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Feasibility Study for CARE-Shelter First

Apr 13, 2006

Thomas Choi, Shao Hung Goh, Marco Gutierriz, Randy May, Zhao Ki So, Kai Wang

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Outline Introduction CARE Shelter First Objectives Challenges Deliverables

Distribution Network for Disaster Relief Warehouse Location Model and Cost

Estimates Case Studies

Conclusions

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Relief Aid

Relief Aid can be subdivided into 2 categories:

• Humanitarian Aid• Provided on an urgent basis in

response to a humanitarian crisis• Objective is to save lives, alleviate

suffering, and maintain human dignity.• Development Aid

• Address socioeconomic factors that may have led to a crisis

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Aid Organizations• Subdivided into GOs and NGOs.

• Government organizations• Within government (USAID)• International level (United Nations)

• Non-governmental organizations• Local• International (CARE, Shelter First)• Funded by individuals, corporations, governments,

and other organizations• Some aid organizations carry out both

kinds of aid (CARE)• Some organizations specialize (Red Cross

and Shelter First, humanitarian aid)

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Humanitarian Aid Trends

• Funding and delivery increasingly being organized at an international level.

• Faster and more effective response for major emergencies.

• International NGOs becoming an increasingly effective vehicle for delivery.

• Standardization and improvement efforts• SPHERE minimum standards for disaster

response.• Although mostly qualitative, provides guidelines

for effective and efficient response.

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Humanitarian Aid NGOs – Challenges

• Funded in response to emergencies• Little, if any, funds are dedicated to

preparedness (including pre-positioning)

• Typically NGOs must wait until after emergency to source supplies. Response time is sometimes too slow causing additional deaths and sufferings

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Humanitarian Aid NGOs – Response Chain

Suppliers

Supplies purchased by NGOs

Consolidation Warehouses

Set up in response to emergency

Aid RecipientsTransport in response to emergency

Transport in response to emergency

Typical Response Chain

Suppliers

Supplies purchased by NGOs

Consolidation Warehouses

Set up in response to emergency

Aid Recipients

Response Chain with Pre-positioning

Pre-positioning Warehouses

Set up in advance of emergencyTransport in

advance to emergency

Transport in response to emergency

Transport in response to emergency

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Shelter First Concept• To provide immediate short-term shelter

to victims of natural disasters worldwide.• Purchase and pre-stage temporary

shelters at various points around the world.

• Start with a single warehouse. Expand over time to multiple locations.

• If possible, airdrop shelters directly to affected area. If not, fly shelters to closest airstrip.

• The ultimate goal is to airdrop shelters to destination within 24 hrs after a request.

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Perceived Value• Provide a vehicle for positive publicity

for the hospitality industry worldwide.• Focus on temporary shelters, as opposed

to the other so many needs that aid organizations face.

• Most importantly, reduce response time and reduce human suffering worldwide.

• Initially, reduce shelter provision response time from 2-3 wks to 5-7 days.

• Ultimately achieve 1 day response time goal.

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Shelter Design• Shelter design must meet SPHERE minimum

standards: adequate for climate, lighting, ventilation, places to store food, water

• Estimated cost of $500 per shelter.• Only standard that raises an issue is size.

• Minimum of 17.5 sqm for a 5 member family.• Might make shelter kit too large and more

expensive to transport.

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Kit Contents

• Contents should address basic needs

• Should last until other aid reaches the beneficiaries (3-4 wks)

• Minimum contents: shelter, blankets, food rations, water purification kits, first-aid kits

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Packaging Ideal Design• Estimated weight 200lbs.• Size of standard pallet.• Slots for forklifts’ forks.• Disassembled into 4

color-coded, 50lbs “boxes”.

• Each separate box can be safely handled by a single person.

• Rationale: take advantage of both worlds (commercial and humanitarian), avoid need of pallet.

48 in

50 in

FRONT VIEW

40 in

50 in

SIDE VIEW

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Outline Introduction CARE Shelter First Objectives Challenges Deliverables

Distribution Network for Disaster Relief Warehouse Location Model and Cost

Estimates Case Studies

Conclusions

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Challenges Identification of issues in Relief logistics

for Shelter First Initiative Different focus by CARE and Shelter First Feasibility of One-day response time

target Data collection Pre-positioning of possible warehouse

positions

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Outline Introduction CARE Shelter First Objectives Challenges Deliverables

Distribution Network for Disaster Relief Warehouse Location Model and Cost

Estimates Case Studies

Conclusions

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Distribution Network

• 3 stages:• Manufacturing sources to Warehouses• Warehouses to Staging Area • Staging Area to Beneficiaries

Warehouse Staging Area Beneficiaries

(Disaster Zone)

500 to 2000 miles

~ 100 milesSupplier

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Deliverables: Network Strategy

Mobilization and Procurement

(21 days)

Existing Timeline of Shelter Delivery by CARE

Long Haul Transit

(1 day)

Last “100-Mile”

(1 day)

Delivery to Beneficiaries

(7 days)

Proposed Timeline of Shelter Delivery by CARE

Mobilization

(3 days)

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Distribution Network

• From Manufacturing sources to warehouses• Delivery of shelters does not have to

be expedited (Push to stock)• Stocking at warehouses can be done

through economical means such as trucks, rail, sea-freight, air, etc

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Distribution Network

• From Warehouses to Staging Area:• Expedited delivery by commercial express

air carrier• Strike of Disaster• Report on damage assessment• Notify commercial express air carrier• Warehouses prepare shelters for shipping• Staging area is the nearest airport for

regular aircrafts

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Distribution Network• From Staging Area to Beneficiaries

(“100-mile”):• Handoff to beneficiaries within 24 hrs

• If air-drop or air-lift is feasible, fly from Staging Area to Beneficiaries

• If airdrop is infeasible, use any transportation mode available for final distribution

• Modes of transportation• Animal carts/animals• Boats• Helicopters• Pick-up trucks, SUV’s, small trucks

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Distribution Network

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Outline Introduction CARE Shelter First Objectives Challenges Deliverables

Distribution Network for Disaster Relief Warehouse Location Model and Cost

Estimates Case Studies

Conclusions

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Model Rationale

• Requires fast response time to unpredictable (unscheduled) demands

• Basic strategy:• Stockpile inventories “near” possible

disaster zones• Activation of outbound transportation

at short notice

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Warehouses: Centralized vs Decentralized

Decentralization Centralization

Inventory High Low

Response lead time Low High

Overhead cost High Low

Inbound transportation cost High Low

Outbound transportation cost Low High

For a given response lead time and a given budget, balance the tradeoffs

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Warehouse Location Model• Provide a staged plan based on projected

budget growth.• Objective: Maximize coverage• Decision variables:

• Number of warehouses.• Location/s of warehouse/s.• Inventory level/s.

• Constraint: budget constraint.• Inputs:

• Possible demand points, magnitudes and frequencies.

• Candidate locations for warehouses.• Costs.

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Budget Constraint• Projected budget for purchase of shelters,

transportation, warehousing (excluding admin overhead):

• Year 1: $1.2 million• Year 2: $2.4 million• Year 3: $4.8 million• Year 4: $6.0 million

• Assume half of the funds after year 1 will be used for replenishment.

• The goal for each warehouse is to have 10,000 shelters on hand.

• Estimated costs only for shelter.• Cost estimates for additional kits to be

determined.

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Cost of Typical Airdrop Operation• C-130 - $3,500 / hour of charter• 500 shelters – 7 flights• 1000 mi trip – 3 hr flight• 2 hrs loading• Approx $185,500 air carrier• $371 transport / shelter• $0.371 / mile / shelter• Total shelter cost: $500 + $371 • Grand total: $435,500

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Model Formulationr w t

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Budget constraintInventory balance

Tpt budget adequacy Warehouse fixity

Inventory adequacy

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Demand Estimate

• Collected historical information on the number of people displaced because of natural disasters around the world

• Although historical information of disasters can’t predict future events, the analysis provides an idea of frequent geographic locations and expected demand

• Aggregating of expected demand across many locations

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Candidate Locations

• Carried out analysis based on:• Connectivity (port and airport

volumes)• Cost of living• Ease of doing business• Political Stability

• First-cut shortlist of 80, narrowed down to 20.

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Candidate Locations

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Candidate Locations• Based on input from CARE, the following list is

very much preferred:• Panama• Dubai (UAE)• Mombassa (Kenya)• Mumbai (India)• Hong Kong• Johannesburg (South Africa)

• Reasons for preference:• Existing suppliers near these cities• Established transportation network

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Results from Model First warehouse to open: Mumbai, India Year 3, open warehouse in Hong Kong Total shelters delivered over 8 years = 48122 “Steady state” inventory = annual utilization –

2000 in Mumbai & 6500 in Hong Kong Cost structure over 8 years

Setup: $350K Operating: $2.3M Purchasing: $28.2M ($4.2M in inventory) Transporting: $7.5M

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Sensitivity Analysis 2 shelters per pallet

11% increase in coverage (53249) 4 pallets per pallet

18% increase in coverage (56886) 20% increase in aircraft charter rates

Increase in tpt costs: $100K/year or ~13% 20% increase in warehousing costs

1.2% decrease in coverage (47563) 50% in setup costs

0.5% decrease in coverage (47877)

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Sensitivity Analysis

Half shelter cost, a quarter of volume 112% increase in coverage (101874)

10 times annual budget Order of warehouse opening

Year 1: Mumbai & Hong Kong Year 2: Dubai Year 3: Panama & Mombasa Year 4: Johannesburg

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Outline Introduction CARE Shelter First Objectives Challenges Deliverables

Distribution Network for Disaster Relief Warehouse Location Model and Cost

Estimates Case Studies

Conclusions

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Flood in Vietnam Disaster strike on Dec 04 2005 and

concluded on Dec 24 2005 Influence to the residents:

• Affected region: 63,090 sq km• Damage: $ 27 Million• Dead: 62• Displaced: 20,000 • Homeless: 18,000• Infrastructure of houses: 171 destroyed, 335 damaged, 5300 inundated…

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Flood in Vietnam

Affected areas:

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Flood in Vietnam

Influence on the transportation:

• 49 bridges damaged

• Traffic backed up to 30 km as landslides cut off 2 sections of highway

• Emergency bypasses to two sections of Highway 1 were built in Phu Yen Province

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Flood in Vietnam

Local Government’s Reaction Displace the affected residents to the

nearest higher land for sheltering Provide limited quantity of relief

material for short term consumption

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Flood in Vietnam

NGOs’ Reaction to the Flood Assessment and report of the damage and the

number of people affected Estimation of the demand of the relief material Coordination in the provision of the relief

material Mobilize the logistics operation provided by the

commercial service providers Usually the arrival of the first batch of relief

material is 4 to 5 weeks after the disaster

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Flood in Vietnam

You cannot do an act of kindness too soon, for you never know how soon it will be too late…

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Flood in Vietnam

Shelter First’s Goal: Shelters reach the victims who need

them most within 3 days after the occurrence of the disaster

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Flood in Vietnam Proposed response by Shelter First

Initiative

Long Haul Transit

(1 day)

Last “100-Mile”

(1 day)

Mobilization

(3 days)

Warehouse in Mumbai

Staging Area at Tan Son Nhut Airport at Ho Chi Minh City

Disaster Zone

2320 miles by UPS

200 miles by air-lift or air-drop

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Flood in Vietnam Proposed reactions by Shelter First

Initiative 18,000 homeless 3,600 shelters needed since 5 person/shelter Shelter First’s 10% commitment of 360 shelters 54,000 pounds at 150 pounds each or volume of

~23000 ft3 (cube governs) 5 entire Airbus A300 payload (89,000 pounds or ~70

pallets) Need ~ 5 chartered flights Leg 1: Transportation Cost ~$250,000 Leg 2: Airdrop Cost ~$50,000 Total ~$300,000 or $0.33 per shelter per mile

Corrected!

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Flood in Vietnam

Distribution to beneficiaries CARE staff receive the shelters from

trucks or boats and distribute them to the local beneficiaries

Alternatives strategy for last “100-mile” Local military aircraft if available

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Conclusions• 1-day response near impossible• Significant costs in air-dropping• Costs most responsive to volume per

shelter• Most critical to open warehouses in

Mumbai and Hong Kong• Potential savings from using 2-legged air

freight• Great uncertainty in last “100-miles”

transport modes and transit times

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Thank you

• Questions?