Does the Current Constraints in Funding Pr omote …Does the Current Constraints in Funding Pr omote Failure in Humanitarian Supply Chains? Supply Chain Forum An International Journal

Does the CurrentConstraintsin Funding PromoteFailure in HumanitarianSupply Chains?

44Supply Chain Forum An International Journal Vol. 9 - N°2 - 2008 www.supplychain-forum.com

Marianne JahreDepartment of Industrial Management

and Logistics, Lund UniversityDepartment of Strategy and Logistics

BI Norwegian School of Management, Norway

[email protected]

Ian HeighGlobal Emergency Group

[email protected]

Traditionally, most funding is made available when a disaster occurs.

Disaster response is the implementation of what humanitarian actors did

(or didn't do) in preparedness for any intervention. Based on a case study

of a logistics change in the International Federation of Red Cross Red

Crescent Society, this paper discusses how more funding of preparedness

can radically improve the speed and quality of response. Findings

contribute to our understanding of how changes in funding can improve

and support faster recovery due to increased preparedness in disaster-

prone areas. Illustrating how postponement/speculation logistics

strategies are applied to flows of material, information, and human

resources, it is concluded that associated changes of financial flows are

required. Donors and NGOs must think of more 'speculative', long-term,

and unearmarked funding with particular attention to risk sharing, cost

recovery, and measurements. This paper contributes to further

understanding of postponement/speculation in project-based settings

(temporary supply networks), how funding and logistics (payment and

materials flows) are related, as well as the present funding models'

implications for efficiency and effectiveness in humanitarian aid. These

are all areas that have been underresearched.

Introduction, Purpose,and Background

Very often, in the era of instantinformation, news correspondentsarrive at the scene of a majordisaster before or at the same timeas government and humanitarianagencies. Initial reports tend toshow the destruction and theeffects on the population. When the situation has not beenalleviated within a few days of thedisaster, the same correspondentsstart to report on the failures ofagencies to mobilise and deliveressential assistance. The Pakistanearthquake in 2005 exemplifies thistendency: 'Anger is mounting

among survivors of the South Asiaearthquake over the apparentlyslow response to a disaster that killed at least 20,000'.( h t t p : / / n e w s . b b c . c o . u k/2/hi/south_asia/4329218.stm)Generally, those providinghumanitarian logistics servicestake the brunt of the criticism, andthese problems are indeed due tosupply chain failure.

Humanitarian logisticians have adifficult job. They must deliverrelief items and resources into alldisasters everywhere on the planetfrom a standing start within hoursand days of the crisis. They arerequired to make sure inputs

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delivered meet minimum qualitystandards and increasingly thatthey coordinate deliveries withtheir counterparts in otherresponding agencies. From a donorand public point of view, theseagencies have the funds and accessto respond quickly, so, they ask,where is the problem? A closerlook reveals that the solution toimproving the effectiveness ofthese supply chains may not be inthe hands of these supply chainoperators at all. What is less oftenreported are the underlyingcontributing factors to deliveryfailures. 'We have received newpledges of 580 million dollars', UNemergency relief coordinator JanEgeland (2007) told journalists.However, officials emphasised thatit was not clear how much of thenew pledges were earmarked forthe world body's 456 million euroappeal for emergency relief aid tothe earthquake over the next sixmonths or whether the donationcould also be used for other effortsincluding long-term reconstruction(http://www.terradaily.com/reports/$580M_Aid_Pledges_For_Pakstan_Sow_Confusion_For_UN.html.). This type of confusion, reportedfrom the same earthquake, istypical of donor funding patternsand models, and causes massiveuncertainty and competitionbetween agencies, particularly fortheir supply chains. This comes ata time when clarity andcoordination are already in shortsupply.

The purpose of this paper is toconsider the relationship betweendonor funding mechanisms andhumanitarian supply chainoperations. We have identifiedpapers on aspects such as howdisaster relief is viewed separatelyfrom development and how someprojects, e.g. schools, are favouredover other infrastructures such asroads, ports, and sewage (e.g.Donahue & Joyce, 2001; de Waal,2004; Hackl & Pruckner, 2006;Rowat & Seabright, 2006, Manfredo& Schultz, 2007, Pande & Pande,2007) but no research focuses onthe link between logistics andfunding. The challenge of short-term earmarked donations hasbeen highlighted, however(Gustavsson, 2003; Thomas &

Kopczak, 2005; Oloruntoba & Gray,2006; Altinger et al. 2008), as well asproblems of unwanted orinappropriate supplies (EconomistIntelligence Unit, 2005).

This paper attempts to determine ifthe efficiency of a supply chain isdirectly affected by the fundingmechanism employed, discusseshow changing the way donors actcould radically improve the waysupport is delivered, and exploresthe impact of that support for thoseaffected. Using a case study thatshows a change of the supplychain(s) of the InternationalFederation of Red Cross RedCrescent Societies (IFRC), wediscuss how present fundingmodels affect current humanitariansupply chain operations.

Constituting a restructuringinvolving establishment of regionallogistics units to increase logisticsregional support and services, thechange is discussed in view of thep o s t p o n e m e n t / s p e c u l a t i o nprinciple (Alderson, 1950, Bucklin,1965). In particular, the theoreticalconstructs and their implicationsare used to argue for the needs ofother types of funding. Merit andconstraint of funding modelsregarding efficiency andeffectiveness of the supply chainare outlined and the paper presentspractical implications of whatcould, should, and probably willhappen in the future. Implicationsfor further research are alsodelineated.

Research design

Given the lack of prior research andin particular empirical studieswithin the area, this paper is based

on an explorative case study (Voss,et al. 2002). With a starting point onthe effects of the regional concept(Cuckow, 2006), the idea ofdeveloping this case came out ofdiscussions with logisticians in theIFRC. As such, it is based on what istermed 'engaged scholarship' (Vande Ven, 2007), which means closecooperation between researchersand practitioners, not only to findsolutions and collect data, but alsoto define and conceptualize theproblem(s). The main purpose ofthe case study is to describe thechange that has taken place and toglean insight into the mainprocesses of disaster response and preparedness within the IFRC based on three main flows: materials, information, andpayment (i.e., funding).

The case study is based on amultitude of sources, includingtechnical artefacts (i.e., physicalstructures, product catalogues, and ICT systems), systematicinterviews, documents, andarchival material. A prestructuredcase outline for data analysis wasalso used for the purpose ofconstruct validity (Ellram, 1996;Yin, 2003). In order to ensurereliability, a case study protocolguides was developed. Interviewguides were developed and refinedduring the process depending onthe interviewee. The questionsconcerned (1) a description oflogistics systems, processes, andstructures before and after thechange; (2) the view on the change- advantages and disadvantages,main challenges, and implicationsfor funding, assessments,coordination, and measurements;and (3) consequences of thechange for the department and thefunction of service provision,competence requirement, andprocesses (logistics and others).More than 30 semi-structuredinterviews with a number of staffwithin the IFRC were undertakenbetween June 2007 and February2008. (See appendix 1). Interviewswere taped and transcribed andimportant elements in relation tothe prestructured case outline werechosen. Artefacts were used toconfirm facts emerging from the

What is the link

between funding

and

humanitarian

logistics?

interviews. The resultingdescriptions were sent to therespective interviewees for thepurpose of checking for possiblemisinterpretations, and the wholecase study was checked by thehead of logistics as well as theproject manager. A case studydatabase that included notes fromeach interview, detailed write-up ofaspects of the case, and otherdocumentation, was created.

The regional concept in the IFRC - a case study

The International Red Cross RedCrescent Movement incorporatesthe Geneva-based InternationalCommittee of the Red Cross (ICRC)and the IFRC as well as nationalsocieties (NSs) in 186 countries1.As the world's largest humanitarianorganization, providing assistancewithout discrimination, the IFRCprograms reached over 30 millionvulnerable people and assisted NSsin responding to 329 majoremergencies in 2005. The IFRCprograms are grouped into fourmain core areas: promotinghumanitarian principles andvalues, disaster response (thelargest), disaster preparedness,and health and care in thecommunity. When local structuresare overwhelmed by a disaster, arequest for international assistanceis made. In the first instanceregional disaster response teams(RDRT) are launched to supportthe NSs, and if there is need forfurther assistance, the globaldisaster response tools - fieldassessment coordination teams(FACT) and emergency responseunits (ERU) - are sent. ERUs areheld in permanent readiness andinclude logistics, IT/telecom, relief,field hospitals, basic health care,and a range of specialist water andsanitation units. Once on theground, these units are coordinatedby FACT.

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The role of the IFRC logistics unit is'[t]o support any respondingNational Society to prepare for and

(when required) assist in the coordination of sourcing,procurement, warehousing andtransport of relief goods andequipment to meet the specifiedand required needs (disasterresponse plan) at least cost' (Heigh2006). Traditionally, the IFRCsupply structure was made up of anumber of loosely coordinatedstocks of the NSs and frameworkcontracts with supplierscoordinated through headquartersin Geneva. This system wasrestructured to increase logisticalregional support and services andresulted in a headquarter-basedoffice in Geneva (LogisticsResource and MoblisationDepartment-LRMD) and threeregional logistics units (RLUs)located in Dubai, Kuala Lumpur,and Panama2. In addition to LRMDand the RLUs, the NSs are staffedwith personnel who have beentrained in logistics, and there arelogistics delegates for specialoperations in nine different places.The purpose of the regionalconcept is to build on and furtherdevelop existing logisticscompetencies at all levels. Localknowledge of the region andshorter distances to affected areasare vital.3 Hence, operationalresponsibility is regionalised withthe LRMD delivering logisticsservices and tools and managingthe global function.

Regionalised sourcing and procurementThe purchasing function of the IFRCis responsible for sourcing,procuring, and delivering goodsrequired for disaster responseoperations. Four essential elementsconstitute the new purchasingapproach: frame agreements, moredecentralised purchasing based onnew limits for sign-offs,standardisation of procurementprocesses, and standardspecifications of items.Procurement can be undertaken atdifferent levels: by the three RLUs(regional, e.g., basic relief itemssuch as jerry-cans and tarpaulins),LRMD (global, e.g., drugs, vehicles,and tents), the field delegates,4 andsometimes also by the NSs (localcountry-specific items).

Prepositioning stock in regionalwarehousesAn important element of disasterresponse is to increasepreparedness by prepositioninggoods (Oloruntuba & Gray, 2006),which is what the IFRC has donenow in the three RLUs. Not onlydoes this secure deliveries in theimmediate response phase, but italso may reduce costs oftransportation because alternativeand cheaper transportation meanscan be employed. Prepositioneditems include basic relief items(e.g., shelter, kitchen sets, andmosquito nets), support items (e.g.,vehicles and generators), and kits(e.g., for administration andemergency team survival). Theseare distributed over four types ofstocking arrangements in additionto holdings by NSs in their homecountries: (1) federation-ownedstocks (FOS) are owned by theIFRC, located at RLUs, and managedas permanent stock, continuallyreplenished and maintained; (2)participating national societiesstocks in federation warehouses(PNS) are owned by participatingnational societies,5 located in RLUsand managed through standardservice agreements between theRLU and NSs; (3) vendor-consigneditems (VCI) are owned by suppliersand located at the RLU; and (4)supplier-reserved stocks insupplier premises (SRS) are ownedby suppliers and located at theirpremises, but reserved for theIFRC.


1. Description of the general background ofIFRC comes from Heigh (2006b) and 'What wedo' - Disaster Management athttp://www.ifrc.org.2. Dubai handles all of Europe, Africa, theMiddle East, Central Asia, and portions of Asia.Kuala Lumpur handles East Asia, South EastAsia, Pacific and South Asia. Panama handlesthe Caribbean, Central America, NorthAmerica and South America,3. Different time zones pose serious challengesin communication. For example is there a 7-hour difference between Indonesia/Malaysiaand Geneva, which requires much flexibility inthe different ways and means to communicate.4. Delegates are the staff personnel sent to thearea to set up the operation and assist in itsundertaking.5. The terminology is changing, butparticipating national societies means thoseNSs that donate and support but are not struckby the disaster themselves, for example, whenthe Japanese Red Cross pays for prepositioningof stock in the Kuala Lumpur RLU.

Supporting the concept: IT-systems,human resources, and standardsThe regionalisation could not havebeen undertaken withoutappropriate information systemsand support. The development ofHLS - the humanitarian logisticssoftware for emergency responselogistics - started around 2002 andrequired a real culture changewithin the IFRC logistics. It was notuntil the Tsunami operation thatthe importance of such an ITsystem was realised: 'By 6thJanuary 2005, everyone realisedthey simply could not have beenrunning the Tsunami operationwithout HLS. Suddenly the logisticsdepartment bought into it' (Head ITdepartment, Sept., 10, 2007). HLS isnow implemented in the RLUs withaccess to Geneva and training anddevelopment of IT competenciesamong RLU staff. IT provides aservice catalogue listing explainingthe services they provide and forwhom.

The IFRC human resources haveencountered significant challengesthat have been accentuated by theimplementation of the regionalconcept. Many staff are temporarilyemployed and are mobilized onlywhen disasters strike, making itdifficult to defend long-term andexpensive training programmes.The IFRC tries to meet its main HR challenges regarding bothrecruitment and the need for morecontinuous training, planning, andcoordination. 'You have to havemore or less the same people in keypositions [who] would be able tokeep the same policy - to keepstability and consistency' (Head KL-RLU, Dec. 13, 2007).

With regionalisation, operationalsupport has been completelydecentralised. Now the task of theGVA-LRMD is to help the regionallogistics coordinators with training,tools, and standards and to supportthem in training their local/regionalstaff and building logisticscapacities within the local teams: '.. . it is important to keep controlfrom here and to make sure that thestandards we are developing areimplemented in the regionallogistics units . . .' (Field logisticsofficer, June 28, 2007).

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The requirementWhen looking at supply chainfunding, it is important tounderstand that respondingorganisations supply to andgenerally run not one but threetypes of supply chains:

The Permanent Supply Chain: Inorder to be responsive in highlyvolatile circumstances with aconsiderable number of variables,it is important to standardize asmany processes and activities aspossible. This standardisationcannot occur in the middle of anemergency and therefore must becarried out proactively. In general,this will take the form of permanentsupply platforms, usually based inthe regions to reduce lead times.These structures consist of thefollowing key supply chainelements as described in theprevious case: (1) infrastructure inthe form of a set of offices anddepots that hold prepositionedstocks and coordinate procurementand framework contracts forresources and transport; (2)process development wherecommon roles, responsibilities, andactions for supply chain responseare designed and materials fortraining local and regionallogisticians are produced; (3)personnel composed ofmanagement, technical, andtraining positions, bolstered withspecialist technical teams that canbe deployed at very short notice;and (4) systems used to initiate,track, and replenish resources aswell as provide information to makemanagement decisions and reportback to donors. This supply chainis generally predictable and stable,and demand figures can be used toplan resources. Examples includethe UNHRD Depots and the IFRCregional concept as presentedpreviously.

The Emergency Supply Chain:Depending on the resourcesavailable in the disaster area,specialist teams are usuallydeployed to help set up all supplychain activities. This can includemobilisation of resources; customsclearance; warehouse, transport,

and helicopter operations;procurement; fleet service;recruitment; and training. Thesesupply chains are usually set up indays and can be active for a fewweeks or many months at a time.This supply chain is generallyunpredictable and unstable;demand figures cannot be used toplan resources.

The Project Supply Chain: Usuallyset up in the recovery phase of adisaster or to develop someresources in preparation for apossible event, the project supplychain is essentially a locallymanaged set of resources thatprovide a service similar to that ofa commercial service provider,against which costs are recovered.This supply chain is generallypredictable and stable, but requireslocal presence and marketunderstanding of the integratingcompany.

Present funding modelsThis paper considers two types offunding7: long and short term(commonly seen as developmentand emergency response), which are further divided into tied (earmarked) and untied(unearmarked) donations dependingon the stipulation of the donor,often on political grounds. Thismeans that (1) the funding ofpermanent supply chains is usuallynegligible or short term; (2) thefunding of emergency is earmarkedextended short term; and (3)project supply chains get allcombinations of funding. Figure 1shows how funding has developedsince 2002 in the IFRC.


6. UNHRD-United Nations HumanitarianResponse Depots-is a World Food ProgrammeNetwork able to deliver humanitarian reliefitems worldwide within 24 to 48 hrs. Providingstorage, logistics support, and services to UNhumanitarian agencies, internationalhumanitarian organizations, andgovernmental and nongovernmentalorganizations, it reinforces capacity forhumanitarian emergency responsehttp://www.unhrd.org/about.asp), 2008.7. It is noted that many in-kind goods aredonated in an emergency response, but ingeneral this tends to hinder rather than supportthe response and confuses the issue. Hence, wehave not included this type of funding here.


Figure 1 shows that the amount offunding needed for core platformactivities, such as permanentstructure, falls in real terms whenconsidered against the emergency,for example, disaster responseactivities. Hence, there is very littlefunding for the purpose of planningand managing permanent supplychains to maintain a stable supportplatform. The consequence is highcompetition for what is available, alack of preparedness resulting in ahigh cost of setting up the emergencysupply chain, and an inability tosupport the project supply chain. Thefigure also illustrates what typicallyhappens immediately after a majordisaster, for example the Asian-Pacific Tsunami in 2004 whencountless donations poured in.Such massive funding, whilerequired immediately, must also bespent quickly, and tends to prolongthe emergency period.Furthermore, funding of projectsupply chains depends entirely onthe project because the permanentsupply chain is unavailable tosupport its set up, leading toprojects being outsourced withresulting failures and/or very highcosts.

Theoretical underpinnings

The regional concept of logistics inthe IFRC as previously presentedcan be characterized in terms of

the postponement/speculationprinciple that developed within themarketing channels literature in the1950s (Alderson, 1950, 1957;Bucklin, 1965), later becomingessential in logistics (Zinn &Bowersox, 1988), and eventuallyalso in supply chain management(Pagh & Cooper, 1998; Waller,Dabholkar, & Gentry, 2000; Boone,Craighead, & Hanna, 2007). Definedas 'changes in form and identity tooccur at latest possible point in themarketing flow; and changes ininventory location to occur at thelatest possible point in time'(Alderson, 1950, p.16),postponement was originallyviewed as a device for individualinstitutions to shift the risk ofowning goods to another(Alderson, 1957). The aim was toensure flexibility as a response todemand uncertainties. Bucklin(1965) introduced the converse,that is, speculation, contendingthat '[t]he [postponement/speculation] concept . . . extendsbeyond the physical flow of thegoods themselves to the flow oftheir title' (p. 29) and 'broadens thechannel analyst's understanding ofthe intimate relationship betweentitle and physical flow' (p. 30).

Most typologies of postponement/speculation that have beensuggested relate to Alderson'soriginal differentiation of time and

place, commonly denotedmanufacturing8 and logistics,respectively (Heskett, 1977; Zinn & Bowersox, 1988; Pagh &Cooper, 1998). Garcìa-Dastugue and Lambert (2007) definepostponement of manufacturing asthat of 'changing the sequence ofactivities to delay changes in formor identity' (p. 57), whereas time-based postponement implies 'theintentional delay of activities for aslong as possible and includesdelaying differentiation of productsin terms of form, identity, or place,but it does not include changing thesequence of activities.' (p. 58).Manufacturing postponement isoften based on standardization,modular design, and/or processstructuring and might result inperforming activities later in time, closer to when end-customers place the order, in whichcase it also involves time-based postponement. Time-basedpostponement focuses on findingthe best location to position thedecoupling points, that is, alldecisions that increase the cashvalue of the product such asmanufacturing (changes in formand identity) and logistics (changesin place). The theory is that holdinginventory at a lower value reducesthe direct variable costs associatedwith inventory, such as cost ofcapital for the assets employed andcosts associated with the risk ofproducts becoming obsolete.

Although the original focus was onrisk, logistics researchers becamemore concerned with theimplications for physical flows,such as the number of points atwhich products are handled,moved, stored, and assorted,regardless of the number of

Figure 1IFRC funding 2002-2007 (Source: IFRC, 2005)

8. Because the IFRC (similar to other suchorganisations) purchases what it uses and isnot a manufacturer, it could be questioned whymanufacturing postponement is relevant in thiscase. However, its definition, postponement ofbranding and packaging, for example, couldalso be included as part of the manufacturingprocess and thus is relevant in our case.Furthermore, use of sheltering kits (hammers,nails, and other tools) instead of tents asemergency shelter would be time as well asplace postponement according to theoreticaldefinitions.


transfers, title, or the number ofinstitutional entities involved inperforming these activities(Heskett, 1976; LaLonde & Mason,1985; Goldhar & Jelinek, 1983;Waller, Dabholkar, & Gentry, 2000). Few disadvantages ofpostponement were put forwardduring this period with focus on 'mass-customisation': shortproduct life-cycles and just-in-timecombined with the optimistic viewof technology development, makingeconomies of scope andpostponement possible. Withsupply chain management thinking,this seems to be changing.Interorganisational aspects are yetagain becoming more prominent(as they were in the early days ofchannel research) (van Hoek, 2001;Boone, Craighead, & Hanna, 2007).Risk sharing among supply chainmembers and difficulties inimplementing postponement arebeing increasingly discussed (Lee,2002; Yang, Burns, & Backhouse,2004a; Garcìa-Dastugue & Lambert,2007). Costs of lost sales due to latedeliveries, higher transport costsdue to higher frequencies, and lackof economies of scale in processingare being pointed out asdisadvantages. Hence, thecombined principle as coined byBucklin (1965) is again attractinginterest. Table 1 gives a summary,

although simplified, of the majorpoints viewed as particularlyrelevant in order to understand thereasoning behind the regionalconcept of the IFRC and theresulting funding implications.

Discussion

First, the regional concept isdiscussed in theoretical terms aspresented in Table 1. Second, theimplications of the change forfunding are discussed, proposingother funding models for thesupport of the three supply chains, relating this to thep o s t p o n e m e n t / s p e c u l a t i o nprinciple.

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With its regional concept based ondecentralised unearmarked stocks,the IFRC has implemented acombination of speculation ofstocks to increase preparednesssimultaneously with postponementof labelling to increase flexibility inan emergency situation. Table 2provides one example for each typeof supply chain, illustrating theeffects for efficiency andeffectiveness.

With relation to the theorypreviously presented, the changecan be conceptualised as (1)manufacturing and time-basedpostponement by changing thesequence of labelling and thusdelaying changes in identifyingbasic relief items combined withdelaying procurement of culturallysensitive items until (a) they havebeen ordered by a specificoperation and (b) have beentransported to the RLU; and (2)manufacturing and time-basedspeculation by (a) procuring greatervolumes of items to stock up threeRLUs before they are needed and(b) forwarding items to RLUsbefore they are ordered by aspecific operation.

The choice of speculative stocks of basic relief items is consistentwith the literature. As presented in our case study, the context of the permanent supply chain is characterised by stable demandand supply, limited product range constituting relatively simple products with standardspecifications, and littlecustomisation. The project supplychain, while having a fairly stabledemand, requires other types ofitems compared to what isprepositioned in the RLUs. Hence,local procurement, that is

Table 1Summary of major characteristics in relation to postponement/speculation


Table 2Effects of the regional concept

postponement, is more common,making use of establishedregional/local supplier relation-ships, procurement processes, andother capabilities in the permanentsupply chain. The emergencysupply chain, in contrast, ischaracterised by unstable demandand supply and requirescustomisation of certain items (e.g., hygiene parcels). Hence,postponement of certain activitiessuch as procurement of those itemsrequiring customisation andlabelling of the prepositioned stockuntil it is known where items areneeded (i.e., after the disaster hasoccurred) is imperative in order tomake the regional concept work.

Accordingly, it is the combinedprinciple of postponement/speculation across the three types ofsupply chains that lead to reductionin total cost and serviceimprovements including minimumresponse time to the occurringneeds. With regards to the fourmain cost components, assuggested in the literature,response time (i.e., from need to

distribution) is of extremeimportance in the immediateaftermath. Hence, the cost of 'lostsales' is extremely high (i.e., cost of'lost lives') and outweighs very highcosts in this first period when timeis everything. Further, as mostprepositioned stocks are owned bysuppliers, inventory carrying costsare lower than usual, seen from thepoint of view of the aidorganisation. Finally, in times ofdisaster, transport costs mayincrease immensely, due to bothtime constraints often requiringairfreight and a lack of capacity,therefore leading to increasedprices in the surrounding area.Thus, compared to the normativemodels suggesting thattransportation costs go down asinventory carrying costs go up withspeculation, our case demonstrateslower inventory carrying costs withspeculation relative to much higherhuman costs of not being able tohelp quickly enough. Furthermore,transport costs may increaseconsiderably more than usual ifthere is time postponement (e.g.,keeping stocks in Norway or

Geneva instead of in the RLUs).This suggests that thepreparedness, that is the regionalconcept, has advantages in thetemporary supply chain thatoutweigh the costs in thepermanent structure. In particular,the link between the permanentand the temporary and theadvanced transition speed from preparedness to emergencyresponse has improved with theregional concept.

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First, this case study shows thatfunding and resources are requiredto cover the investments andrunning costs of procurement andwarehousing of relief items in anefficient and effective way. It takestime and competence to developand update catalogues, systems,and manuals. Monitoring and

9. From where the goods were positioned atthe time of the disaster (i.e., the RLU, Europe,Middle East, etc.) to the disaster area.


Table 3Ideal funding model(s)

measuring performance for furtherdevelopment and improvementalso require funding. Staff must behired on a more continuous basisand be trained and coordinated. Itis expensive to develop and updateIT systems. Providing thenecessary continuous support to ageographically disparate user set isalso costly. Funding needs for thepermanent structure thereforeincrease.

Second, given that disasterresponse is only as good as thepreparedness for the disaster, theimportance of the permanentsupply chain becomes clear. If it isset up correctly and in theappropriate location, theemergency element can be reducedto a minimum, and in addition,

project supply chains can beestablished easily. By their verynature, these supply chain typesare symbiotic, but they requiredifferent funding types. The needfor the permanent to bettermobilise the temporary and theassociated funding needs arepresented in Table 3. This table alsoshows how funding models can beused to optimise the set of supplychains needed to develop the mostefficient and effective servicedelivery.

Finally, regarding the postponement/speculation principle, it is clearthat payment flows must change.The permanent structure requiresmore 'speculative' funding from thedonors. Hence, as illustrated infigure 2, an evening out of the

funding over time with more for thepermanent structure, less for theresponse, is required.

The basic premise is that the(extra) costs of more long-termunearmarked funding for thepermanent structure are more thanoutweighed by the reduced cost ofthe temporary structure in terms ofthe emergency supply chain as wellas the project supply chain.Continuing the current fundingpatterns means the availability ofresources to help vulnerablecommunities is not aligned with thefunding patterns when it isrequired. At best, this is a waste ofmoney in the response andrecovery phase. At worst, it has thepotential to prolong the badsituation for those it is trying tohelp. A change in funding patternsso that the spending is ahead of thedisaster curve has the potential todramatically change the effect ofinterventions.

Conclusions, Implications,and Further Research

Using the theoretical logisticsconcepts of 'postponement' and 'speculation' of material,informational, and human resources,we conclude that similar conceptsapply to financial resources.Changing structures and processesof materials and information flowsrequire associated changes inpayment flows. We have seen thatthe theoretical concepts can beused to describe and analyse theIFRC's logistics change. We havealso seen that, based on the

Figure 2Evening out the funding over time


particularities of the humanitariancontext, the theory providesincreased understanding of themotivation behind the change.First, there are three different typesof supply chains with profoundlydifferent characteristics ofimportance for the choices ofpostponement / speculationstrategy. Second, the humanitarianlogistics performance of theimmediate disaster response (andthe reconstruction afterwards),which is what most people(including donors) consider, isclosely linked with thepreparedness stage - the betterprepared, the better the response.Third, due to the different supplychain characteristics, differentfunding is required. Putting moreefforts into the permanent chain inorder to better serve thetemporary requires changes in theprevailing funding models.

There are a number of implicationsfrom the findings. First, a change indonor behaviour is required. Thebehaviour of the initial receiverssuch as the IFRC and otherorganisations must also change.The many who work within thissector are used to thinking ofhumanitarian aid in terms ofdisaster response operations andtheir associated funding needs.Hence, one important practicalimplication is that donors and (N)GOs10 must think of more 'speculative', long-term,unearmarked funding withparticular attention to risk sharing,cost recovery, and impactmeasurement. Second, our casestudy shows that changes inlogistics structures and processescan have profound effects on theuse of donations. As logisticsconstitute such a high share of thetotal cost, it is puzzling that donorsdo not show more interest inlogistics and supply chains ofhumanitarian aid. Our findings canhelp communicate these issues todonors (and NGOs) and advisethem to become more concernedwith these aspects. The aftermathof the Tsunami in 2004 sadlyillustrated that 'all the money in theworld' does not help in theprovision of sufficient disasterresponse when one is not well

prepared: 'We were hit by threedisasters in succession. First camethe earthquake, then the Tsunami.And finally the relief agencies.'(Words of an interlocutor inIndonesia during a Tsunami review[IFRC, 2005]).

Numerous issues arise regardingtheoretical contributions andfurther research. First, this paper contributes to a broader understanding of thep o s t p o n e m e n t / s p e c u l a t i o nprinciple in a project-based setting,such as temporary supplynetworks, and its link withpermanent networks. Compared toprevious logistics postponementresearch, the risk perspective asoriginally proposed becomes moreimportant. Hence, one area forfurther research is in-depth studieswith the purpose of theorydevelopment of postponement/speculation focusing on risk andproject-based logistics - areas thathave not received much attentionin prior research.

Interorganisational applicationsrequire more attention to the riskaspects (Garcìa-Dastugue &Lambert 2007). More in-depthanalyses of the regional concept ofthe IFRC can make some interestingcontributions to this point. Second,Boone, Craighead, and Hanna(2007) suggest research onpostponement in service industriesas a challenge in further developingthe concept. Our paper contributesto developing some particularissues such as the usep o s t p o n e m e n t / s p e c u l a t i o nprinciple in connection withpreparedness and response and theconsequences for and of specificfunding, but there remains muchroom for further research. Third,this paper fills part of a voidregarding understanding of thethird basic flow in logistics, namelypayment, and how it links with theother two (Supply Chain Digest,2007). We propose further studieswithin this area, also outside of thehumanitarian logistics context.Fourth, we suggest more researchon the link between pull/push,postponement/speculation, anddecoupling points in a supply chain(Lee, 2002).

Our study provides an illustrationof the need for acceptingspeculation in the permanentnetwork to be able to go from pushto pull in the temporary network.This leads us to our final point,which is to focus on couplingsbetween temporary and permanentnetworks. Apart from Dubois &Gadde (2002), who discusscoordination and linkages withinand between temporary solutionsand more permanent networks inthe construction sector, we havenot identified prior literature thatcovers this particular aspectdirectly. Other research streamshave been suggested (Jahre, et al.2008), including 'projects astemporary organizations' (Lundin &Steinthórsson, 2003), 'networks asoverlapping supply chains' (Herz,2006; Jahre & Fabbe-Costes, 2005)and 'networks as resourcecombinations' (Jahre et al., 2006).In all project-based settings thisshould be an area of great interestfor further research. Furthermore,many industries are increasinglybecoming more project-based,requiring flexible solutions(Reichhart & Holweg, 2007; Bitran,Gurumurthi, & Sam, 2007).

10. National and international (non)governmental organisations.

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About the authors

Marianne JAHRE is Professor at theDepartment of Industrial Management andLogistics at Lund University and AssociateProfessor at the Norwegian School ofManagement in the Department of Strategyand Logistics. She received her Ph.D. inlogistics in 1995 at Chalmers University ofTechnology and is now docent there as wellas visiting professor at Université de laMéditerranée in France. Her current researchinterests include disaster relief logistics,design and development of logistics resourcenetworks, supply chain integration, the role ofservice providers and environmentallogistics. She has co-edited and co-authoredseveral books and published in journalsincluding International Journal of PhysicalDistribution and Logistics Management,International Journal of Logistics: Research andApplications, International Journal of LogisticsManagement.

Ian HEIGH is a senior supply chainprofessional with over fifteen year's overseasexperience in program planning andmanagement in the areas of disasterresponse, strategic planning, logistics andsupply chain management, engineering andreconstruction, livelihoods, and communitydevelopment. In addition, eight yearsexperience up to director level in thebusiness industry working on all aspects ofbusiness improvements and operationsincluding mapping, analysis, design,implementation, and measurement. Ian'spractical experience is complemented by hisacademic achievements including an MSc inLogistics and Supply Chain Management atCranfield University, where he won the awardfor Best Thesis. He has led both a commercialand humanitarian organization in winning theEuropean Supply Chain Award for Excellence.


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