Agility in Humanitarian Supply Chains David Knight Stephen Pettit Anthony Beresford Cardiff Business School, Cardiff University 2nd International HumLog Workshop, Essen, Sept. 2012
Introduction Natural Disasters are Increasing in Frequency ● Majority in third world countries ● No exceptions for developed countries Hurricane Katrina 2005, Australian Floods 2010/2011, Tohoku Earthquake & Tsunami 2011 Volatile business environments require agile supply chain. (Lin et al. 2006)
Introduction Charles et al. (2010) Tatham & Pettit (2010) “by constantly working in environments with high degrees of uncertainty, humanitarian organisations end up becoming specialists in the implementation of agile systems” “the application of commercial supply network management theory and practice has received limited consideration within humanitarian logistics literature to date” Research Objective To examine the shortcomings of humanitarian aid logistics in response to natural disasters
Introduction Research Methods ● Participants: Logistics practitioners and directors from 10 humanitarian aid organisations ● 1st Stage: Semi-structured interviews ● 2nd Stage: Questionnaire survey of 21 open-ended questions (general, operational and strategic activities) ● 30 – 45 minutes for each interview ● Conducted in 2011
Lean or Agile? Agility “Using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile market place”Naylor et al. (1999) “Flexibility in being able to respond to changes in the market, both in terms of demand and design”Beresford et al. (2005) “A Key to an agile response is to have agile partners in SC.” Christopher and Peck (2004) “The notion of agility is therefore recognised to be holistic rather than functional of strategic rather than tactical importance.”Power (2005)
Lean or Agile? Lean thinking “Developing a value stream to eliminate all waste, including time, and to ensure a level schedule”Naylor et al. (1999) Many supply chains incorporate both lean and agile elements. Decoupling Point Both strategies on either side of decoupling point Lean principles when demand is stable and predictable; a hybrid strategy when the market is turbulent or uncertain Market Characteristics
Lean or Agile? It is suggested that HA organisations are already agile and commercial business should take note of their compatibilities. However, it is also argued that HA organisations lack some of the fundamental characteristics that allow an agile supply chain to operate. Any challenges for agile strategies in humanitarian logistics?
Key Challenges 1. Agile and Lean Strategies 2. Customer/Market Sensitivity 3. Virtual Integration 4. Process Integration 5. Network Integration 6. Leagility 7. ICT and Technology
Key Challenges 1. Agile and Lean Strategies ● Some organisations have several plans/strategies in place to deal with different scenarios (droughts, earthquakes, floods, cyclones, etc). These organisations highlight the importance of having the ability to approach disaster with a broad degree of flexibility. ● There was evidence of a leagile strategy in some responses: “we now have a new global strategy for 2011- 2016; it’s all about being faster, cheaper and better.” ● Agility implies that they are process oriented and that they are virtually integrated through shared information.
Key Challenges 2. Customer/Market Sensitivity ● The organisations hold prepositioned stock levels of items that are of equal importance to everyone. Other items held are basic necessities, so they do not need to be customised to individual needs. ●“For unusual items, direct procurement is required. All provision of goods be it from stock or production is always against a determined need rather than forecast based” ● HA organisations follow a top-down approach and do not provide choice to consumers. ● It is difficult to describe HA organisations as sensitive to their customers/markets.
Key Challenges 3. Virtual Integration ● Respondents highlighted many layers of approval for the procurement of relief supplies and a lack of clear communication between procurement and logistics as a hindrance. ● When asked whether there was data sharing across organisations and with suppliers, the answers varied from no data sharing to limited data sharing. But more information than data. ● ICT systems are not robust enough and there are often incompatibilities between suppliers and HA organisations systems.
Key Challenges 3. Virtual Integration cont.. ● Many of these organisations still rely on a paper or spreadsheet system, therefore virtual integration is not an option. ●The real challenge in becoming virtually integrated is “the reluctance that still exists within some organisations to share information across boundaries – be these internal or external.” (Christopher and Tatham, 2011)
Key Challenges 4. Process Integration ● Many of the organisations find the idea of introducing vendor-managed inventory (VMI) an interesting one but assert that suppliers and they do not have the skills to introduce such systems. ● For a VMI system to work suppliers need to reliably provide goods and services, however “often, due to cost or supply reasons, our vendors back out of their responsibilities and schedules” ● Some HA organisations have introduced VMI into some aspects of their operations.
Key Challenges 5. Network Integration ●“One way organisations can enhance their agility is by making use of the capacity, capabilities and resouces of other entities within the network.” (Christopher and Tatham, 2011) ● The biggest obstacle to achieving information sharing and transparency throughout their supply chains as “the cluster system and the lack of desire of many organisations to collaborate over supply chain practices and specification of goods.”
Key Challenges 6. Leagility ● Emergency relief supply chains can be cautiously described as leagile as prepositioned stocks are decoupled in warehouses and once they leave these locations it operates in a responsive and agile way. (Scholten et al., 2010) ● A number of organisations use prepositioned stock but keep this to a minimum and order goods that are not generic. ● As well as this it is evident that stock is often customised after it leaves the warehouse in order to respond to individual needs.
Key Challenges 7. ICT and Technology ● There needs to be significant use of technology to enable ‘connectivity’ in ‘real time.’ (Power, 2005) ● The organisations realise the importance of better ICT and they are actively seeking ways in which to improve. ● Due to the lack of investment in electronic infrastructure HA organisations suffer from increased time to handle information and process a shipment. (Gustavsson, 2003) ●“This is expected to change over time as the development and implementation of the required technology and supporting systems drives the creation of virtual
Key Challenges 7. ICT and Technology cont.. ●“This is expected to change over time as the development and implementation of the required technology and supporting systems drives the creation of virtual networks across global value chains, even in NGOs.” (Scholten et al., 2010) ● However, this can only occur when humanitarian donors fully appreciate the importance and value of providing resources for appropriate information systems and technologies.
Interpretation & Conclusion Findings - It appears there is variation in the emphasis put on logistics and supply chain management within different organisations. - It is evident that none of the organisations have taken a holistic view of their supply chain. - It appears that logistics is seen from a functional perspective rather than a strategic one in HA organisations.
Interpretation & Conclusion Findings - Due to the nature of natural disasters, humanitarian organisations have developed some competencies in rapidly aligning their supply chain. - HA organisations use market knowledge and logistical processes to be flexible in their responses to turbulent environments. - It is evident that HA organisations lack the ICT capability to link networks.
Interpretation & Conclusion Findings - Postponement principles are often used: - prepositioned stocks are customised according to, for example, region/climate/religion at the last minute before deployed. - It is impossible for HA organisations to achieve the levels of integration required to be ‘truly agile’ without significant investment in their systems. - This has allowed them to introduce VMI in some form with success; however, they are far from being fully integrated.
Interpretation & Conclusion Biggest Challenges for agility - Lack of investment in ICT - Unreliable suppliers - Lack of strong relationship with suppliers - Lack of coordination with other HA organisations - Lack of collaboration with other members within their SC
Interpretation & Conclusion Agile characteristics in HA organisations - Rapid alignment of the networks and operations - Postponement with prepositioned stock - Holding generic stock and then customise ‘last minute’ to cater for individual needs Despite demand-driven supply chains, prepositioned stock is still used because suppliers are not reliable and not capable of providing goods at short notice on the ‘just-in-time’ principle.