Supply chain management plays a significant role in the costs associated with delivering humanitarian aid. In fact, a study conducted by Prof. Dr. Maria Besiou, along with co-authors, reveals that 75 percent of the expenses involved in delivering aid stem from supply chain management. This means that a significant amount of the donated funds intended for urgent assistance is allocated to supply chain management. The study is based on data from 14 disaster response operations conducted by five international aid organizations between 2005 and 2018.
The study highlights the importance of focusing on cost-saving measures within the supply chain to ensure that more funds are directed towards areas affected by catastrophes. Geopolitical conflicts, global pandemics, and supply bottlenecks all contribute to the challenges faced by humanitarian aid organizations worldwide. Consequently, it becomes crucial to address the fact that 75 cents of every euro donated to humanitarian aid is allocated to supply chain management. The study identifies procurement, transport, and human resources as the key cost sources within supply chain management.
The research conducted by Prof. Dr. Maria Besiou and her co-authors aims to verify the claim that 60 to 80 percent of the costs associated with humanitarian disaster response operations result from supply chain management. The study also aims to identify areas and approaches for reducing costs and shed light on the role of logistics within aid organizations. The analysis of data from five aid organizations, encompassing 20 disaster response operations in 14 countries, confirms the “60 to 80 percent” claim. Approximately 203 million euros out of the total 276 million euros spent by these organizations went towards supply chain management, which averages out to 75 percent.
Logistics costs are particularly high in situations involving military conflicts and epidemics, according to the researchers’ findings. This underscores the crucial role played by supply chain decision-makers in ensuring efficient and successful relief operations.
To reduce logistics costs for aid organizations, the study proposes various approaches. One key approach is proactive preparation, such as providing training for local staff in advance. This investment eliminates the need to bring in external staff during a catastrophe, which can be significantly more expensive. Local staff members are often more familiar with market structures and security aspects, making them valuable assets during relief operations.
Long-term agreements with suppliers and the implementation of money-and-voucher programs also prove to be cost-effective. These programs allow individuals affected by catastrophes to choose what they need most or trade among themselves, thereby avoiding transportation and storage costs. Collaborations between aid organizations, involving capacity sharing and joint procurement strategies, are highlighted as potential avenues for reducing supply chain management costs. Additionally, detailed planning during the preparation phase is crucial, addressing the rights and responsibilities of supply chain management staff.
The study emphasizes the need for supply chain managers to be part of the coordinating team within aid organizations. While the study primarily focuses on major international aid organizations based in Europe, future evaluations should expand to assess supply chain costs at the local level. This will enable the identification of further cost-saving potentials.
It is vital for the public to recognize the importance of supply chains and allocate sufficient attention, time, and resources to logistics. Decision-makers in supply chain management should have representation on the Executive Boards of aid organizations. The involvement of experienced logistics specialists, starting from the planning phase, is crucial to optimize the utilization of donated funds and ensure efficient and effective disaster response operations.
The findings of this study are published in the Journal of Humanitarian Logistics and Supply Chain Management.
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