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Logistics system design for global humanitarian supply chains, PART A: Pre-design assessment

Dennis Bours, Dpbours@yahoo.com

BSM523 Supply Chain Management (A) (6 May 2013)


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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 first step of the USAID logistics system design model:

Pre-design assessment

Logistics system design

Logistics system implementation

LOGISTICS SYSTEM DESIGN STEPS

Each step of the logistics system design is crucial and leads into the next phase. The first step, being the pre-design assessment, has been adapted into the following logistics pre-design assessment model, further discussed in this report:

Pre-design assessment

ASSESS DEMAND Current situation Desired situation

ASSESS CONSTRAINTS IN OPERATIONAL ENVIRONMENT


Transport; Infrastructure; Logistical bottlenecks; Security; Access restrictions.

ASSESS CONSTRAINTS IN INFORMATION

ASSESS CONSTRAINTS IN RESOURCES

Nature and use of information; Communication infrastructure; Information environment; Information reliability.

Donors and requirements; 3rd Party logistics (3PL); Suppliers and availability; Human resources.

Step 2 is further explained in a separate report titled Logistics system design for global humanitarian supply chains, PART B: Logistics system design and node analysis (Bours 2013). Before going into details 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 as such receives its funding as a percentage of donor funding or pledges for the implementation of humanitarian activities, impacting its ability towards longer term strategic thinking and development.
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The humanitarian organization needs to have a complete understanding of the environment within which the logistics and supply chain system will be implemented. Therefore, a comprehensive assessment should be the first step in designing a system and factors taken into account identify the boundaries towards logistics system design. The assessment also becomes an important baseline to evaluating the new or up-scaled logistics and supply chain system once it has been implemented.

Demand assessment Given the complexity of demand, data will need to be triangulated by analyzing information on beneficiary need, satisfiable beneficiary demand, funding base and order cycles and throughput of goods with respect to order cycles in and capacity of the supply chain. Humanitarian organizations can implement activities directly, they can implement as an implementing partner for multilateral organizations who operate as donor partners, or they can implement through local partners. Different needs in different sectors (food, non-food, health, etc.) and an operational history in the area might result in different implementation structures for activities being planned. Humanitarian activities in post-disaster settings unfortunately are not demand-driven, but donor-driven. Direct bilateral grants are diminishing in favour of consolidated funding streams into shared, centralized funding mechanisms where humanitarian organizations become implementing partner. Working as implementing partner in a centralized funding mechanism often means that the donor partner organization is responsible for managing the supply chain up to project level warehouses. The sector and type of good often prescribes whether goods will be procured locally, if possible and depending on quality standards and availability, shipped from RLCs or international, and what the procurement / replenishment cycle will be. The procurement channels at various levels and types of implementation also put different demands on the supply chain, warehouses and replenishment cycles. While it is true that BPAs and pre-positioning do not solve all problems in humanitarian logistics, the fact is that it mitigates a lot of them. Pre-positioning of emergency stocks means we need to take into account other considerations in our logistics network structure; including facility overheads, staffing costs, procurement costs and inventory holding costs. It might be good to look into cost-sharing of warehouse and logistics network structure with institutional donors and implementing partner organizations. This also depends on the type of implementation model being followed.

Operational constraints A full overview of air, sea, river, road and rail transport should be developed, including security, accessibility, information on operators and transport providers including availability and reliability, facilities available, and the type of aircrafts, vessels and trucks that can make use of the ports and roads.
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Logistics and infrastructure bottlenecks are identified with the use of the Theory of Constraints (TOC). The supply chain must be planned in such a way it recognises security risks and mitigates them. The security of beneficiaries also needs to be very carefully considered. Security constraints should be part of an organizational country security analysis and plan, and specific constraints focussing on logistics and supply chain security should be part of this plan.

The constraints in information and communication Although information is a major supply chain driver, it can often be overlooked because it does not have a physical presence. The role of information is critical as it affects every part of the supply chain. The nature of communication is differentiated between the different roles of information and different levels of information. Within each individual role you will find all information levels, though the emphasis will be on position-specific management levels and decision making responsibilities. Partnerships and linkages between information elements are about the joint pursuit of a specific result with internal as well as external actors. The development of the various roles and levels of information will be discussed in depth in Bours (2013) Logistics system design for global humanitarian supply chains, PART B: Logistics system design and node analysis.

Constraints in resources with respect to donors, 3PL, suppliers and human resources Humanitarian organizations should only commit resources to emergencies if replenishment funds for replenishment of preparedness stocks are committed and should only accept funding as an implementing partner if the funds provide adequate coverage for all overhead costs. The use of 3PL providers depends very much on the type of implementation, but supply chain management within the humanitarian organization should focus on: 1. Contexts that are not easily transferable to 3PL providers, 2. Last-mile logistics challenges, 3. Scale-up coordination, 4. Performance monitoring and 5. Logistics input for policy development. Based on the operational context the humanitarian demand needs to be matched with supplier profiles, given that suppliers might have restrictions to service certain areas, or longer lead times to certain areas given their 3PL network. This information would need to be triangulated with the need for (additional) organizational transport and warehouse capacity needs. A lack of resources might mean that additional plans have to be put in place to cover shortages. Resource conflict management should also be taken into account and the importance of using local capacity and social capital should not be underestimated. Last, staff retention plans should be thought of, with the option of 3PL providers making up for staff deficiencies in case of multiple emergencies.
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Table of Contents
Executive summary ....................................................................................................................................... 3 List of abbreviations ...................................................................................................................................... 8 List of figures ............................................................................................................................................... 10 List of tables ................................................................................................................................................ 10 Introduction ................................................................................................................................................ 11

Chapter 1: Demand assessment.................................................................................................................. 17 1.1 Current demand ................................................................................................................................ 17 1.2 Desired situation ............................................................................................................................... 20 Chapter 2: Assessment of the operational environment ............................................................................ 23 2.1 Transport and infrastructure............................................................................................................. 23 2.2 Logistics and infrastructure bottlenecks ........................................................................................... 23 2.3 Security .............................................................................................................................................. 24 Chapter 3: Information and communication .............................................................................................. 25 Chapter 4: Resource constraints ................................................................................................................. 27 4.1 Donors and funding ........................................................................................................................... 27 4.2 3PL providers and suppliers .............................................................................................................. 27 4.3 Human resources .............................................................................................................................. 30

Annex 1: Quick analysis of post-disaster beneficiary demand.................................................................... 31 Annex 2: Humanitarian funding trends and developments ........................................................................ 34 Annex 3: Transport / infrastructure assessment map ................................................................................ 36 Annex 4: Explanation on the different types of bottlenecks identified ...................................................... 37 Annex 5: Humanitarian geographical matrix structures ............................................................................. 39 References................................................................................................................................................... 41

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List of abbreviations
3C 3PL BSC BPA Communication, coordination and collaboration 3rd Party logistics Balanced Scorecard Blanket pre-purchase agreement, interchangeable with FA (FA is used in the European Union, BPA in the United States) CAP CERF CHF DART DFID DRR ECHO FA Consolidated Appeal Process Central Emergency Response Fund Common Humanitarian Fund Disaster Assistance Rescue Team Department for International Development UK Disaster risk reduction European Community Humanitarian Office 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 FPA Food and Agricultural Organization Framework Partnership Agreement, ECHO donor agreement with NGOs and IOs like ICRC and IFRC H-LMIS HR HRM ICRC IFRC INGO Humanitarian logistics management information system Human resources Human resources management International Committee of the Red Cross International Federation of the Red Cross International non-governmental organization
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IO JI LMIS MER MoU NGO OECD PAHO PF RCRC RLC SOP TBC TOC ToT UNGM

International Organization, not part of the UN structure Joined Initiative Logistics management information system Monitoring, evaluation and reporting Memorandum of understanding Non-governmental organization Organisation for Economic Co-operation and Development Pan-American Health Organization Pooled Fund Red Cross and Red Crescent Regional logistics centre Standard operating procedure Tuberculosis Theory of constraints Training of Trainers UN Global Marketplace, previously known as UN Common Supplier Database (UNCSD)

UNHCR UNICEF UNJLC UNOCHA USAID WASH WFP

United Nations Higher Commissioner for Refugees United Nations International Children's Emergency Fund United Nations Joint Logistics Centre United Nations Office for the Coordination of Humanitarian Affairs United States Agency for International Development Water, sanitation and hygiene World Food Programme

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List of figures
Figure 1: USAID logistics system design model ........................................................................................... 11 Figure 2: Expanded logistics system design model ..................................................................................... 12 Figure 3: Pre-design assessment ................................................................................................................. 15 Figure 4: Main funding flows in the humanitarian sector........................................................................... 19 Figure 5: Procurement channels at various levels ...................................................................................... 20 Figure 6: Thomas-Mizushima relief supply chain model ............................................................................ 21 Figure 7: Adjusted humanitarian relief supply chain model ....................................................................... 22 Figure 8: TOC bottleneck analysis ............................................................................................................... 24 Figure 9: Roles of information..................................................................................................................... 25 Figure 10: Levels of information and the information pyramid.................................................................. 26 Figure 11: Mind-map for transport / infrastructure assessment ................................................................ 36 Figure 12: Example of a humanitarian geographical matrix structure ....................................................... 39

List of tables
Table 1: Humanitarian vis--vis commercial supply chain operations........................................................ 17 Table 2: Example of sector focus analysis ................................................................................................... 31 Table 3: Example of beneficiary reach analysis........................................................................................... 32 Table 4: Example of beneficiary demand analysis of a number of food items ........................................... 33

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Introduction
The primary objective of humanitarian organizations is to save lives, alleviate suffering, and maintain and restore human dignity, without regard for race, ethnicity, religion or political affiliation. Humanitarian action should be undertaken for the benefit of vulnerable people and guided by principles of humanity, impartiality, neutrality and independence (IFRC 2002). It 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 compromised by the disaster or conflict, internal and external political objectives, insecurity and other external factors. (PAHO 2001; Cassidy 2003; Beamon 2004; Van Wassenhove 2006; Kovcs and Spens 2007; Ergun et. al. 2009; Argollo da Costa, Campos and Albergaria de Mello Bandeira 2012) This report covers the first step of the USAID logistics system design model (Owens and Warner 2003; USAID 2009), being the pre-design assessment phase, as presented in Figure 1:

Pre-design assessment

Logistics system design

Logistics system implementation

LOGISTICS SYSTEM DESIGN STEPS

Figure 1: USAID logistics system design model Each step of the logistics system design is crucial and leads into the next phase. The three steps have been adapted into a specific logistics design model portrayed on the following page in Figure 2, informed by an extensive literature review on the topic1, 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.
1

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 and Gutierrez (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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Pre-design assessment

ASSESS DEMAND Current situation Desired situation

ASSESS CONSTRAINTS IN OPERATIONAL ENVIRONMENT Transport; Infrastructure; Logistical bottlenecks; Security; Access restrictions.

ASSESS CONSTRAINTS IN INFORMATION

ASSESS CONSTRAINTS IN RESOURCES

Nature and use of information; Communication infrastructure; Information environment; Information reliability.

Donors and requirements; 3rd Party logistics (3PL); Suppliers and availability; Human resources.

Logistics system design

Organisational structure

Supply chain structure Inventory Facilities Transport Information

Linkages and partnerships

Drivers of supply chain performance and cost efficiency

Logistics system implementation


tion Informa and ToT Full roll-out

SO Ps

Training l materia

nic Commu plan

ation

Implementation planning

Supply chain design

(Human) resources

(Implementation) budget

Implementation quality control

Figure 2: Expanded logistics system design model


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It should be understood that the logistics or supply chain function in global humanitarian organizations is seen as a support function towards its main humanitarian activities and receives its funding as a percentage of donor funding or pledges for the implementation of humanitarian activities. 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; Van Weele 2010), which is often impossible within humanitarian organizations due to the way the logistics function is financed.

Step 2 is further explained in a separate report titled Logistics system design for global humanitarian supply chains, PART B: Logistics system design and node analysis (Bours 2013).

The reference to use for this publication is the following: BOURS, D.P., 2013. BSM523. [Coursework 2] Logistics system design for global humanitarian supply chains, PART A: Pre-design assessment. Supply Chain Management. The Robert Gordon University, MSc Purchasing & Supply Chain Management, Aberdeen Business School.
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PART A: PRE-DESIGN ASSESSMENT

Pre-design assessment

ASSESS DEMAND Current situation Desired situation

ASSESS CONSTRAINTS IN OPERATIONAL ENVIRONMENT


Transport; Infrastructure; Logistical bottlenecks; Security; Access restrictions.

ASSESS CONSTRAINTS IN INFORMATION

ASSESS CONSTRAINTS IN RESOURCES

Nature and use of information; Communication infrastructure; Information environment; Information reliability.

Donors and requirements; 3rd Party logistics (3PL); Suppliers and availability; Human resources.

Figure 3: Pre-design assessment The humanitarian organization needs to have a complete understanding of the environment within which the logistics and supply chain system will be implemented. Therefore, a comprehensive assessment should be the first step in designing a system. This assessment allows the organization to identify challenges in supply chain and logistics management enabling them to avoid these, and factors identified present the boundaries towards logistics system design. The assessment also becomes an important baseline to evaluating the new or upscaled system once it has been implemented. (Owens and Warner 2003; USAID 2009; Holgun-Veras et. al. 2012) The pre-design assessment focuses on the following four main elements: 1. Demand assessment: Beneficiary needs, satisfiable demand, demand and humanitarian funding base, and supply chain throughput capacity 2. Operational constraints: The constraints in operational development with respect to transport, infrastructure, logistical bottlenecks, security constraints and access restrictions 3. The constraints in information and communication 4. Constraints in resources with respect to donors, 3PL, suppliers and human resources.

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Chapter 1: Demand assessment


1.1 Current demand
One major difference between commercial and humanitarian supply chains is the demand pattern. For many commercial supply chains, the demand for products is in comparison stable and predictable. Demands as seen from warehouses occur from established locations in relatively regular intervals. The demands in humanitarian relief chains are supplies and people, and those demands occur in irregular quantities, at irregular intervals and abruptly, such that quantities and locations are often unknown until the demand occurs, rendering demand forecasting in post-disaster settings almost impossible. Table 1 depicts some of the main characteristics of humanitarian vs. commercial supply chain operations (Thomas 2003; Beamon 2004; Russell 2005; Blanco and Goentzel 2006; Kovcs and Spens 2007; Agrawal and Perrin 2008; Agrawal, Kononen and Perrin 2009; Ergun et. al. 2009; Kovcs and Spens 2009; Balcik et. al. 2010; Suarez and Tall 2010a and 2010b; Argollo da Costa, Campos and Albergaria de Mello Bandeira 2012Heaslip, Sharif and Althonayan 2012; Holgun-Veras et. al. 2012).

Table 1: Humanitarian vis--vis commercial supply chain operations Given the complexity of demand, data will be triangulated by analyzing information on beneficiary need, satisfiable beneficiary demand, funding base and throughput of goods capacity of the supply chain.
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Beneficiary need and satisfiable demand The reach of other humanitarian actors operating in a post-disaster setting need to be taken into account when analyzing beneficiary needs. One organization will never be able to reach the entire beneficiary population, nor would it be advisable to try to do so. A second point to take into account is the fact that beneficiary needs are not assessed by logistics and supply chain professionals, but by programmatic staff divided over various sectors, i.e. food, non-food, WASH, medical, shelter, education, etc. Humanitarian organizations often work in multiple sectors but rarely in all, and should focus on specific needs in specific sectors. Humanitarian logistics and supply chain departments should make sure they are involved at an early stage in humanitarian needs assessments, to be aware about the logistics and supply chain implications of these needs. (Kaatrud, Samii and van Wassenhove 2003; Ergun et. al. 2009; ICRC 2008; Balcik et. al. 2010; Argollo da Costa, Campos and Albergaria de Mello Bandeira 2012; Holgun-Veras et. al. 2012) Humanitarian organizations can implement activities directly, they can implement as an implementing partner for multilateral organizations (UNHCR, UNICEF, UNJLC etc.) who operate as donor partners through FPAs or FAFAs2, or they can implement through local partners. Different needs in different sectors might result in different implementation structures for activities being planned. This also depends on whether the humanitarian organization already has a history in the area of operation, i.e. is there an existing logistics and supply chain structure that can be scaled up. An example of what to take into account in a quick demand assessment is presented in Annex 1.

Demand and humanitarian funding Humanitarian activities in post-disaster settings unfortunately are not demand-driven, but donor-driven. The funding from donor governments to populations affected by disasters in recipient countries flows through many different types of organizations before it reaches the end beneficiary (Lee and Lee 2007; Balcik et. al. 2010), visible in Figure 4. With an increasing number of globally operating humanitarian organizations the competition for donor funding is getting more intense and data demonstrating impact is likely to be the differentiator. Further, donors are becoming less tolerant of duplication of efforts and are strongly encouraging humanitarian organizations to collaborate around the creation of common services.

FPA = Framework Partnership Agreement, donor agreement with NGOs and IOs like ICRC and IFRC FAFA = Financial and Administrative Framework Agreement, donor agreement with UN agencies and FAO.

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Direct bilateral donor-to-(I)NGO grants are diminishing in favor of consolidated funding streams into shared, centralized funding mechanisms where humanitarian organizations become implementing partner. (Buchanan-Smith and Randel 2002; Gustavsson 2003; Lee and Lee 2007) See Annex 2 for a detailed explanation on pooled funding and other humanitarian funding trends and developments. Working as implementing partner in a centralized funding mechanism often means that the donor partner organization is responsible for managing the supply chain up to project level warehouses.

Figure 4: Main funding flows in the humanitarian sector

Demand and supply chain throughput The sector and type of good often prescribes whether goods will be procured locally, if possible and depending on quality standards and availability, from regional logistics centers (RLCs) or international, and what the procurement / replenishment cycle will be. An example of use of the various procurement levels is presented in Figure 5. (Kovcs and Spens 2007; Ergun et. al. 2009; Holgun-Veras et. al. 2012) Procurement channels at various levels and types of implementation (direct, as implementing partner, or through implementing partners) also put different demands on the supply chain, warehouses and replenishment cycles.

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International procurement often results in three or six-monthly order cycles. Order cycles for local procurement are often monthly, while replenishment cycles for food distributions are often weekly.
LOCAL CHANNELS
restocking

Item NFI emergency stocks LLIN Food items Inter-agency health kits Medicine
Planned orders and tenders

RLC LEVEL CHANNELS


restocking + emergencies

INTERNATIONAL CHANNELS
emergencies

depending on availability

depending on quality and availability

restocking

restocking + emergencies

basic items + quick turnover

complex items

Medical equipment
Planned orders and tenders

basic items

complex items

Laboratory equipment
Planned orders and tenders

basic items + quick turnover

complex items

Logistics / technical equipment


Planned orders and tenders

basic items

complex items

Logistics emergency stocks

basic items

restocking

restocking + emergencies

Figure 5: Procurement channels at various levels

1.2 Desired situation


A big part of the demand identification problem stems from the difference between humanitarian and commercial logistics; both are concerned with the distribution of goods and satisfying customer demand, but thats where the similarities end. In commercial logistics, a small group of decision makers determines the best way to move goods along a structured supply chain based on demand forecasts. In humanitarian logistics, you have thousands of decision makers and supply chains, simultaneously sending goods to the disaster-affected area. There is limited to no demand forecast, problematic coordination, and overlapping relief supply chains compete for resources (Kaatrud, Samii and van Wassenhove 2003; Ergun et. al. 2009; Cassidy 2010; Heaslip, Sharif and Althonayan 2012; Holgun-Veras et. al. 2012). The desired situation is to implement activities as implementing partner of a multilateral organization, who organizes the supply of goods for a multitude of sectors and implementing partners through a centralized funding mechanism or Consolidated Appeal Process (CAP) also see Annex 2 (Fenton and Philips 2009; Konyndyk 2009; UNOCHA 2010). A second option is to implement direct activities with private funding, i.e. non-earmarked bilateral funding or general public funding.
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Anisya Thomas, co-founder of Fritz Institute, developed a humanitarian supply chain model that was further modified by Mitsuko Mizushima, Chief Logistics Officer of Fritz Institute (Russell 2005), presented in Figure 6.

Communication, coordination and collaboration

Preparedness

Assessment / Appeals

Resource mobilization

Procurement

Transportation Tracking and Stock asset execution tracing management

Extended Point of Delivery

Relief to beneficiaries

Monitoring / Evaluation / Reporting

Figure 6: Thomas-Mizushima relief supply chain model

BPAs and pre-positioning Pre-positioning of relief goods and the entering into blanket pre-purchase agreements (BPAs) is the way forward for post-disaster humanitarian supply chains for directly implemented programmes. These supplies should be the first wave of resources that arrive after a disaster (Russell 2005; Cassidy 2010; Balcik et. al. 2010; Duran and Gutierrez 2011). The use of BPAs and pre-positioning should be incorporated in the supply chain model, linked to post-disaster response activities and related assessments. A second change would be to replace the 3 Cs (communication, coordination and collaboration) with the notion of linkages (Van Wassenhove 2006). The non-tacit nature of communication stems in part from a failure to differentiate between all possible information and the information individuals need to do their jobs effectively. Coordination, like communication, begins with an assumption of differences. Coordination achieves efficiency but tells us nothing about the consequence. To speak of a well oiled team tells us that friction is reduced but not that results are achieved (Denise 1999). The concept of linkages and partnerships is more in line with collaboration, linking all supply chain design elements before the occurrence of a disaster, including checks and balances through supply chain performance and cost efficiency. Linkages and partnerships are about the joint pursuit of a specific result. Unlike coordination, linkages and partnerships seek divergent insight and spontaneity, not structural harmony. (Birnbaum 2004 and 2009; Tatham and Kovcs 2010)

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Last, the Monitoring, Evaluation and Reporting (MER) is replaced by the notions of supply chain performance and cost efficiency. MER in humanitarian organizations relates to programme performance measurement. Taking the preceding discourse into account, the humanitarian relief supply chain model is now presented in Figure 7.

Linkages and partnerships

Preparedness Disaster Risk Reduction

BPAs

Procurement and prepositioning Appeal

Resource mobilization

Transportation Tracking and Stock asset execution tracing management

Assessment

Extended Point of Delivery

Relief to beneficiaries

Supply chain performance and cost efficiency

Figure 7: Adjusted humanitarian relief supply chain model

While it is true that BPAs and pre-positioning do not solve all problems in humanitarian logistics, the fact is that it mitigates a lot of them. Pre-positioning of emergency stocks means we now need to take into account other considerations in our logistics network structure; including facility overheads, staffing costs, procurement costs and inventory holding costs (Russell 2005; Akkihal 2006; Cassidy 2010). It might be good to look into cost-sharing of warehouse and logistics network structure with institutional donors and implementing partner organizations. This also depends on the type of implementation model being followed, i.e. direct programmes, as implementing partner or through implementing partners.

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Chapter 2: Assessment of the operational environment


2.1 Transport and infrastructure
The transport and infrastructure assessment (PAHO 2001; Bourne 2008; Bourne 2009; Balcik et. al. 2010; Pedraza-Martinez, Stapleton and Van Wassenhove 2011) could start with the mind map added in Annex 3, showing elements to take into account. An overview of current transport options and infrastructure is best given graphically on a map. A full overview of air, sea, river, road and rail transport should be developed, including security (accidents, road safety, robberies, pirates, etc.), accessibility, information on operators and transport providers including availability and reliability, facilities available, and the type of aircrafts, vessels and trucks that can make use of the ports and roads. Transport and infrastructure will be discussed more in-depth in Step 2 Logistics system design and node analysis (Bours 2013).

2.2 Logistics and infrastructure bottlenecks


Logistics and infrastructure bottlenecks are identified with the use of the Theory of Constraints (TOC), which has been used often in the analysis of supply chain bottlenecks. (Umble, Umble and von Deylen 2001; Simatupang, Wright and Sridharan 2004; Schragenheim, Dettmer and Patterson 2009; dos Santos et.al. 2010; Srinivasan 2011) Humanitarian activities create additional volumes of products flowing through supply chain infrastructures, which do not have the capability to rapidly scale up to accommodate all additional activity. Consequently, this can develop into bottlenecks. Constraints in this case have three main elements: infrastructure, regulation and supply chain. For each element, there are two locations; temporary vs. chronic, direct vs. indirect and internal vs. external. Figure 8 shows a bottleneck analysis example. The main idea behind TOC is to identify bottlenecks or constraints, decide how to exploit or alleviate these, dedicate resources and make policy choices to support these decisions. This process is recurrent in the sense that a subsequent constraint will be targeted after one constraint has been addressed in a pervious step. The most undesirable bottlenecks are often caused by a few core problems. Solving symptoms wont help if core problem remains; the only solution is to identify and correct the core problems and this will also need to get the focus during the supply chain design phase. (Goldratt 2004; Prentice 2004; dos Santos et.al. 2010; Srinivasan 2011)

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One first tackles the internal, direct and temporary elements after which the focus will be on external, indirect and chronic elements of constraint. Even when constraints are external, the cause could be external or internal. Regardless of where the cause is, the solution to overcome it will be internal.

Figure 8: TOC bottleneck analysis A more in-depth description of bottlenecks can be found in Annex 4.

2.3 Security
Post-disaster supply chains are often being operated in environments where the normal rule of law is perhaps not applicable anymore, either due to armed conflict or disruption of government systems due to natural disasters. This could mean that the integrity of products, of services and the safety of personnel and resources are at risk. The supply chain must be planned in such a way it recognises these risks and mitigates them. The security of beneficiaries also needs to be very carefully considered. Security constraints should be part of an organizational country security analysis and plan, and specific security constraints focussing on logistics and supply chain security should be part of this plan. Examples are; the use of armed guards at warehouses, layout of distribution sites, transport guidelines, no-go areas and evacuation plans.

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Chapter 3: Information and communication


Information and communication are highly dependent on the organizational structure, which in the case of globally operating humanitarian organizations is often a geographical matrix structure with vertical hierarchical lines on a global level amalgamated with horizontal functional lines within each region that have an advisory role. This structure allows for flexibility if the situation demands a switch in supply chain phase from call-forward to either push or pull, and is further explained in Annex 5. (Mintzberg 1993; Sy and dAnnunzio 2005; Appelbaum, Nadeau and Cyr 2008A, 2008B and 2009) The role of information is critical as it affects every part of the supply chain. The nature of communication is differentiated between the different roles of information and different levels of information. The roles of information can be broken down into the following four areas (Figure 9):

SUPPLY CHAIN ROLE

Supply chain trigger Supply chain perf ormance Cost ef f iciency

TRADE-OFF The Pareto principle, cost vs. service improvement trade-of f Inf ormation driver

STRATEGIC ROLE Linkages & partnerships f or supply chain perf ormance and ef f iciency

DECISION COMPONENTS Supply chain strategy Coordination & partnerships Forecasting & planning Enabling technologies (LSS)

Figure 9: Roles of information Although information is a major supply chain driver, it can often be overlooked because it does not have a physical presence. This is especially the case when looking at information from the perspective of strategic decision making (Tatham and Kovcs 2010). Levels of information relate to the levels of management and decision making responsibility, which are presented together with examples of the underlying documents in the information pyramid in Figure 10.

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Policy management Strategic level INDICES


Supply chain strategy Long term strategic decisions

INDICATORS Management level


Supply chain planning PBAs Key suppliers

Operational management

Shorter term operational decisions

ANALYZED DATA Knowledge level


Theft report Damage report Pipeline analysis

Bid analysis

Budget report

PRIMARY DATA
Demand data Packi ng list Stock cards Receipt of payment Purchase order Chart of accounts

Stock request

Delivery note

Project order

Waybill

Operational level

Stock overview

Order overview

Figure 10: Levels of information and the information pyramid Within each individual role you will find all information levels, though the emphasis will be on specific management levels and decision making responsibilities depending on the position. Linkages between levels and roles of information are about using information to create something new. Combined with partnerships the linkages between information elements are about the joint pursuit of a specific result with internal as well as external actors. The development of the various roles and levels of information is further discussed in Bours (2013) Logistics system design and node analysis.

Please consider the environment before printing

Chapter 4: Resource constraints


Resource constraints indicate boundaries of the operational capacity of humanitarian organizations. The focus will first be on donors and funding, after which the use of 3PL, suppliers and resource competition will be discussed, to end with a short recap on humanitarian human resources (HR).

4.1 Donors and funding


Peoples lives often depend on aid reaching them quickly in post-disaster settings and the way in which humanitarian assistance is funded is vital to making this happen. Funding must reach frontline implementing agencies efficiently and reliably. Where there are obstacles that prevent or delay funds reaching humanitarian organizations, they often cannot begin or scale up operations creating potential delays for communities on the ground with unmet humanitarian needs. Humanitarian goals get more and more intertwined with strategic, political agendas of governments and the lines between humanitarian actors and for profit actors blurs the concept of neutrality (Stoddard 2003). Funding is developing more and more into shared, centralized funding mechanisms where humanitarian organizations become implementing partner (Buchanan-Smith and Randel 2002; Gustavsson 2003; Lee and Lee 2007). Humanitarian organizations should only commit resources to emergencies if replenishment funds for replenishment of preparedness stocks are committed and should only accept funding as an implementing partner if the funds provide adequate coverage for all overhead costs, in line with the Good Humanitarian Donors declaration or other good donorship initiatives (OECD 2003; Graves and Wheeler 2006; OECD 2006; Pedraza-Martinez, Stapleton and Van Wassenhove 2011; Besiou, Pedraza-Martinez and Van Wassenhove 2012). A more in-depth overview of funding trends and developments is presented in Annex 2.

4.2 3PL providers and suppliers


Many 3rd Party Logistics (3PL) providers are actively trying to acquire knowledge and expertise in fields that were traditionally preserved to humanitarian organizations. They see growth opportunities and are keen to get on board, learning as they go to deliver better quality than the competition. This also means that they are prepared to cooperate in new ways, using new models that better fit humanitarian operations. Air cargo providers like KLM Cargo and DHL have provided supply chain specialists as well as cargo space for free or at discounted rates to support humanitarian
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interventions around the world. (Beamon 2004; Russell 2005; Kovcs and Spens 2007; Ergun et. al. 2009; Kovcs and Spens 2009; Tatham and Kovcs 2010) As humanitarian organization it is worth looking into developing partnerships with 3PL providers as part of their CSR strategy or to offer humanitarian sabbaticals to their supply chain professionals.

3rd Party Logistics: The use of 3PL providers depends very much on the type of implementation. If routine logistics would be taken care of through 3PL or through a donor partnership, the focus of supply chain management in the humanitarian organization should be on: Those logistics contexts not easily transferable and requiring highly professional, very flexible logistics support Last-mile logistics challenges, focusing on those places 3PL providers are not willing to go Leadership and coordination of quick scale-ups of operations in case of a sudden emergencies, either in cooperation with 3PL providers or not Development and monitoring of logistics policies and contracts, including those with 3PL providers, including 3PL performance monitoring Specialised logistics input for policy development in other functional areas.

(Beamon 2004; Russell 2005; Kovcs and Spens 2009; Holgun-Veras et. al. 2012)

Suppliers and availability: Procurement preferably takes place as close to the need as possible, because its positive impact on security, acceptance, speed and efficiency. Though often it isnt possible or allowed to purchase all humanitarian goods locally, because of existing policies and standards prescribing guarantees of a specified quality of the items purchased. Other reasons can be funding policies, the lack of a local supply pipeline, the non-availability of items, local prices being comparatively high and the draining of the local market causing secondary emergencies. (Beamon 2004; Russell 2005; Kovcs and Spens 2009) Companies selling to humanitarian agencies tend to also supply other markets such as the transport, health and food sectors and the military. Humanitarian organizations should have key supplier lists in place for all humanitarian emergency items, or develop them with the use of supplier lists found in annual reports of UN organizations which need to report all sellers of orders above 100,000 USD.

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Another source of information will be online services like the UN Global Marketplace (UNGM) previously known as UN Common Supplier Database (UNCSD), the LogCluster and DEVEX. Based on the operational context the humanitarian demand needs to be matched with supplier profiles, given that suppliers might have restrictions to service certain areas, or longer lead times to certain areas given their 3PL network. This information would need to be triangulated with the need for (additional) organizational transport and warehouse capacity needs.

Resource competition: There is little point in planning the supply chain, having BPAs with suppliers and 3PL agreements to find out supporting resources are not available for deployment. Some of the resources are obvious but others might easily be overlooked. They include: Labour to undertake supply chain activity Transport to move products Fuel and spare parts for vehicles Power for warehouses Accommodation for personnel Security staff and equipment.

The lack of resources might mean that additional plans have to be put in place to provide coverage for the shortage, such as providing generators for power; though fuel might be a scarce resource as well. (Beamon 2004; Russell 2005; Kovcs and Spens 2007; Kovcs and Spens 2009)

Resource competition is not limited to post-disaster settings; three factors impacting conventional resource competition are globalisation, population growth and urbanisation together creating a fourth, being the irreversible depletion of some non-renewable resources. One can think about, a.o. fish, (hard)wood, petroleum and fresh water due to its geographical boundaries. Resource competition faced by humanitarian organizations is not only towards each other, but also towards the communities, the beneficiaries and the already ongoing resource competition in which programmes are being implemented. Disputes and the potential for conflict can go much further than the resources described above, e.g. territorial disputes over the ownership of contested zones, access conflicts arising from efforts to gain access to a source of critical materials, allocation disputes arising from disagreements over the distribution of supplies and revenue disputes arising from struggles between contending groups for monopolisation of the rents or profits generated by control over resources. Resource-related
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conflicts arising are often beyond the scope of humanitarian organizations operating in a postdisaster setting, but this does not mean they should keep a blind eye to it. A first step would be to create the necessary (political) will to come to solutions by incorporating local capacity in the implementation of programmes, incorporating local knowledge, local social capital and existing local communication structures. (Jensen 2009; Klare 2009; Valentino 2011)

4.3 Human resources


Good management of staff is crucial to attain the organizational goals and objectives. The nature of working in the humanitarian sector creates many push factors for staff such as geography, security, short term assignments and the extreme urgency of vacancies. There is also a pull factor from competitors, since limited funding or limited career progression opportunities make that staff is quickly moving from one to another humanitarian organization. Humanitarian organizations often feel they are not in control of turnover, but they do unnecessarily contribute to push factors that make them loose staff. This is done through poor organisational change processes, limited career management and accepting a funding model which is short term and not strategic. This helps pull factors of other humanitarian organizations take primacy over other job satisfaction factors. A first step would be to sign up for the People In Aid Code of Good HR Practice and implement this code in organizational HRM (People in Aid 2003). The basis should be the retention of staff and development of a HR strategy towards capacity building of national staff and retention of expats. Development of infrastructural funding supports the retention of staff on strategic positions.

Finally, stronger partnerships with suppliers and 3PL providers will make up for staff deficiency in case of multiple emergencies. 3PL providers often temporarily station staff within humanitarian clients to improve support and communication, or helping to make information systems interoperable.

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Annex 1: Quick analysis of post-disaster beneficiary demand


Table 2, Table 3 and Table 4 provide an example of the basic elements to take into account when quickly analyzing post-disaster beneficiary demand. It first needs to be clear which sectors will have the focus of the humanitarian organization, how these will be served, how this looks towards total beneficiary demand and the work of other humanitarian players operating in the area and how this translates per sector into a quick analysis of the flow of humanitarian goods to be expected, with an example relevant to food distributions.

Table 2: Example of sector focus analysis

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Table 3: Example of beneficiary reach analysis

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Table 4: Example of beneficiary demand analysis of a number of food items

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Annex 2: Humanitarian funding trends and developments

Independence and neutrality: For humanitarian agencies, ensuring that key principles of independence and neutrality are adhered to is essential so as to be able to access all affected populations. Post-9/11 the discussion about NGO-neutrality invigorated after the US linked humanitarian goals with their strategic agenda after 11 September. In addition, there is also an increasing role of forprofit actors in the aid and reconstruction response in Afghanistan and Iraq. These actors do not take a neutral stance and the line between neutral (I)NGOs and non-neutral for-profit actors is at best blurred. A last trend is the growth of the faith-based movement in aid and policy circles. In short, some governmental funding lines might obscure the neutrality of humanitarian organizations and the perception of neutrality by beneficiaries. (Stoddard 2003)

Pooled funding: Direct bilateral donor-to-(I)NGO grants are diminishing in favor of consolidated funding streams into shared, centralized funding mechanisms where humanitarian organizations become implementing partner - theoretically simplifying the process of project funding for all involved. (Buchanan-Smith and Randel 2002; Gustavsson 2003; Lee and Lee 2007) The UN has created pooled funds in several countries notably the Common Humanitarian Fund (CHF) in Sudan and the Pooled Fund (PF) in the Democratic Republic of Congo, both of which focus on financing field-level relief and recovery efforts through NGO or UN actors. UN pooled funds need to be signed off by the receiving governments. In some instances governments will not sign off on pooled funds, because they do not want to acknowledge the problems at hand or because a power vacuum created a situation in which there is not one single power to take into account. In one of such situations in Zimbabwe, a consortium of (I)NGOs sat down with a group of donors and developed a funding pool called the Joint Initiative (JI) without the use of the UN and as such with no political connotation. The initiative performed extremely well: of the 16 activity targets in the original proposal, the consortium met or exceeded. It is reasonable to believe that (I)NGO consortia could likewise manage comparably large multi-project funds involving multiple donors in other areas. The JI example has also been used with great success in the Abyei

area of Sudan and in the UN-(I)NGO cluster system approach, especially beneficial with respect to the logistics cluster development. (Fenton and Philips 2009; Konyndyk 2009; UNOCHA 2010)
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Emergency funding: Emergency operations might require the need to develop specific emergency appeals for funds or the development of funding pools as described earlier. A decision will need to be reached by the management team as to whether to commit resources to an emergency before any funds have been received. There is a risk particularly with low profile and enduring humanitarian crises that no replenishment funds will be forthcoming if preparedness stocks are committed.

Infrastructure/overhead funding: Donors are increasingly willing to fund preparedness activities recognising the advantages of advanced planning on the quality, speed and impact of response. There are four common themes when looking at infrastructure funding initiatives: 1. The acceptance that infrastructure (overhead, core costs) is an essential component of program delivery costs; 2. The recognition that any system developed to identify and allocate those costs across programs must be simple, transparent and fair to donors; 3. An understanding that the cost allocation must be able to adjust to the organizations changing circumstances and must be responsive to the organizations unique needs; 4. Acknowledgement that it must encourage efficient and effective use of funds. (Eakin 2002; OECD 2006; Balcik et. al. 2010; Pedraza-Martinez, Stapleton and Van Wassenhove 2011; Besiou, Pedraza-Martinez and Van Wassenhove 2012) Governments, donors and UN agencies rely on (I)NGO partners to implement many of their projects, but they vary widely in their contributions to overhead costs, including funding for staffing and security, with some agencies providing little or none at all. The two-year evaluation of the Central Emergency Response Fund (CERF), published in June 2008, concluded that: where appropriate, UN agencies may be encouraged to pre-qualify competent (I)NGO partners, and to agree consistent arrangements for payment of overhead cost. (Barber et. al. 2008, pp.18)

Humanitarian organizations should only accept funding as an implementing partner if the funds provide adequate coverage for all overhead costs, in line with the Good Humanitarian Donors declaration or other good donorship initiatives. (OECD 2003; Graves and Wheeler 2006; OECD 2006; Pedraza-Martinez, Stapleton and Van Wassenhove 2011; Pedraza-Martinez and Van Wassenhove 2012)
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Annex 3: Transport / infrastructure assessment map

Figure 11: Mind-map for transport / infrastructure assessment


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Annex 4: Explanation on the different types of bottlenecks identified


Understanding and managing the bottlenecks starts with understanding the following points: 1. The supply chain optimal performance is NOT the sum of optima of individual elements. If all parts of the system are performing optimally, the system as a whole will probably not be performing optimally. In other words, it is virtually impossible to obtain a perfect system balance because normal variations in performance are inevitable; 2. The weakest link of the supply chain will limit the performance of the whole system; 3. The most undesirable bottlenecks in the supply chain system are often caused by a few core problems. Solving symptoms of a problem will do little good if the core problem remains. Long-term relief from the undesirable effects will occur only if the core problem is identified and corrected. This will also get the focus during the supply chain design; 4. Supply chain system constraints can be either physical or policy constraints. Policy constraints are generally more difficult to find and eliminate, but the elimination of a policy constraint generally provides a more pronounced supply chain improvement.

Infrastructure bottlenecks: Physical restrictions can form bottlenecks, such as a bridge swept away by the disaster or poorly maintained roads. Under investment in infrastructure can produce chronic bottlenecks. Temporary transportation bottlenecks can be caused by natural or market forces. Weather disruptions, are among the most prominent, as well as construction, robberies and accidents. These events are expected, but cannot be predicted. A surge in demand as in a post-disaster setting also creates bottlenecks as infrastructures are designed to convey a certain and rather constant level of service. The lack of maintenance of infrastructure and modes of transport can cause temporary bottlenecks.

Regulatory bottlenecks: Regulations that delay goods movements for security or safety inspections create bottlenecks as a direct consequence. Even if the intention is not to convey delays, the nature of the activity imposed can cause delays and disruptions. Referring back to the earlier bottleneck example of road transport, there will also be regulatory bottlenecks like security and import inspections at borders or locked down disaster zones.
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Supply chain bottlenecks: Supply chain bottlenecks relate to specific tasks and procedures in supply chain management that trigger bottlenecks. Labour availability may result in capacity shortages. Some firms, like 3PLs, may create bottlenecks on purpose since they control key elements of the supply chain. Technology can also be an issue as different information exchange protocols can create delays in information processing and therefore delays in (trans-) shipments. Supply chain system constraints can be either physical or policy constraints. Policy constraints both internal and external are generally more difficult to find and eliminate, but the elimination provides a more profound improvement.

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Annex 5: Humanitarian geographical matrix structures


A geographical matrix structure 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.

Figure 12: Example of a humanitarian geographical matrix structure This structure allows for flexibility if the situation demands a switch in supply chain phase from callforward to either push or pull. In post-disaster settings, the line management often moves from the
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HQ level down to the 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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