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2.1 An overview of humanitarian supply network
Disasters occur worldwide each year. According to the statistics data1 from The United Nations Office for Disaster Risk Reduction (UNISDR), between 2000 and 2012, 1.2 million people were killed and 2.9 billion were affected by different kinds of disasters. The estimated economic impact of the damages totaled approximately US$ 1.7 trillion in the same period. These numbers suggest that disaster preparation and relief have huge economic and humanitarian implications. Civil society responded by creating more nongovernmental organizations (NGOs) focusing on disaster preparation and aid. As of 2012, the number of NGOs operating in the United States has reached 1.5 million (Human rights’ report, 2012). Academics have also recently addressed the issue from multiple perspectives, including public policy, civil engineering, urban planning and particularly operations and supply chain management. For example, a new dedicated journal – Journal of Humanitarian Logistics and Supply Chain Management – started in 2011 and the number of articles published in a variety of academic outlets has been increasing as well. Despite this positive trend, not all areas in disaster relief receive attention and more application of supply chain management thinking is required in humanitarian operations and disaster relief (Galindo & Batta, 2013).
Humanitarian supply network is referred to as the process of effective and cost-efficient plans, implementations and controls for aid flows (materials, goods, services, financial resources, information) from the point of origin to the point of consumption with the intention of meeting the aid recipients’ requirements (Thomas and Mizushima, 2005; Day et al., 2012). As a subset of supply chain management, it covers almost all of the functional processes that a CSCM does, including processes such as sourcing, procurement, inventory management, logistics and distribution, information management, and so forth (Day et al., 2012). However, unlike the “financial” objectives of CSCM, the primary goal for HSN is to minimize human suffering — more specifically to prevent further loss of life and harm to humans, as well as provide immediate treatment to those with injuries and illness (Beamon and Balcik, 2008). A New Research Framework for Humanitarian Supply Chain Management 3 On the other hand, as have been discussed by some researchers, humanitarian supply chains operate under highly uncertain conditions relative to commercial supply network (Wassenhove, 2006). First of all, the unpredictability of disaster occurrence and the magnitude of damage make forecasting extremely difficult. Second, the typical collapse of infrastructure in the affected area severely inhibits aid to the disaster region. Third, the humanitarian supply network is temporary making the management of the whole system especially challenging. Meanwhile, raising the necessary financial and material resources is difficult to predict because each disaster is unique.
2.2 Challenges of Humanitarian supply network
In many large contracts the initial set-up costs can be substantial, with deals taking many months to complete. By concentrating on establishing and developing long term relationships these costs can be offset, with both parties actively looking to avoid any unnecessary costs which may arise from re-tendering, re-negotiating or being forced to exit an existing contract early. Better relationships and increased interaction will lead to less incidents or issues of poor performance, which in turn lead to lower costs for managing the relationship and reduced costs through failures (Balcik et al., 2010).
Relation between humanitarian organization and suppliers, the longer a supplier provides a customer, the better their understanding of the customers market, business and business processes will be. This will allow greater integration of business, IT and financial processes alongside increased effective stakeholder involvement from both parties. As a consequence the service will improve, becoming more efficient, with “grey areas” disappearing and any issues which do arise can be handled more effectively (Ertem et al., 2010).
Price volatility is a major challenge to many humanitarian organizations as organizational prices keeps on changing, It requires careful weighting of price volatility against the contract length, volumes and the importance of the procured product (or service) to the buying organization. For many companies it is vital to establish how much volatility can be absorbed, Is it better to have a stable, high contract price, or can the organization handle volatility in exchange for the chance of price drops. The reverse is of course also true for a supplier, so many suppliers will commit to more modest and / or flexible pricing models for long term contracts in order to mitigate their risk and exposure. By taking into account their margins and interests you can protect those of your business. Open book policies and negotiated margins (as opposed to fixed contract pricing) are the logical conclusion to this type or partnership and allow both parties to benefit from.
As supplier relationships develop, so does the buyers understanding of the suppliers business models, products and services increases. In return the supplier will develop an increased understanding of the buyers needs. This allows both parties to look for areas of consolidation across existing products and services, as well as the potential addition of potential new product and service offerings ((Balcik & Beamon, 2008).
For buyers, consolidation allows for reductions in supplier numbers, creating a more streamlined and efficient supply chain. This can reduce internal workloads and soft costs, whilst providing increased opportunity to reduce costs through economies of scale and leveraged spend.
Outsourcing rules in an organization; Relationships with trusted suppliers can enable organizations to outsource non critical activities, allowing buyers to harness specific industry and/or product or service expertise, whilst simultaneously reducing internal workloads and increasing efficiencies. Examples can include everything from small business services such as document production to full blown services such as logistics and supply chain management.
Long term relationships provide the opportunity for buyers to engage suppliers in a process of continual improvement of both products and services provided and of the accompanying service levels. This can be achieved through product development, development of new processes and procedures and through developing KPI’s and SLA’s over the course of the contract. By taking an active approach to ensuring that contractual performance is met, buyers can ensure that suppliers continue to improve in the ways which provide the most substantial improvement to the customer organization’s products and services (Balcik et al., 2008).
Lack of transparency in the procurement systems of the organization; It helps in the formation of a transparent system of working. This system allows in identifying, managing and controlling non-conformities. Every business has documented procedures for dealing with actual and potential non-conformances (problems involving suppliers, customers or internal problems). Having the proper documentation from beginning to end ensures consistency in producing good quality products and services. It is equally beneficial when job knowledge and adequate training provide the basis for consistency. There becomes little or no rework because of defects/errors that could have been prevented by following proper procedures (Paul, 2013).
It ensures effective monitoring throughout the work process. To determine if the quality process is being managed effectively and being followed efficiently, regular performance review can be done through internal audits and meetings. , Westcott (2010); asserted that the meetings can deal with present and past problems, records the activities, resulting decisions and thus monitors the effectiveness of the meeting, thereby proving to be an efficient operation.
Rose (2011), noted that every organization must be loyal to its Customers, by ensuring the quality of the product and by building a loyal relationship with the Customers. This will in turn bring in more customers, increasing the sales and enhance the branding. Branding is what serves as a great identification to the organization.
According to Chandes & Pache, (2009), global supply chain network enables an organization to be able to ensure customer satisfaction. when an organization is involved in global supply chain network it is able to provide the customer with variety therefore customers are able to get what they what at the time they need, apart from the global supply chain also provide quality since the most competent supplier is given the chance to supply.
It is common knowledge that reduced product life cycles increase the pressure on firms to develop new products, which often creates considerable stress on the organization’s R&D function and its budgetary constraints. Similarly, increasingly competitive global supply chains place enormous pressures on supply chain managers to develop new processes that enhance both cost efficiencies and customer services. Like new product development, new process development can be extraordinarily expensive…and risky. Yet time and time again, we see long-term collaborative partnerships as the most innovative way to develop processes that both reduce costs and add value for the partners. long-term supply chain relationships create an environment for developing innovative solutions to problems and challenges. These innovations aren’t necessarily the big breakthroughs of highly advanced new processes; more often they are innovative combinations of existing tactics that are well suited for volatile markets. This is consistent with the premise that most successful innovations don’t come from the lab, they come from customers and suppliers (Mentzer et al, 2010).
2.3 various ways of improving the performance of Humanitarian supply network.
Strategic relationship enables organizations to share technology, Global companies like Toyota, Honda, and Isuzu share their new technologies with their suppliers so as they supply up to date products needed by these companies this also helps in quality improvement in both companies. Most companies like Volkswagen, fiat and Toyota share their new technological ideas with their suppliers, this to mainly to ensure that there is quality and efficiency in the organization manufacture (Kovacs & Tatham, 2008).
According to Wargner et al (2006) the success of Japanese automobile industry has been largely been because of strategic relationship in the global supply chain in this situation the buyers share with the sellers different idea, technology, scientific research, and costs and future expectations so that each firm is able to produce as required by the other party (buying party).
Strategic relationship enables suppliers some of the financial help they need from their buyers in order to enable the suppliers to produce the required good s and services to the buyers at the required time, companies give suppliers money in order to purchase new equipment perhaps which may be needed for the new product development or even improving the skills of workers by giving them education in required institutions of learning so that they are able to produce products which are needed by the buyer. Ford the American automobile manufacturer spend nearly 30 million dollars in giving financial aid to its suppliers of spare parts so that they are able to improve their technological capability in line with ford standards (Kovacs & Spens, 2009). Financial help to suppliers is very imperative in the supplier development process and by 2000 multinational companies total expenditures in supplier development has changed from 91 billion dollars to 416 billion dollars in the last 20 years (Maon et al, 2010).
Suppliers are able to develop the required manpower who can guarantee continuous supply this is when buyers train the workers of suppliers so as they adapt to new techniques or technologies that the buyer needs and upgrade to the current standards or even to the goals of the buying organization during this process buyer sends employees to the suppliers site to train suppliers employees so as they are able to adapt to the current trends as desired by the buying organization and in turn help the buying organization fulfill its objectives and goals which may sometimes be in introduction of new products in the market (Tatham & Kovacs, 2010).
With global supply chain network buyers and suppliers are able Share ideas, This is when buyers share knowledge with suppliers about the future product to be developed and this enables the supplier to adjust their production techniques accordingly, this knowledge is mainly in science and technology and how the future of the industry will be adjusted in relation to perhaps the market needs and competition in the global market, (Trestrail , Paul & Maloni, 2009).
In 1970s Japanese auto makers implemented the system of supplier development made their own modifications for example Honda developed a system called best practices in which among many things the system involved sharing of the ideas with their suppliers, (sako,2004).
Multinational organizations exchange employees with their suppliers so that employees can learn from one another and ensure that they both sides can learn from one another’s culture and organizational ways of working. Sometimes Toyota exchanges employees with its suppliers of spare parts so that they both learn from one another (Whiting, & Ostrom, 2009)
In 1939, Toyota purchasing department rules stated that Toyota suppliers must be treated as part of Toyota. And Toyota will continue doing business with suppliers in areas like exchanging of employees so as they are able to understand the needs of Toyota, apart from that Hyundai does not financially support its suppliers but gives personnel support to it suppliers this kind of personnel exchange is aimed at developing suppliers, (handfield et al,2000).
Organizations develop their suppliers by sharing their cost of operation especially when under taking a project so as to meet the needs of the buyers, most of these costs are incurred in training of workers so that they are able to develop new products and achieve the needs of the buyers or acquisition of facilities among many other costs involved in the production of new commodity or product. Toyota and Honda sometimes they compensate their suppliers for the costs they incur during research and development of the new products (Krause et al, 2006).
Involving suppliers during the design process of new products by the buyer, when organizations are in the course of developing new products, they invite their suppliers in the design process of new products so that suppliers are aware of the new demands of the buyer and also the new needs products in the market and change her production techniques accordingly, most of these is mainly in the earlier stages of product development and also helps suppliers adjust their production technologies. A number of studies confirmed several benefits out of supplier development activities. Toyota, Nissan and Honda involve their suppliers of spare in the design process to ensure that suppliers understand the new production techniques of the suppliers and also to improve on their production techniques in relation to the buyer’s needs (Taskin & Lodree, 2009).
Recognition of suppliers for their outstanding performance, Buyers normally give their suppliers awards so as suppliers feel appreciated for the good quality products they have manufactured. This also creates competition between the suppliers and they are able to improve quality of their products accordingly. Most of these is inform of quality awards, monetary rewards, scholarship opportunities for employees or even training opportunities for their employees among many others.( Kumar, Olsen & Peterson, 2010).
There is possibility of an organization getting the best quality products in the global supply chain management systems, according to Westcott (2010), Quality products and services give the Limited a spotless reputation in the industry. This reputation allows the Limited to gain new customers and sell additional products and services to existing customers. A quality management program also removes inefficient processes within the system. By removing unnecessary processes, employee productivity increases. The employee is spending less time on activities that do not contribute to the product’s quality. As a result, the employee is producing more work in less time while the Limited has not increased the salary. Quality management programs help recapture lost monies due to inefficiencies.
A quality management program that organizations achieve as a result of developing strategic relationship helps companies reduce waste. Companies that house inventory are paying for the storage, management and tracking of the inventory. The costs of having the inventory are built into the price of the product. Implementing a quality management program reduces the amount of inventory that costs the Limited money and occupies valuable space. Quality management means that there is a systematic approach to keeping inventories at acceptable levels without incurring waste. Work closely with suppliers to manage inventory using a Just-in-Time (JIT) philosophy. In short, a JIT inventory system helps the suppliers and manufacturer remain in close communication to become more responsive to the customer, Thareja (2013).
Quality management systems enable Limited departments to work as a team. Different areas of the Limited become reliant upon one another to produce a quality product that meets and exceeds the customers’ expectations. A quality system incorporates measures that affect sales, finance, operations, customer service and marketing. The balanced scorecard is a one-stop-shop for evaluating how various departments are operating against their performance expectations. Use the balanced scorecard to show how close the Limited is to the financial, operational, customer service and learning/growth targets as suggested by Littlefield, Matthew and Michael (2012).
It helps in the formation of a transparent system of working. This system allows in identifying, managing and controlling non-conformities. Every business has documented procedures for dealing with actual and potential non-conformances (problems involving suppliers, customers or internal problems). Having the proper documentation from beginning to end ensures consistency in producing good quality products and services. It is equally beneficial when job knowledge and adequate training provide the basis for consistency. There becomes little or no rework because of defects/errors that could have been prevented by following proper procedures, Paul (2013).
Procurement leaders are realizing the opportunities for further cost reduction from a Total Cost of Ownership (TCO) standpoint by working in close collaboration with key suppliers across the lifecycle of the product. For example, during the product development stage it is critical for suppliers to develop products and samples from the “large scale production feasibility” aspect rather than trying to make customized and/or over-engineered samples. Accenture worked with suppliers of an agricultural equipment client to carefully ensure that during the product approval process, sample products were also evaluated on their production capability to be mass produced and this Oloruntoba & Gray (2009) have focused on supplier development processes and they found supplier development as a four step process as, assess the supplier’s readiness for change, build commitment through collaboration, implement system-wide changes, transition out of the supplier’s organization, establish follow-up and recognition procedures (McLachlin & Khan, 2009).
Before engaging in a strategic relationship with the suppliers the purchasing and supply management professional must first have identified a reason and an understanding of why relationship with a specific supplier is necessary should be undertaken and what it involves. The selection of suppliers for development should be dependent on; Category strategy, Scale of value/improvement opportunity, Cost, complexity and duration of value attainment, and Supplier co-operation, (Schulz & Heigh ,2009)
The development of any purchasing and supply management strategy is that purchasing and supply management professionals analyze, evaluate and appreciate their own organization’s corporate objectives and business needs. The global supply chain development projects which are undertaken must be in support of the purchasing and supply management strategy which, in turn, supports the organizational strategy (Oloruntoba & Gray, 2009).
2.4 Factors that affect humanitarian supply network.
Management of quality may be difficult in the process because of the complexity of the system, different authors have different definition of quality management according to Ashton (2012) defined Quality Management (QM) as a comprehensive and structured approach to organizational management that seeks to improve the quality of products and services through ongoing refinements in response to continuous feedback. QM requirements may be defined separately for a particular organization or may be in adherence to established standards, such as the International Organization for Standardization’s ISO 9000 series. Ashton further states that in a global supply chain most companies may find it difficult to properly inspect the quality of the products being imported and this may have serious consequences to the company since when the quality is compromised it may generally affect the company’s performance.
While Stanthon (2013); also defined quality management as a concept that ensures the effective design of processes that verify customer needs, plan product life cycle and design, produce and deliver the product or service. This also incorporates measuring all process elements, the analysis of performance and the continual improvement of the products, services and processes that deliver them to the customer. Quality management is also referred to as business management or integrated management. According to Stanthon (2013), he asserts that global supply chain network makes it difficult to guarantee quality since there are many players in the system.
Manufacturing processes aren’t perfect, so the industry typically accepts a certain quality level for products. Complexity and variability are part of any production process, and unfamiliar sources might not adhere to accepted defect levels. Choosing a non a foreign based sourcing firm can open up questions and disputes about which party is liable for defect percentages that rise above normal.
Difference in time zones between countries and continents affects the effectiveness of the global supply chain for example Some U.S. firms experience issues when dealing with companies on the other side of the country in addition to that there is 13-hour time difference between the United States and Asia. Waking and working hours do not coincide, which can be a challenge when a pressing issue arises. Waiting one day to clarify a product question or process change can often simply be too long for companies that are trying to run nimble operations (Chandes & Pache, 2009).
Due to long distance there is a challenge in long range logistics, purchasing items at a delivered price is easy, but the shipment can be delayed. Whether it is a factory hold-up or transit problem, ignoring the complexity of long-range logistics can be a risk.
Opportunity for violation of international law is possible by some companies when they are in global supply chain, it may be difficult for corporations to discover if one of their suppliers is disobeying international for example an organization using child labor may be involved in child labour therefore Companies should consider social compliance every time they look at global sourcing. They need to conduct due diligence about child labor practices, acceptable working conditions, forced labor, and fair compensation practices. Barring the hiring of local staff members, however, there isn’t a surefire way to ensure social compliance from across the globe. Risk comes in the form of severe brand damage due to unfair or illegal practices that come to light (Ertem, Buyurgan, & Rossetti, 2010).
The delay involved in global supply chain may affect production process of the organization, this is because the organization may not to receive on-time product delivery, it is vital to have firm completion dates and shipping timeframes. An item that is globally sourced, however, is often just a piece of a bill of materials that must be on hand for product completion, for example Delays from a non-United states company can derail production and drive up related costs in another organization may be in china (Jahre, Jensen & Listou, 2009).
Organization may face a challenge of language barrier because of the diversity that exists in the global supply chain network. Since global supply chain involves cross border from one boundary to another and sometimes from one continent from another therefore language becomes a big challenge to different organization this may involve an additional cost to the organization.
Global partners offer competitive pricing and efficiencies, but still often conduct day-to-day business in a different language. Managers will likely speak English, but their directions must be relayed to line staff, and your own words might be lost in translation. Errors are bound to happen when communications aren’t translated and interpreted perfectly.
