keskinocak2011).

Characteristics of the DRM intervention and related supply chain (Figure 7) are as follows:

- Strong focus on the pre-positioning of emergency items, mostly emergency kits (health kits,

shelter kits, nutrition kits, etc.) because the post-disaster need is yet unknown

- Pre-positioning of items either within the organizations supply chain nodes, as part of regional

stockpiles of coordinating bodies/donor partners or through blanket pre-purchase agreements

(BPAs) at suppliers, to support a first wave of resources after a disaster has struck


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- Specifications of emergency kits are internationally standardized (PAHO 2001; IFRC 2009; UNHCR

2012; WHO 2012; UNICEF 2013; USAID 2013) and often regionally stockpiled

- Information flows go from head office and RLCs towards the country programs

- In-country pre-positioning is often limited, unless the area is known for seasonal disasters, orpre-positioning is taking place because of a slow-onset disaster developing (e.g. food shortage)

- The operational focus is on the RLCs, HQ and international warehouse nodes and the

information and goods flows between them, international and regional suppliers.

Figure 7: Disaster risk management intervention: preparedness supply chain


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1.2.3 Post-disaster emergency intervention, push supply chain

There is a partial or total breakdown of infrastructure and authority, and emergency response may be


external factors. Emergency items are pushed into a disaster area from pre-positioned emergency stocksand supplier level BPAs. Distribution point nodes are set up and the number of local warehouse nodes

around the disaster area is expanded. Responsiveness is high, but there is also a high level of uncertainty

with respect to beneficiary needs. (PAHO 2001; Cassidy 2003; Thomas 2003; Beamon 2004; Van

Wassenhove 2006; Kovcs and Spens 2007; Ergun et. al. 2009; Agrollo da Costa, Campos and Albergaria

de Mello Bandeira 2012; Holgun-Veras 2012) The supply chain is pictured inFigure 8.

Figure 8: Emergency response: push supply chain


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Characteristics of the emergency response and related supply chain (Figure 8) are as follows:

- The supply chain is in push-mode. Humanitarian supplies are pushed through the supply chain

and nodes from the international warehouse, RLCs and supplier BPAs towards beneficiaries

- The focus is on speed, on responsiveness, getting the goods to end users as quickly as possible

- Demand is uncertain and supply focuses on distribution of standardized humanitarian kits

- Coordination often moves down the chain, towards the RLC and at times even to country level

- Operational focus is two-fold; on the pre-positioned items and on the delivery. The country

warehouse node is often used for transhipment and local warehouse nodes are the central point

of activity, though this also depends on the local-level security environment

- Given the distribution of kits the information flow up focuses on distribution figures and demand

for kits, with limited identification at this point of very specific beneficiary needs.

1.2.4 Transitional response, 6-months to 1 year onward: call forward supply chain

The emergency response phase moves into a transitional phase after 6 months to a year after a disaster

struck, characterized by a call forward supply chain. The needs and the operational environment will be

better known bi-directionality of the information flow in the supply chain becomes more important

and with a lower level of uncertainty distribution will be matched more to specific needs, limiting the

distribution of emergency kits and/or developing kits adapted to the situation. The operational focus

moves up from the distribution point nodes to local warehouse nodes, country office and main

warehouse(s). The information flow becomes more important and bidirectional in-country. The head

office supply unit, international warehouse and RLC nodes only send goods upon request.

Changes are mostly

visible in the down-

stream part of the

supply chain as

visualized in Figure 9,

and the in the way

movement of goods is

initiated, i.e. upon

request opposed to

push.

Figure 9: Transitional phase: call forward supply chain


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Chapter 2: Supply chain design

Each supply chain type has different levels of uncertainty and requires different degrees of

responsiveness, i.e. speed at which a supply chain is able to get emergency items to the beneficiaries.

Time is generally more critical in humanitarian supply chains, looking at the trade-off between

responsiveness and efficiency (Figure 10) (Jacobs, Chase and Qauilano 2008; Chopra and Meindl 2013).

2.1 Responsiveness and efficiency

A key characteristic of humanitarian supply chains is that they must be both responsive and efficient, but

will never be able to get the efficiency found in commercial supply chains because of the higher degree

of flexibility humanitarian operations require. This doesnt mean theres no trade-off between

responsiveness and efficiency; it simply means that the weight of responsiveness is greater than the

weight of efficiency.

Figure 10: Responsiveness vs. efficiency trade-off

There is a cost to achieving responsiveness and increasing responsiveness results in higher cost and thus

lower efficiency. The lower efficiency in itself is not an issue if the resulting increase in responsiveness


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matches the strategic fit, i.e. there is consistency between overall organizational priorities, intervention

strategy and supply chain capabilities specified by the supply chain strategy (Donaldson 2006). The

second step towards strategic fit is to map the supply chain on the responsiveness spectrum (Figure 11)

against the implied level of uncertainty (Fisher 1997; Donaldson 2006; Chopra and Meindl 2013).

Figure 11: Responsiveness, efficiency and (implied) uncertainty

2.2 Product segmentation

Each response phase is marked by different levels of uncertainty, but even within one response phase

some programmatic sectors (food, non-food, health, shelter, education, WASH, etc.) and some product

groups might have a more certain demand.




procedures (Donaldson 2006; USAID 2009). As a result, the supply chain structure designed must be able

to cope with various supply chain types within one structure that transform and possibly also overlap in

the course of operations. An example of product segmentation is presented on the following page in

Figure 12and humanitarian product segmentation is further explained inAnnex 2.


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Figure 12: Example of product segmentation

2.3 Other specific characteristics to take into account

Next to responsiveness, efficiency, the level of uncertainty and product segmentation, there are other

critical design decisions to take into account, depending on the specific characteristics of the various

supply chain types. And overview of characteristics is given inTable 1on the following page.

For example, in a push supply chain, the implied uncertainty in demand is high and as such buffer stocks

are increased. A next question would be whether the available storage space in the system is able to

cope with the maximum stock levels. Next to that, lead time estimations are important because if

underestimated, the system is at risk of stock-out and if overestimated, it is at risk of wastage.


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Table 1: Supply chain types and critical design decisions

The preparedness supply chain in which demand is completely unknown and implied uncertainty is as

such infinite has not been taken into account in Table 1. In post-disaster response there is a natural

development path that moves the supply chain from preparedness to push to call forward to pull (Figure

5). The preparedness chain is there to create a state of readiness for the initial response to an

emergency can be achieved rapidly. The push chain then deploys using the preparedness supply chain as

a foundation. (Fisher 1997; Donaldson 2006; USAID 2009)


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Chapter 3: Supply chain performance drivers

The chosen supply chain structure is one of the factors depending on the nature of our operations, the

characteristics of our beneficiaries needs, the humanitarian response phase and implementation type.

Next to the supply chain structure, the way we operate our supply chain is also depending on the nature

of our operations, which was already visible in a sense inFigure 12on product segmentation. As such,

the type of programme and the corresponding supply chain type/mode impact the way we seek to

satisfy the specific needs and requirements of the beneficiaries and the way we operate our supply

chain. The supply chain type determines the mix of push and pull processes and also the level of

uncertainty that needs to be managed together with the degree of responsiveness that is required.

The focus of this chapter will be on four drivers of performance within the supply chain, being:

- Inventory (Logistical driver);

- Facilities (Logistical driver);

- Transport (Logistical driver);

- Information (Cross-functional driver).

Figure 13: Drivers of supply chain performance

Inventory is all the goods and materials held available in stock and in the pipeline within a supply chain,

and an important supply chain driver because changing inventory policies can dramatically alter the

supply chains responsiveness and efficiency.

Facilities are places in the network where inventory is stored or assembled. Decisions regarding location,

capacity and flexibility of facilities have significant impact on supply chain performance.

Transport is the movement of goods from point to point, using a combination of modes and routes, and

having a significant impact on a supply chains responsiveness and efficiency.

Information consists of data and analysis regarding inventory, transportation, facilities, beneficiaries and

other stakeholders throughout the supply chain. Information is potentially one of the biggest drivers of

performance in the supply chain as it directly affects each of the other drivers and it is cross-functional.(Donaldson 2006; USAID 2009; Chopra and Meindl 2013)





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These four drivers of performance will be discussed in depth in the subsequent paragraphs and

referenced annexes. The focus will be on four roles of the drivers of performance, being the supply chain

role, strategic role, decision components and trade-off.

Sourcing has not been discussed as supply chain driver, given the sourcing choices to be made are very

much dictated by the funding flows, donor partners and their specific sourcing requirements.

3.1 Inventory

There are three basic reasons for keeping inventory:

- Lowering lead time through cycle stock

- Coping with uncertainty through buffers

- Economies of scale in procurement, movement and storage.

All three reasons indicate that inventories are about managing risks, resulting in global pre-positioning of

relief supplies as an expansion of warehousing strategies seen in humanitarian emergency responses,

which have by definition unpredictable demand patterns. Inventory allows responding quickly to

disasters with relief supplies from strategically stocked RLCs or BPAs throughout the world (Russell

2005; Beamon and Kotleba 2006; Bourne 2009; Cassidy 2010; Balcik et. al. 2010; Duran, Gutierrez and

Keskinocak 2011).

Oloruntoba and Grey (2006) did a first investigation into whether agility is or could be part of

humanitarian supply chains and their inventory management, which is further discussed inAnnex 3and

it is through BPAs and shared inventories with humanitarian partners that agility is achieved. The

various roles of inventory are presented inFigure 14on the next page, summarized below and further

elaborated on inAnnex 4.

1. Supply chain role of inventory: Inventory exists to overcome the mismatch between supply and

demand, i.e. to cope with the implied uncertainty and have emergency items available as soon as

(disaster) situations demand. A low implied uncertainty as in developmental programmes will result in

less inventory and programmes with high implied uncertainty result in higher levels of inventory.

Pre-positioning also depends on the product segmentation (Annex 2) and the use of BPAs can be seen

as holding inventory in a more generic form as part of agility (Annex 3).


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Figure 14: Roles of inventory in supply chain performance

2. Strategic role of inventory and 3. Decision components: Inventory is used to achieve a high level ofresponsiveness by locating large amounts of inventory close to possible future needs. Most strategic is

the use of a three-tier approach, reserving stocks at suppliers through BPAs and partner organizations

through MoUs, pre-positioning stocks in the RLCs and pre-positioning stocks in the field where

emergencies are seasonal or expected and security permits pre-positioning. Safety stocks should only be

kept in the shape of standardized emergency kits at RLC level. Other items identified in the product

segmentation as emergency stocks should either be kept at the supplier through BPAs, at partner

organizations or limited amounts at country level if security allows.

4. Trade-off in inventory: The general trade-off managers must make is between responsiveness and

efficiency (Figure 11). Increasing inventory generally makes the supply chain more responsive, but at the

cost of decreasing efficiency and bounded by the financial impact of the pre-positioning of items, as

discussed in Bours (2013). Pre-positioning at suppliers through BPAs, at partner organizations and

through sharing capacity and inventories between humanitarian organizations will take the pressure off

the private funding base for support cost (Russell 2005; Akkihal 2006; Cassidy 2010).

Inventory driver

SUPPLY CHAIN ROLE

Balance supply & demand

Material flow time

STRATEGIC ROLE

More inventory responsive

Less inventory - efficient

DECISION COMPONENTS

Cycle inventory

Safety stock

Seasonal inventory

TRADE-OFF

Inventory vs. out of stock

Availability vs. cost


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3.2 Facilities

Decisions on the location of facilities have a significant impact on the supply chain performance because

they determine the supply chain configuration and set constraints within which other performance

drivers can be used to either decrease supply chain cost or to increase responsiveness.

If already operating in an area, some warehouses are already established and shutting down a facility or

moving it to a different location has its price. The focus in existing programmes would be more towards

the management of current facilities. The roles of inventory are presented inFigure 15, shortly discussed

below and further elaborated on inAnnex 5.

Figure 15: Roles of facilities in supply chain performance

1. Supply chain role of facilities: Facilities are the locations to which or from which inventory is

transported and stored before being shipped to the next stage in the supply chain. All warehouses

should be inspected with the use of a checklist (Annex 6) including key identifiers on warehouse

appropriateness, ranging from the layout of the facility to the skills of the warehouse staff.

2. Strategic role of facilities and 3. Decision components:Country main warehouses are often used to

hold emergency goods for seasonal emergencies and support stocks like vehicle parts. They are also

Facilities driver

SUPPLY CHAIN ROLE

Transformation

Storage

STRATEGIC ROLE

Locating for responsiveness

Centralising for efficiency

DECISION COMPONENTS

Location

Capacity

Operating methodology

TRADE-OFF

Number, location and types

vs. responsiveness


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used to hold inventory en route (overnight parking of trucks, trailers) and for cross-docking and

transhipment if space and layout allows. A choice could be to share the use of facilities between

humanitarian actors.

Locating facilities close to beneficiaries increases the number of facilities needed and reduces efficiency,

but increases responsiveness. Choices made in this respect depend on the response phase, product

segmentation, expected future changes in that respect and local security situations.

Factors to take into account are, among others, the availability of a local market for humanitarian goods,

the existence and location of international logistical decoupling points, the security situation, the level of

uncertainty towards possible in-country disasters, the availability of appropriate premises, skilled staff

and staff cost, the size of existing programmes, the in-country infrastructure and the needs of our

beneficiaries.

4. Trade-off in facilities:The overall trade-off in is between the cost of the number, location and type of

facilities and the level of responsiveness that these facilities provide the organisation as portrayed in

Figure 16. At each operational level an analysis should be made on the balance needed between

efficiency and responsiveness in relation to the number of warehouses (Chopra and Meindl 2009).

Figure 16: Responsiveness vs. total supply chain cost

Logistics / supplychain costs

Number of facilities

Transportation costs

Facility costs

Total supply chain costs

Inventory costs

1 2 3 4 5 6 7 8 9 10 11 12

RESPONSIVENESS+ +

- -

RESPONSIVENESS


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3.3 Transport

Transportation plays a key role in the responsiveness and efficiency of a supply chain because it moves

product between the different levels of and facilities in the supply chain, but also responsiveness in

transport comes at a price.

Figure 17: Roles of transport in supply chain performance

1. Supply chain role of transport:Faster modes of transport and smaller batches generally more cost

than slower bulk transport. There is a clear trade-off here in cost vs. speed. An overview of criteria for

various modes of transport is visible inAnnex 7,Table 2.

3PL providers have extensive knowledge and experience in integrated supply chains, can leverage

economies of scale through combined facilities and shipping at much larger scales than any but the

biggest humanitarian organizations and donor partners. And last, the use of 3PL providers allows for

easier up and down-scaling (not having to deal with possibly painful measures like lay-offs, or,

conversely, having to go through expedited hiring of new staff).

It is recommended to outsource the routine logistics work and focus the organizations supply chain

capacity on specialized humanitarian logistics and supply chain tasks and last-mile-logistics (Amin and

Goldstein 2008; Bourne 2008; Bours 2013).

Transport driver

SUPPLY CHAIN ROLE

Movement between nodes

Time reduction

STRATEGIC ROLE

Responsiveness

Efficiency

DECISION COMPONENTS

Mode of transport

Route and network selection

Use of 3PL

TRADE-OFF

Cost vs. Speed


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2. Strategic role of transport and 3. Decision components: Transportation as a strategic driver in the

supply chain is seen as a choice between responsiveness with the associated cost increase, or lower

transport cost at the expense of responsiveness. But the trade-off is not limited to cost versus

responsiveness. Humanitarian organizations should start incorporating supply chain cost in the bid

analysis for bigger orders of humanitarian goods, in the BPAs with suppliers and MoUs with

humanitarian actors to make sure transport cost efficiency is achieved without giving up on

responsiveness, and at the same time increasing flexibility (Ak etl al. 2007).

Choice on transport modes and networks should be made on a case by case basis, taking into account

the availability of goods at certain points in the network, transport availability, security constraints,

absorption capacity of programme teams and the ability to track goods to the beneficiary (Bours 2013).

4. Trade-off: The overall trade-off for transportation is between the cost of transporting a given product

(efficiency), the speed with which that product is transported (responsiveness), and the flexibility and

reliability of the specific mode of transport. An overview of different transport modes and criteria to

take into account is presented inTable 2inAnnex 7.

3.4 Information

Information is the most important supply chain driver, especially towards the linkages between all

elements of the supply chain design. The roles of information have already been discussed in Bours

(2013). The various levels of information were also discussed with the use of the information pyramid.

Within each information role you will find all information levels and Figure 18 on the next page shows an

example of which people are specifically interested in certain information role-level combinations.

It shows that certain positions are in need of certain information. A warehouse officer needs to have

detailed inventory overviews. The field logistician wants a broad scope on information, but still with a

certain level of detail. The logistics coordinator also wants a broad scope, but at a higher level, focusing

on totals, timelines, final overviews, monthly reports.

With the matrix inFigure 18the following can be identified:

- Operational level; The supply chain role and strategic role is the most important

- Knowledge level; The information on supply chain role and strategic role level is combined with

decision components, but mainly with an informational purpose


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- Management level; The supply chain role of information becomes of lesser importance and

decision components and trade-off gains in importance

- Strategic level: Strategic and decision components and trade-off are most important.

Figure 18: Information roles versus - levels

A conclusion can be that logistics and supply chain information is needed on all levels of the

organization. Figure 18 only looks at supply chain-related positions, but logistics and supply related

information is also important for various programmatic positions and actors outside of the organization.

Donors are often seen as customers, in the sense that they fund the operations and as such they need to

be informed on whether supplies have met the needs of the beneficiaries.

The humanitarian supply chain cannot be built solely by increasing the capacity or responsibility of

individuals, but the role of supply chain information is formed by the creation of stronger linkages

between people and units within the supply chain. Information also empowers programme staff to

become more engaged consumers of logistic services.

Supply chainrole

Strategic role Decisioncomponents

Trade-off

Operational

level

Knowledge

level

Manag

ement

level

Strategic

level

Field logistician

Logistics

coordinator

Head

of RLC

Logistics

director

Warehouse officer

INFORMATION ROLES

INFORMATIONLEVELS


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Chapter 4: Linkages and partnerships

Linkages and partnerships have already been discussed in Bours (2013) and this chapter will focus on the

use of Humanitarian Logistics Management Information Systems (H-LMIS) as a tool to link various

stakeholders in the humanitarian supply chain.

H-LMIS improves the flow of information between people and departments, within the organization and

with external actors, improving the effectiveness of the supply chain and facilitating the switching

between supply chain types. H-LMIS software generally looks at the coordination function, commodity

tracking and inventory control on all supply chain levels and reports on data that can be used on all

levels of the information pyramid (Bours 2013). Other H-LMIS functions are to:

- Ensure that field staff know what supplies are available for beneficiaries, either in local warehouses,

pre-positioned emergency stocks or from local and international markets

- Share lists of supplies available in local and international markets including prices and lead times

to assist program staff in better planning their (procurement) activities

- Keep program staff informed about the progress of procurement activities

- Provide the budget holder more accurate financial information regarding funds committed within

the procurement process, to avoid the over- or under-spending of budgets

- Provide improved visibility of current inventory and generate warehouse inventory reports to

program staff to allow them to take more responsibility for their supplies

- Share information on the distribution of supplies to allow program staff to better monitor and

evaluate activities and avoid the duplication in record keeping between logistics and programs

- Allow the organization to place paperless purchase orders with key suppliers, making transactions

more efficient and accurate, decreasing lead time to get products to beneficiaries

- More accurately divide logistics overhead costs such as warehouse rental, transportation and

logistic staff wages into program budgets according to the activities logistics is supporting

- Add increased analytical decision support to supply chain management.

An overview of H-LMIS components is presented inAnnex 8. In humanitarian logistics and supply chains

there are many actors (Figure 19on the next page andAnnex 9) who are not necessarily linked to the

humanitarian ideology. Suppliers have different motivations for participating and customers are not

generating a voluntary demand and will hopefully not create a repeat purchase. An important

difference with commercial supply chains is in the fact that the customer actually has no choice.

(Beamon 2004; Donaldson 2006; USAID 2005B; Howden 2009; Cassidy 2010)


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Figure 19: Humanitarian supply chain actors

But which actors should feed into, or have partial or complete direct access to the H-LMIS? This depends

strongly on the role of the actor/partner towards the supply chain and the level of collaboration

between the humanitarian organization and the actor, which is linked to the likely need to switch supply

chain types and scale-up or scale down over time. Operational partners like 3PL providers should have

access to the H-LMIS. The same accounts for key suppliers with whom the organization has BPAs. Stock

overviews at the side of the supplier should be visible for both the humanitarian organization and the

3PL provider who is requested to arrange transport towards facilities. There are situations in which other

aid agencies, humanitarian organizations and even governments will have access to the system. For

example if aid agencies and humanitarian organizations work together within a consortium or as

implementing partners.

Figure 20: H-LMIS, partnerships and linkages

Humanitarian

supply chain

Military

Other

(I)NGOs

Non-state

actors

Suppliers

DonorsTransporters,

3PL providersAid agencies

Civil society GovernmentsBeneficiaries


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In other circumstances, the system will be used to generate needed documents, overviews and reports

to keep actors and partners informed about supply chain capacity and performance. The exchange of

information between operational partners through H-LMIS will have a positive impact on the strategic

role of information towards supply chain performance and cost efficiency. H-LMIS are not specificallydeveloped for performance and/or cost efficiency evaluations, but the data within the system can be

used to generate performance and cost efficiency reports, depending on the indicators chosen for

supply chain performance and cost efficiency.

The real difficulty of any information system lies in anchoring the system in the organizational context,

supported by relevant and effective operating procedures, agreed terminology and data labelling and a

shared awareness of the benefits of proper handling of information. Any H-LMIS must be supported by

accepted rules, procedures, linkages and partnerships that encourage, facilitate, and guide the

compiling, sharing, analysis and use of data to manage the supply chain. Next to organizational and

procedural aspects, the H-LMIS needs to be supported by appropriate information and communication

technology, including the related training and capacity building of staff making use of the system.

(Donaldson 2006; Amin and Goldstein 2008; Howden 2009)


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Chapter 5: Supply chain performance

To design a successful supply chain performance measurement system we should first determine what

elements of performance are most important to the humanitarian organization and the closest

stakeholders, and define the metrics supporting these priorities. Organizational and stakeholders goals

should determine what metrics are put into place.

Financial efficiency and responding to the requests of donors are of importance towards donors whereas

the effectiveness of actual and timely response to beneficiaries is most important towards the

humanitarian organization.

The balanced scorecard (BSC) is an often used strategic performance management tool, but according to

Ray Archer3

, Vice President of DAO Operations at Dell Inc., BSC is best used to track how well anorganization is meeting its goals for change management. BSC is not necessarily the best method to

measure ongoing supply chain performance, but can be used for implementation quality control.

Based on the work of Anne Leslie Davidson (2006) and the USAID Logistics Indicators Assessment Tool

(2005B), supply chain performance can be analyzed by means of a supply chain performance indicator

framework. Related indicators are presented inAnnex 10, but their applicability will need to be reviewed

during the supply chain implementation phase.

3 Statement made during a 2012 meeting between Mr. Archer and the author.


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Annex 1: Humanitarian geographical matrix structures

A geographical matrix structure (Figure 4) has both functional and geographic structures implemented

simultaneously and resources are shared between the two. In commercial matrix structures the

geographic (or product) managers and the functional managers have equal authority within the

organization, and employees report to both of them. In humanitarian geographical matrix structures,

vertical hierarchical lines on a global level are amalgamated with horizontal functional lines within each

region that have an advisory role and as such have no direct influence on individual decision making. The

structure works well in highly complex and uncertain environments, given the environment creates and

requires a high level of interdependence between actors and parts of the organization.

This structure allows for flexibility if situations demand a switch in supply chain type from preparedness

to push. In post-disaster settings, the line management often moves from HQ level down to RLC level, to

make sure lines are shorter and closer to the needs and regional coordination.

Advantages:

Shared and flexible use of resources across geography and functions

Supports flexibility when switching between supply chain phases

Coordination in support of complex and uncertain operating environments

Enhances communication and commonality of purpose among managers

Facilitates complex decision making between functions and sectors

Facilitates learning through the shared resources and functional lines.

Disadvantages:

Can create conflicts of interest, given multiple lines

Multiple lines might result in too many reporting requirements

Multiple lines can result in confusion on who either the functional manager or the country or

program manager should be responsible for an individual in the organization

Shared resources can get overworked easily if multiple events happen at the same time

Requires a collegial (rather than hierarchical) culture, which is often in place in humanitarian

organizations

Can be difficult to implement from scratch.

(Mintzberg 1993; Sy and dAnnunzio 2005; Appelbaum, Nadeau and Cyr 2008A, 2008B and 2009)


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Annex 2: Humanitarian product segmentation

The level of uncertainty is one of the factors influencing the type of supply chain and uncertainty

correlates strongly with the type of programmes and this type of products in the supply chain. Various

programme demand different products with a differing level of implied uncertainty.

Product segmentation is the process of dividing products into groups for the purpose of supply chain

management. Products are categorized by characteristics that affect how and where they are managed

in the supply chain. Examples of product segmentation categories for logistics system design include:

- Emergency response vs. predictable demand, i.e. Push vs. pull supply chain strategy

- Products whose demand differs geographically, i.e. food supplies need to be adapted to local

customs. Some areas eat rice, other areas maize or grain. Another example is the type of shelter,which depends on climatic conditions in the area, i.e. where some tents are designed to keep

heat out, other tents are designed to keep heat in for cold climates

- Slow moving or fast moving: This refers to how often the stock is resupplied; for example, a

slow-moving product may not need to be ordered at every resupply interval

- Short or long shelf life: A product with a short shelf life is one that is likely to expire if it proceeds

down the normal pipeline

- Full supply vs. non-full supply: This refers to prioritizing which products will always be kept in full

supply to prioritize limited resources and ensure a minimal set of services

It is important not to have too many segments and often a combination of the categories mentioned

above are put into the same segment because their characteristics allow them to be managed in similar

ways. For example, one segment could include products that have a long shelf life, are fast moving, and

have predictable demand. (Donaldson 2006; USAID 2009)




procedures.

As a result, the supply chain structure designed must be able to cope with various supply chain types

within one structure that transform and possibly also overlap in the course of operations and as such the

supply chain structure needs to be able to be successful for different pipelines within one system. An

example of product segmentation is presented inFigure 12.


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The highest response is needed in post-disaster situations in which communicable diseases break out

and emergency vaccination campaigns are among those interventions with the highest level of demand

uncertainty, given a lack of reliable health data and post-disaster migration. Emergency food

distributions and medical emergency interventions in the immediate aftermath of a disaster will be aclose second when ot comes to high responsiveness and uncertainty of demand (and context). After that

emergency shelter and the pre-positioning of shelter and non-food items (NFIs) can be seen as a product

segment. Going further down the zone of strategic fit, demand becomes more certain and the supply

chain can be less responsive and more efficient.


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Annex 3: Agility in humanitarian supply chains

Agility refers to the ability to achieve strategic fit through partnering with supply chain stages that

change over time. When applying agility to humanitarian aid supply chains it is often suggested to hold

inventory in a generic form instead of using prepositioned stock. Aid goods can then be distributed

according to the evolving needs of the end user, the concept of postponement, resulting in the use of

more accurate data and reliability of information about recipients immediate needs while saving costs,

overcoming security risks and speeding response and flexibility (Oloruntoba and Gray 2006; Scholten,

Scott and Fynes 2010).

The information driven supply chain: Agility is dependent on the information from local peopleregarding the complexity of operations as well as changing needs as an agile supply chain is information

driven. A reduction in forecasting errors as such would result in a reduction in cost and waste.

Continuous developments in early warning science and technology now presents us with some level of

anticipation of future disasters, but hurricane Katrina (2005) in the United States, the 2005 famine in

Niger, cyclone Nargis in Myanmar (2008), the 2009 earthquake in Italy, the 2011 Thoku earthquake and

tsunami in Japan and the 2011 earthquake in New Zealand show that the predictability of natural

hazards in itself does not guarantee correct predictions, or the use of predictions resulting in informedhumanitarian supply chain management and decision making. As Jessica Boesl (2012, p. 2) of START puts

it:

Regrettably, scientific outputs do not always constitute a basis for peoples choices. Part of

the problem is that the optimal output signal of an impending threat, from the perspective

of scientists, is a set of complex data about objective physical variables (maps, numeric

tables or technical statements that are often incomprehensible for non-specialists); whereas

the optimal input signal from the humanitarian perspective is a simple instruction (i.e.

"evacuate" versus "do nothing").

A number of approaches to inform humanitarian decision making have been developed over time

(Agrawal and Perrin 2008; Agrawal, Kononen and Perrin 2009; Suarez 2009; Suarez, Ribot and Patt 2009;

Suarez and Tall 2010A and 2010B), but demand forecasting in humanitarian supply chains currently

focuses mainly on seasonality of events, taking into account local geographical and climatic contexts,

which does mainly inform medical humanitarian supply chains in their preparation for seasonal diseases.(Tall et. al. 2012)


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Companies must be able to become part of new supply chains while ensuring strategic fit. This level of

agility becomes more important as the competitive environment becomes more dynamic (Chopra and

Meindl 2013), which is not really the case in humanitarian organizations and supply chains. The agility

concept adds needed flexibility between and within all partners in the chain, including external partners(suppliers, carriers, 3PL providers), but there is a limit to the agility in humanitarian supply chains due to

the unpredictability of the need and if the need is known, there is the problem of the relative unstable

nature of it.

The use of BPAs can be seen as holding inventory in a more generic form as part of agility. It reduces

material flow time, lowers the amount of RLC inventory needed and should be considered as a way to be

responsive and at the same time keep the supply chain more agile. Another source of pre-positioning in

a generic way could be to either pre-register as implementing partner through MoUs with humanitarianpartners and to share RLC warehouse capacity with humanitarian partners with respect to the pre-

positioning of emergency goods.


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Annex 4: Roles of inventory in supply chain performance

There are three basic reasons for keeping inventory:

- Time: The time lags present in the supply chain, from supplier to the beneficiary at every stage,

requires that a certain amount of inventory, cycle stock, is being used during this "lead time";

- Uncertainty: Inventories are maintained as buffers to meet uncertainties in demand, supply and

movements of goods. When inventory is available the organisation has some protection from

unanticipated or unplanned events;

- Economies of scale: Economies of scale due to bulk procurement, movement and storage.

All three reasons above indicate that inventories are about managing risks, resulting in global pre-

positioning of relief supplies as an expansion of warehousing strategies seen in humanitarian emergency

responses, which have by definition unpredictable demand patterns. Inventory allows responding

quickly to disasters with relief supplies from strategically stocked RLCs or BPAs throughout the world

(Russell 2005; Beamon and Kotleba 2006; Cassidy 2010; Balcik et. al. 2010; Duran, Gutierrez and

Keskinocak 2011).

1. Supply chain role of inventory: Inventory exists in the supply chain to overcome the mismatch

between supply and demand, i.e. to cope with the implied uncertainty of humanitarian emergency

operations and have emergency items available as soon as possible when beneficiaries need them. A low

implied uncertainty will result in less inventory as in development related programmes and programmes

with a high implied uncertainty result in higher levels of inventory.

Lead time is the time from the moment a beneficiary need is identified to the moment it is satisfied.

Lead time is low for pre-positioned goods and should generally be kept low.

Material flow time is the time that elapses between materials entering the supply chain and the point at

which they exit. Material flow times are higher for goods that need to be pre-positioned in order to cope

with uncertainty in demand and guarantee high responsiveness.

Lead time from different points of material stocks and material flow time are visualized in Figure 21on

the following page.


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Figure 21: Lead time and material flow time

The pre-positioning also depends on the product segmentation (Annex 2), eg. items with a short shelf

life will probably not be pre-positioned by the organization, but if needed in emergency situations the

items could be pre-positioned at the side of the supplier through a BPA. The use of BPAs can be seen as

holding inventory in a more generic form as part of agility (Annex 3). Another source of pre-positioning

in a generic way could be to either pre-register as implementing partner through MoUs with

humanitarian partners and to share RLC warehouse capacity with humanitarian partners with respect to

the pre-positioning of emergency goods.

2. Strategic role of inventory and 3. decision components: Inventory is used to achieve a very high level

of responsiveness by locating large amounts of inventory close to possible future needs. Most strategic is

the use of a three-tier approach, reserving stocks at suppliers through BPAs and partner organizations

through MoUs, pre-positioning stocks in the RLCs and pre-positioning stocks in the fields where

emergencies are seasonal or expected and security permits pre-positioning. Safety stocks should only be

kept in the shape of standardized emergency kits at RLC level. Other items identified in the product

segmentation as emergency stocks should either be kept at the supplier through BPAs, at partner

organizations or limited amounts at country level if security allows.

Increasingly humanitarian organizations look to replace inventory with cash grants or vouchers to enable

beneficiaries to be able to determine for themselves what they wish to purchase. Cash grants only work

if after a disaster there is a local market left for buying goods to satisfy basic needs and security allows

the moving around of cash. Next to that, cash grants should be a coordinated effort between all

organizations working on an emergency in order to be effective (Harvey 2007).


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For example; cash grants did not work in Aceh after the Tsunami because people would not use the

money to rebuild their homes, since there were other organizations rebuilding homes. Why rebuild your

home and not buy a motorbike when other organizations are still identifying beneficiaries? Cash grants

are as such very context specific and often have limited impact on longer term needs (Tennant andTroeger 2008A and 2008B).

4. Trade-off in inventory: The general trade-off that managers must make is between responsiveness

and efficiency. Increasing inventory will generally make the supply chain more responsive, but at the

cost of decreasing efficiency.

The choices to be made have already been discussed with respect to decision components. The trade-off

between responsiveness and efficiency is also bounded by the financial impact of the pre-positioning of

items, as discussed in Bours (2013). Pre-positioning at suppliers through BPAs and at partner

organizations will take the pressure off the private funding base for support cost (Russell 2005; Akkihal

2006; Cassidy 2010). Next to that, RLC capacity can be shared with partner organizations that do not

have regional warehouse capacity and inventories can be bought in bulk, including combined orders with

other humanitarian organizations to create economies of scale taking care of the division of

responsibilities through MoUs and standardizing emergency response kits between organizations.


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Annex 5: Roles of facilities in supply chain performance

1. Supply chain role of facilities: Facilities are the locations to which or from which inventory is

transported and stored before being shipped to the next stage in the supply chain. In an existing

programme the focus will be on the efficiency of the warehouses. All warehouses existing ones and

new ones should be inspected with the u

global humanitarian supply chains - part b - system design and node analysis

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