scm - managing risk and disruptions

Supply Chain Management

Managing Risk and Disruptions

&

SCM´s Role in Humanitarian Operations

Submitted by:

José García Esteban (20061263)

Submitted to:

Ms. Patricia Maher

Date:

9th

of December, 2013

2 Supply Chain Management

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Table of Contents

1. Executive Summary ............................................................................................................. 5

2. Introduction .......................................................................................................................... 5

3. Supply Chain Management ................................................................................................. 6

3.1 – Approaching the concept Supply Chain Management (SCM) ................................................... 6

3.2 – Common players and stakeholders within a supply chain ......................................................... 7

3.3 – Competitive advantage and the value chain ............................................................................... 8

3.4 – Customer satisfaction and collaboration at the heart of SCM .................................................... 9

3.5 – The “4Rs” of supply chain management .................................................................................. 10

3.6 – From local to global operations ............................................................................................... 11

3.7 – Examples of outstanding supply chain management ............................................................... 13

4. Managing risk and disruptions ......................................................................................... 14

4.1 – Risk and disruptions affecting to supply chain performance ................................................... 14

4.2 – Developing a Risk Mitigation Plan .......................................................................................... 14

I – Before crisis Proactive measures ..................................................................................... 15

II – In crisis Reactive measures ............................................................................................. 21

5. SCM´s role in humanitarian operations .......................................................................... 26

5.1 – Natural disasters ....................................................................................................................... 26

5.2 – Humanitarian response to natural disasters .............................................................................. 26

5.3 – The humanitarian supply chain ................................................................................................ 27

5.4 – Decision making process in humanitarian supply chains ........................................................ 27

5.5 – Long term operations and recovery ......................................................................................... 29

5.6 – Lessons from the latest disasters .............................................................................................. 30

5.7 – Implication of recovery processes on profit-driven supply chains .......................................... 31

6. Table of figures ................................................................................................................... 33

7. Bibliography ....................................................................................................................... 34


1. Executive Summary

The purpose of this project was divided into three areas. The first one was focused into what

supply chain management represents and its role within the organization, followed by the

analysis of the current trends regarding supply chain risk management and, as final point;

supply chain implications in humanitarian operations were considered.

The methodology used ranges from specialized books on SCM, different cases of study, as

well as online research approaching more accurate issues.

The entire project tries to gather the most useful measures and recommendations when

managing a supply chain in many different scenarios, from global operations to dealing with

disruptions and crisis, aside from assessing the important role that SCM has dealing with

natural disasters as the network that supports humanitarian and recovery operations.

2. Introduction

This project was submitted to Ms. Patricia Maher, Supply Chain Management lecturer at

Waterford Institute of Technology, as final assessment of the SCM module that was carried

out from September to December, 2013. The project was aimed to acquire the proper

understanding of the module itself and, by using that knowledge, analyzing how risk are

managed regarding supply chain operations and how SCM practices are implemented when

developing humanitarian operations. Following this line, the project was broken down on

three main sections, Supply Chain Management as business function, managing risk and

disruptions in supply chains and, as final point, SCM´s role in humanitarian operations. In

addition, the project was intended to gather useful methods and tools to be implemented by

supply chain managers.


3. Supply Chain Management

3.1 – Approaching the concept Supply Chain Management (SCM)

Agreeing with the definition adopted by Martin Christopher in his book (Logistics and

Supply Chain Management, 2005), Supply Chain Management can be defined as the

management of upstream and downstream relationships with suppliers and customers to

deliver superior customer value at less cost to the supply chain as a whole.

In that way, a supply chain can be represented as is shown in Figure 3.1, where the company

appears as the centre of the network. The flow of products, information and money goes from

suppliers, passing through the organization, continuing towards customers and reaching the

final consumer at the end. After that, this process takes the opposite direction, from the final

customer until the initial vendor.

Fig. 3.1 – Supply chain network structur 1

Fig. 3.1 – Supply chain network structure


3.2 – Common players and stakeholders within a supply chain

Every single supply chain network has a series of stakeholders who interact with the entire

system and who must be considered. As primarily ones, there are suppliers, providing the

necessary inputs, both products and services. As well, the business functions and

management of the organization, and the company´s customers, who can be another business

or the final customer, depending of the position that the company has within the supply chain.

As secondary stakeholders, a large number of entities and individuals appears, from

employees to final consumers, among many others, who shape the external environment of

the organization.

All those sources of interests must be analyzed and be taken into account in order to ensure a

smooth and efficient flow of products, services, cash and information.

Image source: (Developing a Sustainable Supply Chain Strategy, 2011)

Fig. 3.2 – Supply chain stakeholders


3.3 – Competitive advantage and the value chain

A position of enduring superiority over competitors in terms of customer preference may be

achieved through better management of logistics and the supply chain. In those terms, every

single successful company either has a cost advantage comparing with its competitors or a

value advantage, a higher degree of value perceive by customers than the ones offered by

competitors, or a combination of the two (Logistics and Supply Chain Management, 2005).

Figure 3.3 illustrates the above:

A higher degree of value is found in the ability of the company to differentiate itself from its

competition, as well as in the appropriate communication of that difference to consumer in

order to enhance their perceived value toward the company´s products or services. In

addition, the organization must be able to operate at a lower cost than their competitors

enhancing profit and acquiring a larger market share. These are the basis of the double

competitive advantage.

In order to achieve this privilege position within the marketplace, Michael Porter, the

Harvard Business School professor, developed the concept of “value chain”. The value chain

disaggregates the whole company into its different business functions in order to understand

the behaviour of costs and the existing and potential sources of differentiation within each

function, as well as focusing all of them towards customers´ needs and wants, pursuing

higher levels of customer satisfaction.

Fig. 3.3 – Double competitive advantage


Thus, competitive advantage is derived from the way in which firms organize and perform

their business functions within the flow of the value chain by developing these activities in a

more efficient, cheaper, faster or accurate way, than their competitors or, in a unique way that

creates greater differentiation.

Source: Porter, M.E., Competitive Advantage, The Free Press, 1985

3.4 – Customer satisfaction and collaboration at the heart of SCM

Nowadays and more than ever, place and utility have become key words related to customer

service. Thus, the role of customer service has to be aimed to enhance “value-in-use”,

meaning that the product becomes worth more in the eyes of the customer because service

has added value to the product itself. The achievement of competitive advantage through this

way relies on combination of a carefully strategy for service, the development of an

appropriate delivery system and commitment from every single person in the organization.

Fig. 3.4 – The value chain


In order to achieve that excellence in service, the organization must operate in a fully

integrated and collaborative supply chain which allows the required degree of efficiency and

flexibility. The closer the relationship between buyer and supplier the more likely it is that the

expertise of both parties can be applied to mutual benefit, both guided by the common goal

that is satisfying consumer´s needs and wants in a better way than competitors (Logistics and

Supply Chain Management, 2005).

3.5 – The “4Rs” of supply chain management

This concept has arisen as the set of tools that every supply chain manager should master. It

is made up of the following elements (Logistics and Supply Chain Management, 2005):

1. Responsiveness: based on the ability to respond to customers´ requirements in ever-

shorter time-frames working in a just-in-time frame, as well as looking for flexibility

and increasingly customized solutions.

2. Reliability: it focused on process control and enhanced pipeline visibility across the

supply chain network in order to deal with uncertainty and to ensure the quality of

materials or components.

3. Resilience: given the higher levels of turbulence and volatility that are impregnating

today´s marketplace, supply chains are more vulnerable to disruptions. Accordingly,

risk management plans should be developed to cope with unexpected disturbances

and ensure as much as possible the business continuity when these situations loom up.

4. Relationships: following the idea that buyer/supplier relationships should be based

upon partnership and seeking the advantages that create mutually beneficial, long-

term relationships with suppliers.


3.6 – From local to global operations

Companies are facing a common trend toward global organization of both manufacturing and

marketing, fact that also increases substantially the complexity of logistics tasks. In this

context, a global organization can be defined as a company that sources its materials and

components in more than one country, that has multiple assembly or manufacturing locations

geographically dispersed and that subsequently, markets its products worldwide. In order to

remain competitive in this global environment,

companies have to continually seek ways to reduce

costs and enhance product and service value,

meaning that the supply chain´s role becomes crucial

regarding its efficiency and effectiveness (Logistics

and Supply Chain Management, 2005).

Among the benefits of these international and global operations we can find (Purchasing and

Supply Chain Management, 1996):

o Getting access to a certain or required level of quality of components and materials.

o Accessing new products and process technologies.

o Reducing dependency of suppliers expanding sourcing networks and improving

response capability against unexpected demand.

o Cutting down purchasing or manufacturing costs.

o Broadening widely your potential markets and consumers.

Regarding the problems and main considerations when approaching this kind of operations´

scale:

o Differences in culture and communication can represent a large obstacle when doing

business within an international or global framework.

o Payments terms and conditions must be carefully and clearly established between

parts. As well, transaction´s costs might increase when the use of credit is necessary.

o Transport and risk transmission is another crucial issue within those operations. They

are usually managed by means of International Commercial Terms.

Fig. 3.5 – From local to global operations


o Long lead times associated to variable shipping schedules, customs activities, the

need of greater coordination in international operations and meteorological issues.

o Additional inventories, given that managing adequate inventory levels when

purchasing from foreign sources can be a difficult task.

o Quality concerns about purchased materials, components and products.

o Social and labour issues regarding working conditions in overseas plants.

o Higher costs of doing business related to issues like the possible need of translators or

the distances involved in making site visits add on to the cost of doing business on a

international or global scale.

In order to deal with those facts, visibility across supply chain operations, members and links

becomes the most important piece of the puzzle.

One tool that can greatly improve the visibility along side of complex global supply chains is

Supply Chain Event Management (SCEM). It is based on the process of monitoring the

planned sequence of activities along the supply chain and the subsequent reporting of any

divergence from that plan. Ideally SCEM should also enable a proactive, even automatic,

response to deviations or disruptions from the initial plan. The Internet can provide the means

whereby SCEM reporting systems can link together the partners of the global supply chain in

a collaborative and information sharing based model (Logistics and Supply Chain

Management, 2005). Figure 3.6 shows the principal functions of SCEM:

Fig. 3.6 – SCEM functions


3.7 – Examples of outstanding supply chain management

There are many examples of outstanding SCM. One of the most analyzed has been Tesco´s

SCM practices. The company has achieved and maintained a large advantage over its

competitors by incorporating innovations in its processes and facilities, leading to an

integrated management of materials, information and financial flows from raw material

extraction to end-user (Tesco´s Supply Chain Management Practices, 2006).

Another illustrator example is Musgrave Group, whose operations are currently supporting

660 stores across Ireland. Its main challenge was to ensure that goods and information were

supplied to all those stores in a timely and efficiently manner, and it has been achieved

through the implementation in 2004 of the so called “Musgrave Simplifies Retail” (MSR)

plan, which was aimed to synchronize infrastructure, procedures, technology and information

within the entire group (Musgrave Group, 2007).


4. Managing risk and disruptions

4.1 – Risk and disruptions affecting to supply chain performance

In a supply chain, disruptions occur when one or more supply chain members´ activities are

interrupted, resulting in a major disruption of the normal flow of goods or services.

Nowadays, in addition to the higher levels of complexity within the global business

framework induced by raising costs and financial volatility, environmental concerns and

fierce global competition, the number of occurrences of disruptions and disastrous situations

has been increasing over the years.

This reality makes imperative the need to plan ahead for such situations. This measure is

known “as risk management”, the process of making proactive decisions to avoid or

minimize risk and reactive decisions in overcoming disruptions once they have taken place

(Managing supply chain in times of crisis: a review of the literature and insights, 2009).

The distribution of authors working in this field reveals that USA and Europe lead the

development of content for managing disruptions and crisis in supply chain management. In

addition, a survey carried out in 2004 by the American Management Association showed that

61 percent of respondents had a crisis management plan.

4.2 – Developing a Risk Mitigation Plan

Martin Christopher, in his book Logistics and Supply Chain Management, states that a

tailored supply risk profile should be established for the organization. Its purpose is to

determine where the greatest vulnerabilities lie and assets what the probability of disruption

is regarding those vulnerabilities, adding the next idea:

Supply chain risk = Probability of disruption x Impact


The risk profile attempts to seek out the critical fields within the organization, and across the

entire supply chain network, where management attention should be specially focused in

order to deal with risk and ensure business continuity (Logistics and Supply Chain

Management, 2005).

Once the above has been considered, a tailored Risk Mitigation Plan should be developed. A

series of steps and recommendations on the process are explained then:

I – Before crisis Proactive measures

1 – Analysis of the possible sources of risk

There are three principal categories of risk in a supply chain according to Juttner et al. (2002),

internal, external and network related:

a) Internal risk: within the organization itself, these sources can be related to

the following issues:

Production / Product: bottlenecks, errors and recalls.

Workforce: worker strikes.

Information Technology: computer network crashing.

Criminal actions: corporate espionage, fraud or sabotage.

Infrastructure and facilities: internal fire, industrial accidents.

Finance: supplier / customer bankruptcy.

b) External risk: they are outside of the organization control and can have a

large impact on the business environment where the firm operates:

Political: growing exposure to differing and rapidly changing

regulatory requirements.

Social: geopolitical instability.


Market and financial issues: increasing logistics and commodity

prices, pressure from global competition, currency fluctuations, and

volatility of customer demand.

Criminal: theft, company network hacking and terrorism.

Natural disasters: motivated by hydro-meteorological, technical-

chemical, geological or human related causes, their consequences can

be devastating. In the last three decades, the occurrences of these

phenomena have increased significantly (IFRC).

c) Network related: this supply related risk arises due to the interaction between

the different organizations that compose the entire supply chain. It is also

related with the increasing complexity in the supplier landscape.

At this point, it would be interesting to show the results of the survey carried out in October

2010 by McKinsey&Company regarding the challenges lying ahead for companies´ supply

chains. The online study received responses from 639 executives representing a full range of

industries, primarily based in United Stated and Europe (The challenges ahead for supply

chains, 2010).

Fig. 4.1 – Companies´ challenges in supply chain management


The survey can give some clues about the expected risks around which supply chain

managers should develop mitigations plans and acquire a certain level of preparedness.

Natural disasters, because of their unpredictability and potential damage level at every stage,

ought to be considered apart.

2 – Development of a Risk Mitigation Plan

In order to improve the resilience of the organization and the supply chain against the

different sources of risk exposed above, as well as to minimize the possibilities of those

disruptions to appear when it depends directly of internal or network related causes, the

following measures are provided.

The Risk Mitigation Plan should be developed after the analysis and measurement of the

principal sources of risk, followed by the consideration, election and synchronization of the

most suitable measures for the organization. As follows, a series of different measures

regarding certain areas and functions are exposed:

I. Information & Communication

Integrated information systems: they must lead to higher coordination degrees

between internal business functions, the different plants of the organization,

domestically and internationally based, suppliers and internal customers.

Virtual supply chain: this concept is related to the idea of virtual teaming, where

several individuals can get together for a project or discussion although they are not

together in the physical sense.

Virtual dual sourcing: through this method, information can be obtained upstream in

the line, rebuilt and relocated based on previously obtained information when an

emergency occurs.

External integration with key suppliers: it is critical to maintain the whole supply

chain integration when a crisis occurs. One of the most-used methods are contractor

agreements.


II. Diversifying risk

Dual tooling: measure based on preparing multiple copies of equipment and molds

that store design information.

Extension of the company´s manufacturing network: this can be done in a

regional, national or international scale. When a disruption occurs in one location, the

others productions plans can minimize its overall impact over the entire organization

by increasing their production.

Extension of the company´s supply network: following a similar line that the

previous measure, risk can be also reduced from the supply perspective by

diversifying the vendors’ locations. This measure should be considered previous

analysis and differentiation between core and general inputs, and factors such as

proximity versus cost, delivery times or required inventory levels.

Core suppliers´ dependence degree: this aspect should be examined because, if the

company is highly dependent of very special or sophisticated components, it might

drastically reduce its flexibility and agility facing disruptions in its supply chain.

Communiqué: example of international operations


Virtual supply chain dispersion: implementing a physical dispersion of

manufacturing and supplying on different scales is not always economically faceable

and a cost-effective method. In that case, a interesting alternative can be a virtual

supply chain dispersion, that can be carried out in example by sharing with other

companies or partners drawings and production process information so that, in a

situation of crisis, they can produce your product to give response to your demand.

Nevertheless, in these situations industrial and intellectual property affairs must be

carefully considered. Figure 4.1, from Wintec Industries, illustrates the above.

In addition, Figure 4.2,

from ChainLink Research,

shows the process of

migration from vertical

integration to virtual

enterprise, taking a farther

step in virtual supply chain

operations.

Fig. 4.1 – Operations dispersion and production support

Fig. 4.2 – Vertical versus Virtual integration


III. Infrastructure issues

Physical network mapping and monitoring: the company has to deeply understand

the structure and location of the infrastructure network that gives support to its supply

chain, from the beginning to the end. In this way, when a disaster or disruption

occurs, a quick and precise evaluation of the impact and consequences can be carried

out, and the most suitable measures adopted.

Sources: (Logistics and Supply Chain Management, 2005), (Managing supply chain in times of crisis: a review

of the literature and insights, 2009) and (Supply chain lessons from the catastrophic natural disaster in Japan,

2012).

4 – Monitoring your risk environment and improvement of the Risk Mitigation Plan

The company´s environment is constantly changing thus, the company´s Risk Mitigation Plan

has to evolve and adapt in accordance with it. The plan´s development process includes

identifying leading indicators based on the key

organization and supply chain vulnerabilities

therefore, those indicators are the ones which must

be continuously monitored and followed, keeping in

mind that the challenge is to ensure that the chosen

measures are proportional to the risks, in terms of

both magnitude and likelihood (Logistics and Supply

Chain Management, 2005).

As final point, it should be highlighted that the process of designing a Risk Mitigation Plan

can also be a brilliant opportunity to improve the competitiveness of the company and

optimize its supply chain.

LintenLogic: Real-Time Risk Tracking,

Mapping and Alerts


II – In crisis Reactive measures

Once the proactive measures, under the form of a Risk Mitigation Plan, have been carefully

developed and implemented, the probability of disruptions to occur should have been largely

reduced. However, it is not possible to eliminate the risk completely.

In accordance with this fact, the need of having a clear Crisis Response Procedure that allows

to the organization to face, in an appropriate and effective way, those inevitable situations

arises. The Crisis Response Procedure can be canalized trough the following steps:

1 – Determining the cause

According to the classification previously described, in this first step the source or the

combination of different sources that give origin to the disruptions, creating a crisis situation

within the organization have to be carefully identified.

Fig. 4.3 – Main sources of risk


2 – Identification of the disruption´s scale and the affected areas of the supply chain

There are three categories in which it is possible to classify the affectation and impact of the

disruption (Managing supply chain in times of crisis: a review of the literature and insights,

2009):

I. Single stage: when the crisis affects just to one company within the entire supply

chain network.

II. Supply chain: in those cases the whole supply chain has been affected by the

disruption.

III. Regional: situations whose effects impact outside of the supply chain network and are

felt at a local, regional, national or international scale. Natural disaster usually fit

here.

3 – Crisis Respond Plan Decision making process to mitigate the disruption´s impact

The two previous stages were focused on situation analysis. When it has been properly done,

the decision making time arrives. At this stage the adequate actions must been taken, shaping

the strategy designed to fight against the disruptions and ensure business continuity.

The possible measures to be taken should be based on further actions starting from the ones

that have already been exposed regarding the Risk Mitigation Plan. In addition and, in order

to cope with natural disasters given that these sources of disruptions are the most

unpredictable and usually the most devastator, examples of the measures implemented by

different companies affected by the 2011 earthquake, tsunami and nuclear crisis in Japan will

be displayed then:

I. Internal measures: response actions that have direct effects on the organization’s

functions and performance:

Organization chart simplification: the company flattened the organization

structure to enable a faster sharing of remedies against the disaster.


Restructuring information systems: thanks to an improved “field” IS,

which allowed the collection of real-time data, the information coming from

this system become crucial as restoration roadmap for production lines.

Establishing a 24-hour Crisis Centre: it was focused on facilitate

communications within the company itself, as well as between the

organization and external entities such suppliers, media and the government.

In addition, it had to manage and synchronize the implementation of the

selected response actions.

II. Supply related measures: here the examples of actions taken are aimed to fight

against problems with the organization´s suppliers, when they have been affected by

the disaster:

Quick diversification: the company searched for alternative suppliers within

and outside the country. The viability and implementation speed of this

measure is highly influenced by the kind of inputs the firm is working with.

The more technical and special components, the more complicated to find

quickly new vendors.

Strengthening relationships: the company paid visits to its suppliers to see

directly on the spot and discuss what their needs were in order to help them to

get back on track as soon as possible.

Direct inventory management: in order to face a sudden rise of orders and

demand caused by the needs related to disaster´s recovery operations, the

company directly managed the inventory of its supplier branches to accurately

and tightly manage parts supply.

III. Dealing with electric power shortage: measures based on alternative power supply

by means of gas natural and installation of electric self-generating systems were

taken.

Source: (Supply chain lessons from the catastrophic natural disaster in Japan, 2012)


4 – Execution of the decisions according to the Crisis Respond Plan and recovery

This phase refers to the proper, efficient and synchronised implementation of the strategy

designed to deal with the disruptions occasioned by the disaster and to initiate, as soon as

possible, the way towards the recovery of normal operations and performance.

At this controversial point, managers must be able to motivate their teams and unify efforts

across the entire organization and supply chain in order to successfully achieve the exposed

above.

Regarding the recovery process, milestones should be established along the way as indicators

that show that the process and measures chosen are working out. These milestones can also

be used as motivation tools or points for the teams involved in the recovery actions.

The Talking Leader: motivation and objectives


5 – Performance evaluation and continuous improvement

As final point and once the recovery process has been accomplished, the company should go

over and analyze how the entire process, from the point 1 to 4, has been carried out, as well

as the effectiveness and accuracy of the actions and measures implemented.

The goal of this final analysis is focused on evaluate the company´s performance facing

disruptions and take advantage of the lessons learned during the process, in order to

strengthen its resilience towards upcoming crisis situations.

Following the different examples of the measures taken by those companies affected by the

2011 disaster in Japan exposed at point 3, a set of various actions implemented after crisis

can be considered here:

Risk Management Department: the 24-hour Crisis Centre established just after the

disaster strikes was converted into a whole risk management department in charge of

conducting corporate risk analysis and the development of measures to manage these

sources of disruptions.

Stock related measures: by maintaining one month worth of inventory stock to give

time to the organization to recover from further possible crisis.

Inputs considerations: increasing the use of generic components so that the supply

chain becomes more flexible and adaptable facing disruptions in supplies.

New manufacturing processes: based on developing new manufacturing technology

that can handle both continuous and batch production lines together, as well as dual-

process lines, in order to increase manufacturing flexibility and adaptation to

different situation of demand´s influx.


5. SCM´s role in humanitarian operations

The content of this chapter is based on the information, guidelines and recommendations

offered in the case of study Supply chains in humanitaria operations: cases and analysis

present in the bibliography.

5.1 – Natural disasters

We should start by defining the concept of natural disasters as natural events that, when

occurring on populated areas, they cause the destruction of local infrastructure and population

leading to a state of deprivation and suffering. Generally and immediately after the

occurrence of disasters, humanitarian operations are initiated with the intent to provide rapid

assistance. At this point, delays in delivery or relief can cost many lives and this fact

highlights the crucial role that logistics plays here. The occurrence of this kind of phenomena

has increased significantly in the last decade.

5.2 – Humanitarian response to natural disasters

In order to minimize as much as possible the impact of the disaster, reactive humanitarian

operations must be carefully planned to allow a rapid and appropriate response. This process

requires exceptional levels of coordination between all the players involved who are:

1. Governments

2. Nongovernmental organizations (NGOs)

3. UN agencies

4. Military

5. Private sector organizations

Their elevated number, as well as their different action procedures and goals make difficult

an efficient synchronization between all them. The best prepared player to manage a certain

disaster should take the position of leader regarding the development of the humanitarian

response.


In addition, international humanitarian organizations and the rest of the exposed players have

a responsibility among three groups of stakeholders who must be considered:

I. Donors who provide funds

II. Beneficiaries of the programs

III. The international community

5.3 – The humanitarian supply chain

The main different between private sector supply chains and humanitarian supply chains is

that the first are driven by efficiency in order to reduce costs meanwhile, the second must be

more agile, adaptable and better prepared for crisis given that the survival of large numbers of

people depends on their operations.

The activities involved in humanitarian supply chain, following the same structure that

business supply chains, are the next:

1. Preparation 4. Transportation 7. Customs clearance

2. Planning 5. Storage

3. Procurement 6. Tracking

When dealing with humanitarian operations, the supply chain needs to be flexible and able to

respond quickly to unpredictable events. The main challenge of humanitarian supply chain

management is to establish a flow of donation from different sources which are not always

useful, timely or appropriate, with minimal waste of resources, positioning efficiently

workforce, goods and equipment to affected areas. Generally, the main difficulty that

humanitarian supply chains face is administrative and logistical bottlenecks due to poor

infrastructure and the multiplicity of agencies and governments involved in these operations.

5.4 – Decision making process in humanitarian supply chains

The decision making process in humanitarian operations has three main steps, following a

very similar structure comparing with business supply chains. Figure 5.1 illustrates them:


There are two key types of information regarding humanitarian SCM that feed the decision

making process:

Needs information: needs assessment, size of the affected population, additional

adversity vulnerability, damage levels, pre-existing poverty level and so on.

Logistics information: distance from the hub, transportation capacity, access roads

open or existing cargo handlings orders among others.

Another pillar to develop successful operations is an efficient and precise communication

network that must allow understanding and predicting the effect of the measures adopted over

time. In addition, this communication network has to lay the foundations for the

synchronization among the different players involved in the humanitarian response.

Regarding strategy design, variables such as the specifics needs of survivors, inventories,

transportation capacity, security conditions in the region and climate conditions have to be

analyzed.

Looking at logistics and distribution, the following components must be considered: resource

allocation policies, needs assessment, uncertainty of demand and supply, location for storage

and shipment of goods, type of vehicle fleet and technology and uncertainty about routes and

vehicles.

Fig. 5.1 – Decision making process in humanitarian operations

operations


5.5 – Long term operations and recovery

The process of recovery is going to be defined and explained by means of the following

graph. The information has been extracted from the report Early recovery: an overview of

policy debates and operational challenges present in the bibliography.


5.6 – Lessons from the latest disasters

In the case of study Supply chains in humanitaria operations: cases and analysis, an

assestment of humanitarian operations and supply chains performance dealing with the latest

natural disasters that have taken place in the last decades (Indian Ocean 2004, Pakistan 2005,

Brazil 2011 and Japan 2011) is carried out.

From this analysis, some recommendations aimed to improve efficiency regarding certain

parts of supply chains arise:

Transportation: it is necessary to map the risk areas and identify the available

resources by type of transport looking at units coming from transport services

providers, government entitities and private organizations with fleets availables.

Storage and handling: certain points to receive goods and the availability of

equipment within them should be analyzed and determined in order to manage

propperly the storage and distribution process. As well, qualify staff is crucial to

reduce errors and avoid congestions.

Distribution: the previous recommendation should be made to minimize the

distance to the beneficiaries and it has to be supported by information data regarding

the goods available and the people affected.

Supply management: the development of standars, procedures and technical

specification for supplies would help to speed up operations and minimize wastes.

Performance evaluation: milestones for periodic evaluation of operations

performance should be established based on acqurate field data.


5.7 – Implication of recovery processes on profit-driven supply chains

As has been exposed before, the recovery phase is focused on the restoration of basic services

and the beginning of the repair of physical, social and economic damage by the

reconstructions of many different facilities and utility systems.

This process needs large amounts of products and services to be accomplished thus, it can

bring very profitable business opportunities to certain companies who manufacture or sell

these inputs. In addition, there are cases in which the demand soars suddenly because of

critical needs of the products or services offered by a certain firm. This profitable situation

involves outstanding SCM related challenges, considering also that the disaster could have

affected to its own supply chain network. Furthermore, this kind of business opportunities

also has important ethical implications that must be carefully considered and managed.

Fig. 5.2 – Recovery operations management


6. Table of figures

Fig. 3.1 – Supply chain network structure ............................................................................. 5

Fig. 3.2 – Supply chain stakeholders...................................................................................... 7

Fig. 3.3 – Double competitive advantage ............................................................................... 8

Fig. 3.4 – The value chain ...................................................................................................... 9

Fig. 3.5 – From local to global operations ........................................................................... 11

Fig. 3.6 – SCEM functions ................................................................................................... 12

Fig. 4.1 – Companies´ challenges in supply chain management ......................................... 16

Fig. 4.1 – Operations dispersion and production support .................................................... 19

Fig. 4.2 – Vertical versus Virtual integration ....................................................................... 19

Fig. 4.3 – Main sources of risk ............................................................................................. 21

Fig. 5.1 – Decision making process in humanitarian operations ......................................... 28

Fig. 5.2 – Recovery operations management ....................................................................... 32


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