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Essentials of Supply Chain Management

Book · March 2018

DOI: 10.1002/9781119464495

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 1

Disaster Response Supply Chains Face Unique Challenges

By Dr. Dennis Duke and Michael Hugos

Disaster response supply chains face most of the same challenges as commercial supply
chains, and they also face two additional challenges:

1. High Levels of Unpredictability - commercial supply chains are based on

planning and predictability, but because disasters are not planned, disaster
response supply chains must operate in highly unpredictable environments.
2. Ad Hoc Organization - disaster response supply chains do not exist before a
disaster occurs, so they are assembled quickly when needed, and ways must be
found to coordinate these supply chains where there are often no clear lines of
authority among the many different participants involved.

High levels of unpredictability require disaster response (DR) supply chains to be able to
handle much higher levels of uncertainty than what is encountered in commercial supply
chains. DR supply chains must operate efficiently, yet inventory and transportation
management cannot be handled the same way it is in commercial supply chains. DR
supply chains must keep higher on-hand inventory levels than a commercial supply chain
in order to ensure supplies are ready on short notice. And DR supply chains must
suddenly transport large amounts of products to locations that cannot be determined
beforehand, so transport operations and procedures will be different from those in
commercial supply chains.

The ad hoc organization of DR supply chains is one of their defining features. In

commercial supply chains the various parties have time to select who they will partner
with, negotiate their issues and define service level agreements and prices. This is not
possible in DR supply chains. DR supply chains form up in response to specific disasters
and configure themselves to meet the unique needs of that disaster. DR supply chains are
assembled from different government agencies, non-governmental organizations (NGOs),
military organizations and commercial businesses. Effective coordination among these
different organizations under conditions of stress and uncertainty combined with time
pressure to act quickly in disaster situations is a challenge.

Supply Chains for Unpredictable Environments

We can think of the disaster response life cycle as having three phases: pre-disaster;
disaster response; and recovery and reconstruction. Improved performance in the pre-
disaster phase will produce better results in the response and reconstruction phases. And
since one of the few predictable things about disasters is that they will happen, there is
value to be found in work done in the pre-disaster phase. That work is largely related to
activities in the areas of planning and sourcing (as described in chapter two).

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons
 2

Simplified demand forecasting can be employed to identify areas of the world where
certain kinds of disasters are most likely to occur (earthquakes, fires, floods, hurricanes,
etc.). We can use population numbers in those areas to estimate demand for disaster
response supplies such as food, medicine and shelter. But it is not possible to do the kind
of detailed and accurate demand forecasting and inventory planning done in more
predictable commercial supply chains.

Based on forecasts for different parts of the world it is possible to prevent and mitigate
some of the effects of a disaster. Facilities can be designated where disaster supplies are
stockpiled in anticipation of future use, and sourcing decisions can be made for selecting
suppliers to deliver the products to these locations. In this way the DR supply chain is
provided with "surge capacity" - the ability to respond quickly to unplanned events with
enough supplies to meet the demand.

Yet inventory management practices will be different from commercial supply chains.
Inventory will not turn as quickly. It will hardly move at all, and then suddenly it will
move in a rush. Purchases from suppliers will not be steady and predictable. So
previously selected suppliers may not always be able to deliver more of their products in
the large quantities that can suddenly be requested. And the need to find many new
suppliers often complicates sourcing procedures in a DR supply chain.

Hand-in-hand with this type of planning there should also be training exercises where
staff from different organizations learn to work together in ad hoc supply chains. Based
on forecasts and planning, training can take the form of highly realistic and interactive
exercises that are done in-person and online. People can learn to collaborate under tight
time constraints, and reach consensus and take action to solve problems as they arise.
Then when real disasters happen people collaborate just as they did in their training
exercises.

Training and Coordination in Ad Hoc Supply Chains

Participants in DR supply chains need training in how to operate in environments where

authority is decentralized. Attempts to apply traditional methods of centralized command
and control in DR supply chains often break down because different organizations in the
supply chain often have different understandings of the disaster situation. So they have
different ideas about what should be done. And since these organizations are not bound
by previously negotiated contracts or service level agreements, as would be the case in
commercial supply chains, they resist being ordered about by others.

The problem is compounded by the fact that different organizations also use different
technologies ranging from sophisticated, custom built hardware and software to simple
off-the-shelf technology such as mobile phones and laptops running email and
spreadsheets. So information sharing between organizations is difficult and
communication is slow. And when unexpected events happen during disaster response
missions (as they always do) that creates further strains on the ability of DR supply
chains to respond effectively and keep up with rapidly changing situations.

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons
 3

What is needed is a way for all participants in a DR supply chain to have a common big-
picture understanding of the disaster situation as events unfold. This means all
participants need to easily share and view relevant data, and that data has to be combined
and presented in a coherent and quickly understandable manner. If data is presented as
columns of numbers and jumbles of words and charts it will not be useful.

These needs can be met with a cloud-based training and collaboration platform that
supports thousands of simultaneous users, and is accessible over the Internet using
common consumer technology (PCs, laptops, smartphones). Such a platform could
support the mass collaboration between participants in DR supply chains. This platform
can use application program interfaces (APIs) to connect to and exchanges data with the
different ERP and logistics systems used by supply chain participants. It would be a
central point for information displays and data interchange. It would use constantly
updated map displays to organize the data so people could clearly see what is happening
as it happens (see more about this in chapter seven). This is illustrated in the figure below.

3.1 Cloud-Based Training and Collaboration Platform

Maps provide an easy to understand context within which to organize many different
streams of data and enable people to get a coherent big picture view of events without
being overwhelmed by a flood of details. People can zoom in on particular points of
interest in the supply chain and switch to satellite photos or topographical maps to learn
more about areas of interest. They can call up greater levels of detailed information for
those particular points of interest.

Commercial off-the-shelf technology can be used to create an online training and

collaboration platform like this. Major components of this platform already exist.
Mapping applications such as Apple Maps, Google Maps or OpenStreetMaps can be
combined with other useful applications such as inventory management, GPS tracking,
instant messaging, and video conferencing. All these applications are cloud-based and
they have APIs already built in to facilitate linking them together.

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons
 4

Such a platform would enable people to use accurate and timely data to create models of
DR supply chains and run simulations to explore how different courses of action would
play out. These simulations can train people in what works best for given situations, and
also drive supply chain operating decisions by showing what supply chain designs work
best and identifying areas for improvement.

Supply chain simulations also provide engaging and realistic training for a wide audience
of people. They learn to work collaboratively to design and operate effective supply
chains and respond in a coordinated manner when unexpected events happen. This
training promotes development of situational awareness for people and organizations
working in real-world DR supply chains.

3.2 Maps and Satellite Pictures Provide Organizing Context for Real-Time Data

When supply chain plans are put into operation, this platform becomes the place where
daily operating data is collected and displayed for all to see. As the DR mission
progresses, supply chain plans are continually simulated and updated as called for to
respond to new developments and get the operating results needed.

Mission and Operations Planning (M&OP)

This on-going process of monitoring situations and updating supply chain plans needs a
guiding framework. A concise and easily understandable framework can guide
collaboration between supply chain participants by giving it a structure and sequence that
keeps people focused on important tasks and timely action.

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons
 5

To provide this framework, there is an opportunity to adopt and modify a best practice
widely used in commercial supply chains. In commercial supply chains this process
facilitates on-going collaboration between people in different areas of a company such as
sales, marketing, finance, procurement, and logistics. It is known as Sales and Operations
Planning (S&OP) and companies use this process to produce rolling 30-day supply chain
operating plans (see more about S&OP in chapter 6). A stream-lined version of this
process can guide mass collaboration between participants in disaster response supply
chains. It is called Mission & Operations Planning (M&OP) and is illustrated below.

Ex 3.3 Five-Step Missions and Operations Planning Process

For disaster response missions there is some central person or authority who is (at least
theoretically) responsible for overall success of the mission. But that person cannot
simply issue orders and expect to be obeyed because ad hoc supply chains do not work
that way. So M&OP guides a collaborative process involving all the participants in the
supply chain. In the first step the central authority puts forth the mission orders, also
known as the concept of operations (CONOPS). The CONOPS defines where supplies
for the mission will come from, what facilities will be set up in the disaster area, and
what kinds of people and products will be needed at each facility.

Then demand planning can be done for each facility based on the numbers of people
affected in a disaster, and the resulting demand for products at each facilities. Next, plans
can be made for how to use available vehicles to transport products from stockpiling
locations to meet demand at facilities in the disaster area. These demand plans and supply
plans provide information about products, facilities, vehicles and delivery routes needed
to create accurate models of proposed supply chains. Running those models in
simulations shows where problems will occur, and provides information to fix those

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons
View publication stats

problems and improve operating efficiency. It is far better to find and fix problems in
simulations before they occur in the real world.

At the end of this five-step M&OP process, the supply chain models (plans) that work
best in the simulations are the ones to put into action because they are also the ones most
likely to work well in the real world. When everyone can see what works best, consensus
emerges quickly, and actions taken are more effective.

This is how ad hoc supply chains achieve and sustain high levels of performance in
unpredictable environments without needing centralized command and control.

About the Authors

This executive insight article is based on research done by Dr. Dennis Duke on the use of
supply chain simulations for training, and on work done by Michael Hugos with the
Global Logistics Cluster of the World Food Program. Real operations data was used to
build a model to simulate and explore the supply chain created to respond to the Nepal
earthquake in the spring of 2015. A training case study was created that can be used for
individual training, or for collaborative online training exercises with multiple
organizations (see more at the SCM Globe website "Nepal Earthquake Disaster Response
Supply Chain").

Dr. Dennis Duke (dduke@fit.edu) is an adjunct professor at the Florida Institute of

Technology's Graduate School of Business. He was also a senior defense logistics analyst
for 27 years with the U.S. Navy.

Michael Hugos (mhugos@scmglobe.com) is a co-founder of SCM Globe and author of

Essentials of Supply Chain Management, now in its 4th edition. He was also the chief
information officer for six years at a global distribution and supply chain services
company.

Excerpted from Essentials of Supply Chain Management, 4th Edition, 2018, John Wiley & Sons