Aung Kyaw Moe / Task 6 - Humanitarian Aid and Supply Chain

Memo
To: From: Date: RE:

Francois Damba Aung Kyaw Moe

28 May 2013

TASK 6 HUMANITARIAN AID SUPPLY CHAIN

The Operation Officer Anders Mathisen thinks that Logistics is not a particularly technical support function and is only really there to undertake the tasks we don't have time to do ourselves. His comments and views on logistics is, I think, very shallow and unprofessional. Nobody can deny that Logistics is just a kind of supportive function in a humanitarian organization compared to the other programmatic sections since Logistics is included under the operation cluster of an organization in which Administration and Human Resources, Finance, Supply and Logistics, Information and Communication Technology are its various components. It is true that brain is the most important organ for a human being but brain can not properly function if other organs like heart, lungs, liver and kidneys are not able to support it fully. In the same way, any kind of programmatic activity will collapse without the necessary aids and assistance of the supportive functions of Supply and Logistics, Finance, Admin and HR in a given organization. In this regard, I hereafter prepare an outline of explanation about the nature and function of Logistics in a Humanitarian organization in order for convincing our Operation Officer. DEFINITION OF SUPPLY AND LOGISTICS First of all, we should start with the fundamental definition of Supply and Logistics. Supply chain and logistics can be defined as the process of getting aid, in the form of goods, to the beneficiaries requiring the goods. Management of this acquiring process can be referred as function/department in certain organizations

Another good definition of logistics I have in my mind runs A process that integrates coordinates and controls the movement of materials, goods and related information; from suppliers and donors to meet beneficiary requirements in a timely manner. This definition is very comprehensive. It defines that Supply and Logistics is concerned about the movement of goods and information from donor (money) and suppliers (products and services) to the beneficiaries (end-users). Better this process of movement is integrated and coordinated, smarter the functional efficacy of Supply and Logistics of a given organization. NATURE OF LOGISTICS IN HUMANITARIAN AIDS Compared with the normal process of supply and logistics in the commercial and governmental organizations, the logistics and supply chain element is one of the most complex and largest parts of humanitarian aid operations in the humanitarian organizations. It is because of its nature of humanitarian aid operations makes the logistics and supply chain element different and often more complex than logistics and supply chain elements in commercial organisations. Humanitarian Organizations mainly responses to the urgent situations caused by man-made or natural disasters. Therefore, the difficulty of the task is generated by things like the type and quantity of goods required, the location of the people needing the goods, and the speed with which the goods need to be made to response the urgent emergency situations. There will always be problematic issues such as shortage of required supplies and long lead-time to manufacture new products, the damages of infra-structures and armed fighting among different political groups that might deter the smooth process of the mobilization of supplies. Indeed, it is the quite challenging job to establish an effective and efficient supply and logistics chain during the time of emergency. DEMAND CHAIN MANAGEMENT The main objective of logistics management is to satisfy the demand of these beneficiaries. Therefore, sometimes it is better named as demand chain management, since demand of beneficiaries is the key factor that determines the nature and process of supplying goods. There are generally two phases in it. When a disaster situation commences, goods may be pushed down the supply chain but, as the needs of the victims of certain disasters become well defined and clearer, the chain is responding to the demand placed on it by people in the field operation. GOODS FLOW Supply is logistics chain is basically concerned with the management of goods and information flow. In terms of goods flow, it starts from the accumulation of raw materials and in a numerous steps in the way, a number of activities will take place that will ensure the finished goods get to the beneficiaries. These activities include buying of raw materials, infrastructures and machinery, and hiring of human resources, the actual making and producing the required goods and moving them by different transportation options such as by air or by rail or by sea or by road.

BACKWARD FLOW OF GOODS The flow of goods in the pipelines of supply chain is not always one-directional, from suppliers to the end-users. Sometimes, such goods as faulty goods, too many goods being supplied, or the wrong type of goods being supplied will flow back up the supply chain. In this regard, the backward movement of these goods must be manipulated in a very efficient and cost-effective way in accordance with the preliminary agreements made between suppliers and the logistics management. AGING OF GOODS IN THE WAREHOUSES Actually warehouses are only meant to be used for the sake of transitional storage of supplies along the supply chain starting from suppliers/manufacturers to the endusers. But one of the major problems in humanitarian logistics is that sometimes the supplies which are either unsuitable or excessive or out of expiry dates are uselessly lying in the warehouses for long time. Therefore, aging of goods in the warehouses should be closely monitored and initiate to move these supplies either to the beneficiaries or back to the suppliers or other location which these useful supplies are needed. INFORMATION FLOW Apart from the flow of goods, the flow of information is also a crucial aspect of any supply chain. This information may include the following aspects: WHAT kind of goods/products we need to supply for beneficiaries? WHAT is the number of total available beneficiaries/end-users? HOW MANY (quantity) of supplies needed for supply of goods? WHEN these goods must be supplied? WHERE these goods must be supplied? HOW these goods should be supplied? (means of transportation)

Better we know about these kinds of information, clearer our vision of what we need to do become. This information is going to determine the entire supply chain process. All the activities involved in the supply chain process are to be implemented in accordance with this information. This demand for goods will then be communicated up the supply chain in the following steps: Preliminary survey and analysis of needs of beneficiaries Focused Group Discussions with community in need Planning and forecasting of Supplies and Finance Raising Internal/ Programmatic Requisitions of Supplies Allocations of Requisitions to procure and purchase Raising Purchase Orders to the Suppliers Communication about Shipments Receiving and clearance of Supplies from Air/Sea Ports

IMPORTANCE OF INFORMATION In aid situations, understanding the needs of the people affected is key to the success of the aid operation. The initial assessment and the subsequent ongoing assessments of the needs of the beneficiaries, will then lead to demands being placed on the supply chain and orders being placed with suppliers and donors to try to meet these needs. We are like the blind men trying to visualize an elephant if we are not able to get access to the proper information flow. Timely and correct information can help to plan, monitor and control the supply chain and make the whole process visible before our eyes what is going on in the chain. Supply information can highlight the following points: The exact location of supplies in the chain, the status of movement and inventory level kept in, and the amount of supplies to move in transit. The estimated time of departure and arrival of supplies and important instructions in the process of receiving and clearance of supplies (i.e., dangerous/hazardous cargo, highly perishable foods and vaccines which must be kept under certain range of temperature) When goods will arrive at different points in the chain, e.g. goods arriving at ports that will need unloading and goods arriving that will need storing in a warehouse. The volume of goods to arrive and making calculations of resources are needed to move and unload them. Any problems there are which are affecting the flow of goods down the supply chain. From the Donors point of view, donors want to know how and where the goods have been acquired and what is the progress of program implementation which can be measured by this information of supply chain. SPEED OF RESPONSE TOWARDS DISASTERS Compared to the supply and logistics chain in profit-making commercial organizations, speed of response is clearly a key part of humanitarian aid operations because of the high pressure of need and requirement for the beneficiaries. Slow response and delay of the movement of supply to the end-users will create surely high level of unnecessary suffering and problems for actual beneficiaries. Sending the most appropriate supplies and the most sufficient amount of supplies in a quickest possible way towards the beneficiaries is the major responsibility of any humanitarian aids organization. RESPONSE TIME AND BENEFICIARY DELIVERY TIME There are two different times that are important in humanitarian supply chains these are Response Time and Beneficiary Delivery Time. Response Time is defined as the overall time taken for goods to flow along the supply chain whereas Beneficiary Delivery Time is the time from when it is identified that beneficiaries need goods, until they receive them.

Both of them are very important and a humanitarian organization should try to fulfil the need of beneficiaries within the frames of these two times. A good and effective performance of the supply chain can surely impact on how quickly aid can be moved along the chain in order to distribute the supplies to beneficiary in a timely manner by ensuring that the right goods are in the right place, at the right time, in the right quantities, in the right quality from the right source. COST CONTROL Supply/Logistics and cost control are linked and the performance of the supply chain can have a significant impact on the cost of an aid operation in the following aspects : (1) Right price In order to fulfil the requirement of beneficiaries, the operation of the supply chain must start with the purchasing of goods and services. In this regard, the way these goods and services are purchased and the price that is paid for them, will impact on the cost of the aid operation. (2) Minimum cost After purchasing, what follow are the transportation, handling, storage and distribution of the procured supplies. Therefore, the cost of operating the supply chain is a major cost in a total aid operation. The operation of the supply chain involves activities that need to be paid for. To gain a good impact on the cost of the total supply chain and aid operation, these following activities in a supply chain must be carried out in a very efficient and cost-effective way. THE MAIN COMPONENTS OF THE SUPPLY CHAIN There are a number of different components in the supply chain process and it is made of a number of activities that need to be carried out. The main components can be counted as follows : Procurement and Order Management. Transport. Warehousing and Inventory.
PROCUREMENT OF SUPPLIES

Basically procurement is an activity or a process that exchanges/transforms cash or financial resources into appropriate goods or services required and a good procurement needs the five Rights as mentioned below: Right Price Right Quality Right Quantity Right Packaging Right Delivery Time

By fulfilling these Rights, the procurement and order management component can manage to source the goods that are needed to meet the needs of the beneficiaries. Goods needing to be delivered to beneficiaries may already be held by humanitarian aid organisations or may be made available by donors; other goods though will need to be sourced from commercial suppliers.

TRANSPORTATION

After procurement is done, the next step in the supply chain process is the physical movement of goods from suppliers or donors to beneficiaries. The transport component of the supply chain is the major part in providing this movement of goods. In terms of transporting goods along the chain, different actors may be involved in the whole process, including commercial suppliers, UN organisations and NGOs. They may all take responsibility for ensuring the goods are transported along part of the physical supply chain. The following steps and sequences shows a generic humanitarian supply chain and all the different movements of goods that will need to happen for the goods to be moved from suppliers or donors, along the supply chain to the beneficiaries. 1. Supplies procured from the International Suppliers and In-kind donations of Donors come to the HQ level central warehouse 2. By means of sea freight or air freight, the supplies come to the sea port and airport of country where humanitarian activities are implemented 3. After customs clearance, the supplies are moved to the country level central warehouse 4. All supplied locally purchased are also joining to this central warehouse 5. Form central warehouse, the supplies go to the regional warehouses and local warehouses in the programmatic area 6. Supplies are distributed to the beneficiaries from local warehouses A great part of our job is to consider the following different factors in implementing transportation The urgency that goods are required. The type of goods to be transported. The volume of goods to be transported. The availability of different transport routes. The place to which the goods need to be transported. The cost of transportation. The availability of different types of transport. The terrain through which the goods need to be transported.

A range of different transport methods will be used to transport goods along a humanitarian supply chain based on the information we collect about the abovementioned factors. These will include air, sea, road and rail, and may range from large sea vessels to horse drawn carts. Transport is therefore an important component that ensures goods are moved efficiently and at the right speed along the supply chain.
WAREHOUSING AND INVENTORY

Warehousing and inventory is the third key component of the supply chain process. Warehousing means any place in the supply chain where inventory is being stored. There is an opinion like that in the perfect supply chain we should not need warehouses and that the goods should always be on the move without being stored in warehouses. But it is only a nice sounding theory but in practice we cannot work like that 100% perfect way. We need some forms of warehouses and storage areas along the supply chain as much as we need accommodations and resting places when we make travelling. These warehouses may be the responsibility of different organisations, e.g. supplier warehouses, donor warehouses, NGO warehouses. There are certain inevitable reasons of the requirement of storing supplies in the warehouses in different stages of transportation and they can be enumerated as follows: 1. 2. 3. 4. To store goods waiting to be transported. To store goods waiting for customs clearance. To combine/consolidate different goods coming from different suppliers. To prepare and consolidate goods in the format needed for distribution to beneficiaries. 5. To hold emergency goods ready for a quick response to any future emergency aid operation. The only thing we need to consider is whether we need to store the supplies for a long duration of time or only for a temporary period just before distribution is taken place. In this case a proper supply chain planning is a major issue for us. Finally I would like to ensure Anders Mathisen that Supply Chain Management is the weakest component in our humanitarian aids organizations and we need to work out very carefully on that and start to train our staff to get basic awareness and higher technical expertise in all steps/stages including planning and forecasting, getting preparedness, collecting and sharing information, raising purchase orders and making pre-delivery inspection, managing transportation, warehousing and distribution. All these steps/stages need detail knowledge of the nitty-gritty things of supply and logistics management and it is not, Im sure, a small job or a piece of cake as he assume to be.

Best Regards, Aung Kyaw Moe Logistics Officer Sub-Office SCILaid Betaland .