Humanitarian and Business Supply Chains - Essay Example

?Humanitarian & Business Supply Chains Introduction The study comprises two sections, the first being the major factors which differentiates the humanitarian and business supply chains such as Stakeholders, Management structure, Coordination with the stakeholders, Infrastructure facilities, Human resources management, and Follow-up formalities. Secondly there are issues common to both humanitarian and business supply chains, but with differences approach and treatment relative to the functions or the issues such as Inventory management, Lead time, Network structure, Logistics model, Transportation, Supplier and customer relationship, Supply chain strategy, Operational strategy and Waste management, Reverse logistics, Outsourcing, Ethical Principles and Corporate Social Responsibility. Though the supply chain strategies in both the cases aim at efficiency, there are differences arising due to the objectives, nature and goals of the operations, the management structure and management style. Blecken, A. (2010, p. 8) states “Thomas and Kopezak (2006) see the lack of recognition of importance of supply chain management and logistics in humanitarian organizations as a challenge to efficient and effective logistics and supply chain management…” This observation is in contrast to the recognition of its importance given by the private businesses, though an encouraging trend is evolving in humanitarian supply chain. I Factors differentiating humanitarian and business supply chains Factors differentiating humanitarian and business supply chains are discussed in this section. Though the operational strategy in the case of both humanitarian and business supply chain basically involves procurement, storage, transportation and distribution, similarities and differences relative to these functions in respect of humanitarian and business supply chains are discussed separately under section II for understanding of the operational issues in proper perspective. Stakeholders The primary stakeholders in the humanitarian supply chain are the people affected by earth quakes, floods and other natural calamities; afflicted by epidemics, poverty or other events. Unlike the customers or suppliers of a business organization who comes to do business with the corporations or associate with them as employees, the humanitarian organizations are involved in the rescue or rehabilitation operations of unknown people from different parts of the world in need of assistance and support. These people are not related to other stakeholders like donors, service providers, NGOs or other agencies and the service to humanity is the cornerstone of these humanitarian organizations. Management structure The management structure of humanitarian organizations is not uniform as in the case of private corporations with a defined hierarchy and chain of command. Lack of accountability is a systematic problem in the charitable organizations. However, Tomasini & Wassenhove (2004, p. 446) noted that in the case of humanitarian supply management system (SUMA) developed by Pan American Health Organization (PAHO) in El Salvador a public-private commission was set up, including Price Waterhouse and KPMG Peat Marwick to audit the reception and distribution of goods as well as the management of funds. SUMA has successfully overcome the inherent weakness in the management structure of the humanitarian supply chain. Coordination with the Stakeholders Humanitarian operations are complex with different stakeholders such as government agencies, local authorities, private sector corporations, service providers, goods suppliers, large and small aid agencies and NGOs apart from the communities involved. Adherence to the humanitarian principles in the activities at all levels and ensuring relief without partiality or discrimination is very important for sustaining the confidence level and trust of the donors and other stakeholders for their continued assistance and support. Infrastructure facilities Problems faced by a typical humanitarian organization in the supply chain management have been succinctly summed up in the statement: “Six days into the worst natural disaster in modern Japanese history, millions of people still lack drinking water as relief efforts are hampered by fuel and water supply shortages, the ongoing nuclear crisis, mangled roads, and extraordinarily cold weather”. (Circle of blue, 2011) Specific details or severity of the disaster or damages may vary from case to case but the problems faced by the organizations are nevertheless daunting. Apart from the damages to the infrastructure in the relief area, the problems associated with the supply chain are multifarious such as uncertainties in the supplies, government approvals and coordination with the number of agencies. Poor road conditions and lack of other infrastructural facilities at the remotest areas, epidemic, shortage of food and potable water and lack of health care facilities disrupt the supply chain. Whereas the business supply chains are more organized with proper chain of command, experienced staff and the scope of operations clearly defined. Human Resources management In the humanitarian supply chain, inexperienced staff and service providers is a major management issue. In view of the uncertainties in the supplies, demand for assistance and support round the clock, manual task of distribution of supplies to various locations and language problems, the local peoples are mostly employed in various operations. Active involvement and participation by the people and the local authorities and dedication on the part of the service providers and staff are essential to overcome these problems. Apart from the natural advantages of using locals, favoritism, partiality and rivalry among the local groups need to be managed with understanding and patience, and the rules formed on adhoc basis to tide over the difficult situations based on the circumstances. Blecken, A. (2010, p. 63) states “Humanitarian logistics is affected by the lack of training in logistics personnel. Logistic personnel are in the midst of numerous requirements posed by local governments and officials, donors, the media, beneficiaries, and their own headquarters. Professional logisticians are rare and thus, employee reliability is hampered.” Follow-up formalities Another important feature in the supply chain is follow up formalities in the case of rescue, rehabilitation or community development operations. In most of the cases, the operations extend over a period of time. Even if the operations are over, the objectives could be achieved only when proper follow-up action measures, albeit at a lesser level, are taken to monitor the developments for taking remedial actions or to give additional support wherever necessary. It is also very important from the angle of the donors, who would like to see their trust on the organization is well placed. Constant vigilance on supply chain is also necessary in view of likely hood of repeated disasters in disaster prone areas, as in the case of earthquakes in Japan. II Similarities and differences relative to the functions or issues Inventory management Procurement, arrivals, delivery, stock reports and follow up in any set up whether it is humanitarian or business organization is very important for efficiency in the operations. The storage facilities available may not be ideal and protection from weather, theft and spillage in the case of humanitarian supply chain, and therefore, it is fraught with so many uncertainties when compared to the businesses’. Even recording is a difficult task, and verification of records is nearly impossible. Zheng & Mesghouni (2011, p. 2011) states “The postponement strategy can bring benefits to the enterprise, such as the reduced inventory, the pooling risk, the accurate forecast.” In the context of humanitarian supply chain, this strategy may have to be frequently adopted due to uncertainties in demand in the absence of standard distribution plan as in the case of business supply chain. Lead time The lead time means the time taken in the supply chain between placement of the order and the receipt of the goods. Establishing schedules for various activities involved in the operation and planning deadlines are fundamental in meeting the objectives. Timelines should be realistic and it needs to be chased in emergency situations involving life and death of the victims of the disaster. In the case of business supply chains, the order is governed by regular terms and conditions covering lead time and consequences of not meeting the deadline. According to Tomasini & Wassenhove (2004, p. 443) reports indicate that 56% of the goods registered by SUMA were purchased by CONASOL using cash donations. Wherever the donations are made in kind, they are voluntary and not against any order. The terms of supply such as time and place of delivery, mode of transport and conditions of packing vary from the project to project and locations which makes the follow up and clear cut communication very essential here in the case of humanitarian supply chains. Network structure Reporting system with transparency, speed and accuracy and the information system through proper networking for integrating the stakeholders and the various operations involved such as arrivals, storage, retrieval and distribution in the case of humanitarian supply chain is very important. There is a well organized system in place in the business organizations, where the authority and responsibility are well defined. There is a formal relationship exists between the different stakeholders, especially the customers, suppliers and the employees in the day to day operations which are structured. The advances in technology and telecommunications paved way for efficiency in the operation through the use of internet and mobile telephone whose reach is phenomenal in the recent years. However, the data processing within the system and flow of information needs to be paid attention for efficiency in humanitarian supply chain. Logistics model The Fritz Institute (2004, p. 12) states “Logistics model will take variables and environmental parameters as inputs to obtain a specific output objective. Output objectives may include maximizing the flow of materials through the system or minimizing the cost or time of delivering supplies”. Tactics of the model involves defining the problem, establishing the system boundaries, identifying the performance metrics, documenting the operation models, eliminating waste and optimizing control methods to ensure consistency, reliability and transparency. The international humanitarian organizations introduced scientific supply management and have developed and implemented advanced information management systems in line with the multinational private corporations’ in logistics and supply chains. For example, “The International Federation of Red Cross and Crescent has won the prestigious ESCA 2006 (European Supply Chain Excellence Award).  Past winners include companies like Coca-Cola, Dell, Johnson & Johnson and British Airways. The prize is awarded each year a company, organization or company that has particularly distinguished itself in the logistics of supply in Europe”. (IFRC, 2006) Transportation Transportation plays a crucial role in logistics and supply chain management. The operations of the international humanitarian organizations spread over the world and for example, in the fiscal year 2010 CARE worked in 87 countries around the world. Transportation of men, materials, medicines and equipments to the different corners of the world need to be coordinated well for efficient functioning. It could be observed from the Checklist for reviewing project proposal that CARE evaluate transportation needs systematically with reference to the associated resource requirements and costs in respect of a project (Care). Unlike in the case of business supply chain, the last mile problem in the transportation is crucial. Otherwise, both Humanitarian & Business Supply Chains use contract services for transportation in general. The last mile to the destination or the final leg of delivery proves to be a challenge to the humanitarian supply chain, where accessibility could be a problem due to lack of infrastructure, damages to the roads in disaster, other disruptions and traffic consequent upon the calamities. Supplier and customer relationship The supplier and customer relationship in humanitarian nonprofit organizations has been by and large neglected historically. However, Customer relationship management (CRM) techniques are increasingly used by the not for profit organizations presently. It is found that there is enormous scope for Customer Relationship Management in the humanitarian supply chain for operational efficiency and efficiency in fundraising programs.  Revamping the organization structure and training the managers and staff in CRM would ensure ‘customer retention’ in these organizations, which is an important factor, donor being a customer in charity marketing and an important stakeholder in the humanitarian supply chain.  The humanitarian organizations are subject to scrutiny by the public, media, tax authorizes and other government agencies and hence they need to use new systems, tools and processes. It is also important to note that these organizations also need to be efficient and transparent on account of competition. In the case of private corporations, the focus would be mainly in relation to customers, focusing on the customer profile, their preferences, their spending pattern, tastes and fashions and income levels for the growth of the business. Thompson & Thode, K. R. (2003, p, 11) state “Customers in the NGO landscape take several forms. For large humanitarian aid NGOs, customers can include those downstream agencies that provide the end relief, those people actually receiving the goods and services, and the financial supporters that fund much of the operations”. Supply chain strategy In the case of businesses, according to Shukla, Garg & Agarwal (2011, p. 2060) “Supply Chain Management is management of material, money, men, and information within and across the supply chain to maximize customer satisfaction and to get an edge over competitors”. Procuring aid is a distinctive feature in the humanitarian supply chain because donations in kind are also involved. Supply chain disruption under disastrous situations is a challenge. However, it is also important to note that the disasters also affect the business supply chains, especially the kind of recent earthquake in Japan. Kim & Jim (2011) state “The 8.9 magnitude quake and ensuing tsunami destroyed infrastructure and knocked out factories supplying everything from high-tech components to steel, forcing firms including Toyota Corp and Sony Corp to suspend production”. But, the government and other national and international agencies give priority to the rescue programs of the humanitarian supply chain by resolving the issues. Therefore, the supply chain strategy should concentrate more on the issues related to distribution to save the lives of the people and improve their living conditions. OCHA (2011) states that they provide logistics support in respect of equipments, airport handling through coordination with Logistics Cluster during relief operations, cooperation and coordination in respect of timely provision of non food items for emergency reliefs, customs facilitation measures and global mapping of emergency stockpiles in partnership with the Logistics Cluster to the humanitarian organizations and agencies. Operational strategy According to Tomasini & Wassenhove (2004, p. 444-445) in El Salvador, the National Committee for solidarity (CONASOL) had the challenging task of procuring the right amount of goods, at the right time, to be delivered to the right place with a system to track incoming goods, goods in transit, stored, distributed, or unsolicited, but efficiently handled with operational standards. There are numerous emergency situations caused by fire, flood, earth quakes, explosion, civil disturbances, etc. According to FEMA (2010), “Emergency management is the process of preparing for, mitigating, responding to and recovering from an emergency”. Emergencies affect the communities and business is also a part of the community. Though the emergency management guide issued by FEMA is for the business and industry, it is eminently relevant and useful for strategic application in business as well as humanitarian supply chains, involving planning, team, authority, mission statement and schedule and budget. Waste management The international humanitarian agencies have been addressing the growing environmental threats caused by the factors such as greenhouse gas emissions, water pollution and pollution caused due to generation of waste. IFRC (2006) states that the Australian Red Cross and Canadian Red Cross have initiated steps to address the problem of tsunami debris, other wastes, stagnant water, soil and water contamination in Maldives by establishing a sustainable waste management system in the country with the help of EU and World Bank. The Body Shop Stakeholder Panel Review dt.31 August 2008 indicates the initiatives taken by the company which includes inter alia, the plastic bags are replaced by 100% recycled paper bags from 2008, 80% of all packaging contains recycled content and the recycled content of gift packaging is increased and secondary packing is reduced. The corporate companies take proactive measures in waste management, waste recycling and generation of electricity from waste. McDermott (2009) states that UK supermarket chain Tesco can stick a feather in its waste-reduction cap: Its 2,300-odd stores have managed to divert 100% of their waste going into landfills nearly six months ahead of schedule -- a decidedly good thing. The humanitarian organizations need to formulate strategies for efficient waste management and recycling. Reverse logistics Quoting Karen Hawks, VP Supply Chain Practice of Navesink, Mehrmann (2008) stated “reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics." Mismanagement in the supply chain could be devastating, and real time analysis is important in this process as it involves cost and additional strain in the supply chain. In the case of business supply chain, it is usually taken care of in the terms and conditions of the order and immediate replacement is arranged considering the ‘Just-in-time’ inventory management followed by several companies. However, in the case of disaster management, as it involves human lives and their living conditions, the first priority in most of the cases would be replacement, and the justification for reverse logistics calls for comparison of costs as well as emergency in need. Outsourcing Contracting out to the private companies in humanitarian organizations in line with the business supply chain has been gathering momentum in the recent years. “In the supply chain environment, modern port logistics will shift from "function integration" to "the supply chain integration", it is not only acts as the third party logistics enterprise to a larger extent it plays the supply chain”. (Wang, 2011, p. 270) Considering the complexities involved, outsourcing to specialized service providers could increase overall efficiency by enabling the organizations to concentrate on the core activities. Blecken, A. (2010, p. 6) states “Lufthansa Cargo, for instance, transports medical equipments and personnel from Frankfurt to Nairobi on a daily basis and supports construction projects”. Ethical principles Code of ethics for the stakeholders in the humanitarian supply chain is of paramount importance. MSF (2009), an international humanitarian aid organization states “Members undertake to respect their professional code of ethics and to maintain complete independence from all political, economic or religious powers”. The adoption of the principles of humanitarian action and ethical principles in relation to various services such as healthcare in dealing with the beneficiaries differentiates the nature service in humanitarian organizations from the business organization. Corporate Social Responsibility The principles of corporate social responsibility (CSR) need to be integrated in the humanitarian supply chain in view of the environmental concerns post Kyoto Protocol. The corporate companies have started recognizing their role and aim for energy efficient supply chain. The reduction in transportation cost also implies reduced consumption of fuel thereby pollution. “Marks and Spencer, for example, has a specific initiative under way to reduce “food miles,” ((Parry, Martha and Grenon, 2007) Areas of concentration International agencies have fine tuned their strategies based on the experience gained by standardization of the supplies, data management and communication systems. However, disaster preparedness at the international level through coordination with the national agencies and NGOs is necessary for timely rescue and rehabilitation operations. Restructuring the existing supply chains by strengthening the network and establishment of nodal agencies for coordination among the various humanitarian organizations for the storage of emergency supplies, medicines and equipments are important in this process. Conclusion Convergence of technology, communication and media resulted into formation of new groups in the world cutting across the borders based on different criteria. A particular trait, quality or habit may connect the people of various countries. Common causes exist among people belong to various societies or countries. An urge to help or assist the deprived or less privileged as in the case of hunger, epidemic and natural calamities would be instantaneous and are satisfied by the modern communication facilities, social networks, media, cell phone and internet that pervaded into the communities and societies. The commercial undertakings understood the implications of these changes and adapted themselves to the changing environment. Though, the humanitarian organizations had been slow in reacting to the developments taking place, nevertheless the adaptation process is gaining momentum. The sincerity and integrity on the part of the humanitarian organizations, when they are translated into efficiency and transparency in their operations, would enable them to eminently act as the bridge between donors and the needy effectively. References Blecken, A., 2010, Humanitarian Logistics: Modelling Supply Chain Processes of humanitarian Organizations, Kuhne Foundation Book Series on Logistics 18. Haupt Berne, Germany. 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By Turning Meat into Electricity! Treehugger, 8 July 2009, Viewed 12 April 2011, Medicine Sans Frontiers (MSF), 2009, About MSF, MSF’s website, Viewed 11 April 2011, Mehrmann, J., 2008, Reverse logistics in Supply Chain Management, Improvement and Innovation.com, 9 May 2008, Viewed 12 April 2011, Parry, P. Martha, J. and Grenon, G. (2007) The Energy-Efficient Supply Chain, strategy+business, Viewed 12 April 2011, Shukla,R. K., Garg, D. & Agarwal, A., 2011, ‘UNDERSTANDING OF SUPPLY CHAIN: A LITERATURE REVIEW’, International Journal of Engineering Science and Technology, Volume 3, Issue 3, pp. 2059-2072, http://www.ijest.info/docs/IJEST11-03-03-152.pdf   The Body Shop, 2008, The Body Shop Stakeholder Panel Review, 31 August 2008, Viewed 12 April 2011, Tomasini, R. M. & Wassenhove, L. N. 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