Procurement policies in commercial supply chains

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Procurement process in disaster relief

Instantly after a disaster strikes, relief organizations conduct an initial assessment (usually within one day after occurrence).The expected quantity of supplies required to meet the relief needs of the affected population is estimated (Thomas, 2003) as well as pre-positioned supplies, already available at the organizations warehouses, are evaluated. Relief items, which need to be procured from suppliers, are determined (Balcik & Beamon, 2008). As next step, this assessment is translated into supply requirements. Demand for relief supplies varies in terms of magnitude, criticality and type of required materials and is highly unpredictable (Kovács & Spens, 2007).
Supplies are mainly ‘pushed’ to the disaster area in the response phase, whereas during the reconstruction phase the principle of ‘pull’ in sourcing is predominately applied. Another key point is, that the customers (receivers of aid) to not generate demand voluntarily and do not intend to ‘repurchase’. Thus no ‘real demand’ is created, as demand is assessed through aid agencies (Long & Wood, 1995).
Goods can be acquired differently, like in bulk or vendor stored, until needed (Russell, 2005) and procurement can consider just local or also global suppliers and vice-versa (Blecken, 2010). After a disaster struck, speed at any costs is of utmost importance, as the first 72 hours are crucial for providing relief. Goods are brought into the affected area as quickly as possible. After the first 90 to 100 days, disaster response is delivered more effectively at reasonable cost and speed. Humanitarian organizations start from then on to source relief items locally (Van Wassenhove, 2006).
Statistics show, that in practice suppliers of relief items are predominately multinational firms from developed countries, capable of supplying immense quantities (Taupiac, 2001). Conversely, pre-stocked items at the affected region can considerably increase the speed of operations. Another approach of disaster response procurement is purchasing from local and regional suppliers instead of relying on long-distance donations in order to decrease transport costs and accelerate delivery (Nikbakhsh & Farahani, 2011). If local procurement is applied, the economy of the affected region is
stimulated as well. Nevertheless, local procurement usually faces quality problems and might lead to supply shortages. In addition, local purchasing can generate competition between organizations, which results in high prices for the relief items (PAHO, 2001).
International or global procurement is primarily done to access larger quantities, get lower prices and keep consistent quality. In contrast, delivery times are longer and transportation costs are higher by using global suppliers (Sowinski, 2003). In most cases, humanitarian organizations will have multiple suppliers for each relief effort (Falasca & Zobel, 2011).
Humanitarin organizations often purchase relief items from global suppliers through competitive bidding processes (Balcik & Beamon, 2008) in order to provide equal opportunities to all firms interested. However, in cases of huge disasters, when providing goods quickly in large amounts is crucial, tendering techniques are not applied (Taupiac, 2001). In the bidding process, humanitarian organizations first identify potential suppliers, which are able to meet the item and delivery requirements.
Next, these qualified suppliers are invited to bid. As final step, humanitarian organizations evaluate the purchasing offers and finally make contracts with the winning supplier. Then the delivery of supplies to the affected areas begins. To increase responsiveness, humanitarian organizations started to establish pre-purchasing agreements with suppliers, which specify in advance quality and delivery requirements for emergency items. Mostly, these agreements contain that suppliers hold emergency stocks for humanitarian organizations (Balcik & Beamon, 2008).

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Required relief items and equipment

After a disaster occured, a high demand for various relief items exists. The Pan American Health Organization and the World Health Organization (2011) released a minimum list of required relief commodities for disaster management. Those products are listed in table 2-1.
As a matter of course, this list is general and the type of products and level of urgency differs, depending on the requirements and characteristics of each disaster. In case of an earthquake during the winter season for instance, the supply of clothing and blankets is more critical, than during a flood in summer (Nikbakhsh & Farahani, 2011).

1 Introduction
1.1 Background
1.2 Problem description & research questions
1.3 Main purpose and objective
1.4 Delimitations and scope
2 Frame of Reference
2.1 Definition and categorization of disasters
2.2 Humanitarian logistics and disaster relief/response
2.3 Procurement particularities in humanitarian organizations
2.4 Humanitarian versus commercial supply chains
2.5 Procurement policies in commercial supply chains
3 Methodology chapter
3.1 Research design
3.2 Research approach
3.3 Time horizon
3.4 Method choices
3.5 Data collection process .
3.7 Evaluation of the study
4 Empirical Data
4.1 United Nations
4.2 World Vision International (WVI)
4.3 Save the Children
4.4 International Federation of Red Cross and Red Crescent Societies (IFRC)
4.5 CARE
4.6 Catholic Relief Services (CRS)
4.7 Médecins sans Frontières (MSF)
4.8 Oxfam
5 Analysis
5.1 Analysis of examined humanitarian organizations
5.2 Procurement concepts in disaster response
6 Further Discussion
6.1 Purchasing operations and bidding processes in disaster
response
6.2 Subject of sourcing in disaster response
6.3 Quality assurance in procurement of relief items
6.4 Pooled Procurement in disaster response
7 Conclusion