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Humourless links for April 28, 2010

by Michael Keizer on April 28, 2010

[Image: Liquid Links by Desirae; some rights reserved.]

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The unkindest cut: why gifts in kind are often a bad idea

by Michael Keizer on April 24, 2010

The Park House Club in Cardiff, wrapped as a gift - Howard Dickins

Over the last couple of months, a lot has been written about old shoes, a.k.a. gifts in kind (GiK). Most commenters seem to agree that they are only appropriate in a fairly limited number of narrowly defined situations. Over at Tales From the Hood, J. has come up with two preconditions for GiK to be acceptable: they should fit programme design (instead of vice versa) and they should directly address the needs in the field. Of course, J. is correct as ever, but I do think that in this case he is not exhaustive. I will use the five rights of logistics to add to the list.

The right goods

Both J.’s preconditions are linked to this one. Of course, they should fit the needs of the people we are trying to serve, and that implies that the programme should fit these needs and that the goods delivered in turn should fit the programme. Another issue to keep in mind here is that they should also fit the way your organisation works: if nobody knows how to work that donated doodad, it could fit your programme like a glove but it would still be utterly useless.

The right quantity

GiK hardly ever come in the quantities needed: either too much or too little. In the former case, the challenges of dealing with the surplus could more than negate the advantages of receiving the gifts. In any case, it would be a good idea not to accept more GiK than are needed for the programme[1]. If the GiK are not sufficient to cover the full need of the programme, the extra cost having to buy and handle smaller amounts of goods from multiple sources need to be taken into account as well.

The right location

Often, there are local or regional sources of the same goods that are donated. Obviously, these goods will be available at the programme location much faster and much more cheaply than the donated goods ever can be.

The right time

For most programmes, timing is crucial. An item can be really needed at some stage, arrive in just the right quantity and be available at the right spot, but if it arrives too late it will be as useless as a recipe for lumbard mustard for McDonald’s. If it arrives too early, it will needlessly clog up storage space (which is an important consideration in many of our programmes). It is hardly ever possible to time GiK correctly.

The right price

GiK are, as the name implies, free.

Well, no, actually they aren’t. There are serious costs connected to GiK: costs when organising collection and reception, cost when handling and shipping, costs when using. Good examples are the costs for the organisation of collection points, for bundling and preparation for shipping, for cleaning and repair, and for maintenance in the field. Similar costs are, of course, connected to goods bought from donated money; but almost always these costs are much lower than for GiK – sometimes so much cheaper that, all in all, it can be cheaper to buy them new than to pay for the costs to process the GiK.

Most people understand that this is the case when comparing local goods with GiK: obviously, it is quite possible that the cost of shipping items from Freetown, Kentucky to Freetown, Liberia could be more than the full price of the same item bought on the local market. However, this could also be true for items bought in (in this case) the US. This comes as a surprise for many people: how can it be cheaper to buy e.g. medicines locally and ship them over, than to have those drugs donated at the exact same spot for free? Yet this is true quite often, caused by e.g.:

  • having to combine items from various locations instead of shipping it directly from one location (the supplier’s);
  • use of standardised items designed for cheap and simple transport, e.g. because they are lighter, can be nested or because a multiple fits exactly in a standard shipping container;
  • being able to easily consolidate shipments, leading to lower shipping costs;
  • having to deal with reverse logistics after early expiry of goods (i.e. earlier than newly bought goods).

Gifts in kind are not always kind

Time to out one of my darker secrets: back in my younger days, I have been involved in a drive to collect gifts in kind for Romanian orphanages (after the revolution of 1989). I was highly disappointed and slightly upset when none of the large aid organisations wanted to accept our goods. Now, half a lifetime later, I understand why they did so. Gifts in kind can be the right thing – but often they aren’t. Both donors (when giving or organising drives) and aid organisations (when accepting the gifts) should keep this in mind – and logisticians have a special responsibility for explaining the issues.

Update (April 28): I hardly turned my back (had a long day of lectures and didn’t read my Twitter stream) or a new GiK initiative crops up. This time, somebody want to get 1,000,000 shirts to ‘Africa’. A good analysis of the goods and bads can be found on Amanda Makulec’s blog (and it is of course always nice to called a “development logistics guru”); Aid Thoughts has a rather snarkier take on things; Tales From the Hood comments on the rather aggressive media strategy of the founder (which basically seems to come down to, “let’s get this discussion off from the internet ASAP”); Texas In Africa lists better alternatives.

Update 2 (April 30): There are now more than 30 blog posts written about the whole 1 million shirts kerfuffle. A selection of the most interesting ones:

[Image: The Park House Club in Cardiff, wrapped as a gift by Howard Dickins. Some rights reserved.]

Footnote

Back to post [1] Of course, this is true for gifts in money, too, but I leave that fish for others to fry.

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Not a fairy tale: when the five rights of logistics are not enough

by Michael Keizer on November 5, 2009

Warning: serious business in a very silly disguise ahead.

You will of course remember that logistics is all about the five rights: getting the right goods, in the right quantity, to the right location, at the right time, at the right price. (And if you don’t, you could read all about it in my March article on the five rights.)

But now imagine the following scenario (perhaps a bit too literally a scenario, but please humour me).

You are the logistics coordinator for a nutritional NGO in the Kingdom of Far Far Away. After a rather nasty little conflict about a swamp, large groups of displaced people have moved to the edges of the disputed area, where spontaneous IDP camps have appeared. As there is hardly any food available there, levels of malnutrition rise alarmingly (and there there have even been some unconfirmed cases of cannibalism amongst one of the tribes, the Jinjabredmen). Your NGO has decided to intervene and you are tasked with finding sufficient amounts of the local staple, faerivloss.

You have two possible sources for the faerivloss:

  1. You can buy it in the capital for about 200,000 shrec/MT (about $800/MT). Transport by local truck (affectionately called ‘donkeys’ because of their usually greyish colour, their ability to where even stallions can’t, and their drivers’ propensity for Eddie Murphy impersonations) will cost you an additional 30,000 shrec/MT.
  2. You can get the faerivloss for free from the local sub-office of WFG (the World’s Fairy Godmother) who just received an enormous donation of the food from the Republic of Dizneeland (halfway across the globe). The donation is sitting in warehouses in the main harbour, but the government of Dizneeland offers to transport it for free to the IDP camps using a number of MH-53E Sea Dragon helicopters, stationed on a carrier just of the coast.

Not a difficult choice, isn’t it? Both options give you the right goods, in the right quantity, at the right location, at the right time; but the donation gives it to you for a price that is much righter than the locally bought goods. So you quickly fill in the WFG requisition forms and go off for a beer.

A couple of years later, you return to Far Far Away as part of your organisation’s emergency team. Although the IDP’s have all returned home after the resolution of the conflict and the accession of the new king (as the result of the unfortunate anuration of the old one), the region again is in the grip of a famine, and you quickly find out why: after the importation of massive amount of free faerivloss, the price on the local markets collapsed and the local farmers were forced of their land (and have moved to giant slums in the capital, where they joined the former donkey drivers, who now try to make a precarious living by driving taxis or, if they are lucky, work as drivers for the numerous NGOs that have made their base there). Most of the land lies fallow, and there will be no faerivloss harvested for the second year in a row. Complicating matters is that the local harbour is rendered largely unusable due to a number of very destructive hurricanes – probably the result of global warming.

Suddenly you get a sinking feeling in your stomach; similar to what you felt when, as a five-year-old, you pulled the tail of what you thought was the neighbour’s cat, but turned out to be some strange feline wearing boots and a rapier, speaking Spanish-accented English.

Of course, in reality our decisions will normally not have such dramatic consequences – but each of our decisions could have smaller but still noticeable negative consequences. When you import goods from overseas, you will have an impact on the local economy, and transport will have an impact on the global environment. And, of course, the fact that your NGO does not need to pay for the donated goods or their transport, does not mean that those costs have not been incurred.

Normally it is not up to us logisticians to make the decision whether we would forego a possible advantage for our organisation, based on wider-ranging considerations like climate change or economic consequences. However, it is up to us to make the people who do take these decisions aware of the possible consequences of our logistical choices, and ensure that they know that there is more than just the one option.

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Supply chain risk management

by Michael Keizer on May 25, 2009

A lot has been written about how to deal with logistics disasters, or how to avoid specific types of mishaps. Much less attention is given to the process of managing those risks.

Risk management for the supply chain is not really different from generic risk management. Like all risk management processes, you start by making an inventory of possible risks, based on your environment, the programmes that you try to support, possible future scenarios, etcetera. This inventory includes the nature of the risk, its likelihood of occurrence, as well as its possible and likely impact. The result should be an overview of the possible extent of risk for each of the risks that you list. Some examples:

  • If a meteorite would hit your main logistics hub, you would be in dire straits indeed. However, the likelihood of this happening is vanishingly small. As a result, the extent of your risk is still very low.
  • If one of your 15 drivers would fall ill, it would probably not pose much of a problem; however, the likelihood of this happening in any given year approaches certainty. Still, because of its low impact, the extent of the risk would be low.
  • Having your one and only purchaser fall seriously ill would not be a big problem in a well set up system, in which everything is well documented. The likelihood of this happening is also quite small, so the extent of the risk here is very low.
  • However, if documentation is sketchy and most of the knowledge about markets and suppliers is locked up inside the head of your purchaser, the impact of this happening would be a lot bigger. Suddenly, the extent of your risk is now medium or possibly even high.

This last example points to the importance of the risk environment when performing your risk analysis. (It also points towards a possible way of dealing with it, about which more later.)

The next step is to design a strategy to deal with the risks. All risk strategies can be divided into four basic categories: avoid, reduce, transfer, and retain. In our example, this would mean:

  • Avoid: an avoidance strategy could take the form of not doing any local purchasing, or perhaps withdrawing from the programme. This illustrates that avoidance strategies are rarely feasible in the environments in which we work, but nevertheless they should be considered.
  • Reduce: ways in which we could reduce the extent of the risk include hiring a second purchaser (reducing the likelihood of being marooned without a purchaser) or ensuring good systematic registration and documentation (reducing the impact of the purchaser falling ill).
  • Transfer: we could outsource our purchasing to an external company, using service level agreements to ensure that they deliver what we we need, when we need it. This is not a very likely scenario for most of us, but it is something that we often do with e.g. air transport: we transfer the (very real) risks linked to these operations to e.g. a charter company.
  • Retain: we could decided that the extent of the risk is so small (e.g. because we hardly do any local purchasing anyway), that we take no action and leave things as they are. In other words: grit your teeth and suck it up.

A risk management plan basically consists of the risk analysis, with the appropriate strategy for each of these risks. Risk management plans for multinationals often comprise whole volumes (or, more and more often, many Gigabytes of documentation, code, and data), but for most field operations there is no need to go to that length: two to five pages would normally be enough. On an organisational level, it will obviously depend on how big your organisation is as well as its nature: the risk management plan for a two-project, one-country educational organisation will probably be not much more than the one-page result of a day’s hard work, but WFP’s risk management plan will more likely resemble that of a big multinational company.

However, whatever the size or nature of your organisation: you cannot afford to go without some form of risk management; organisations that think they can tend to be unpleasantly surprised at some stage.

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Logistics of swine flu aid

by Michael Keizer on May 1, 2009

Deborah Cannon/AMERICAN-STATESMAN 03/27/06 Michael Leavitt, Secretary of U.S. Department of Health and Human Services talks with an audience at the Hyatt Regency in Austin, Texas on Monday, March 27, 2006. The state held an all-day summit on pandemic flu preparedness efforts. I have had to rewrite this post three times today as new developments rolled in (not the least of which is of course that we are now officially in a pandemic), and as I found more pertinent information

The swine flu pandemic will obviously have a severe impact on our supply chains; however, it will also impact on the demand placed on these supply chains. These demands will come from two sides: the obvious external demand related to the programmed response to the pandemic, but also the less obvious internal demand caused by efforts to protect (and treat) our own staff.

Both will put an increased strain on a supply chain that will already be more vulnerable. Normally, I would have said that this would require forethought and planning, but it seems we are a bit too late for forethought – so let’s stick to planning.

Note that I will write here as if we all work in medical organisations; of course, many of us work in other types of aid work, but as demands in medical aid will be most intense, this presents a ‘worst case’, and although not all of the aspects debated here will be relevant to other organisations, many will.

Much of what I wrote in my post on contingency planning for the supply chain, is applicable to this issue as well. The four-step approach (prioritisation, sensitivity analysis, preparation of plans, resourcing and communication) is valid as well. However, there some things to keep in mind.

One issue that will hit every organisation, will be logistics (including procurement) of goods related to the protection of our staff. It will be necessary to sit down now with whoever in your organisation is in charge of OSH and work out what you will need. Think of protective clothing, microfiltrating face masks, and (depending on whether your staff will be in direct/prolonged contact with influenza patients) many other items. A specific issue is the availability of antivirals. If these are needed in any more than very modest amounts, and you do not have them stockpiled yet, it will be highly unlikely that you will be able to procure them now.

A second step is to look at your organisations programmes, and how they will adapt to the pandemic. Is it likely that your organisation will be involved in the treatment of patients? If so, you will need to start planning for that now: get your programme people to give you an idea of where things might go – again, developing a couple of likely scenarios – see what would be demanded from logistics in these scenarios, and how you can address those demands. I cannot stress enough that now is the time to pipe up if your conclusion would be that logistics cannot address the demands in one or more of the scenarios: both top management and your programme departments should know. Conversely, it would also be a good idea what would be your best guess of what you can do.

In case of a pandemic, your biggest headache (next to keeping your supply chain from collapsing) will probably be procurement: demand for the same limited amount of resources will increase tremendously (share prices for manufacturers of antivirals are already soaring), and you will be just one of the very many customers. So start talking now with your suppliers and see what can still be done. You might already be too late, but you will definitely be too late if you wait much longer.

As with the protection of your supply chain, using a methodical approach to the increased demand caused by the pandemic is essential, and the same four-step approach can be used successfully. However, in the end it is again not so much how you plan, or what you plan, but that you plan which will make all the difference. Don’t be caught on the hop.

(Image by Ryan Schultz. Some rights reserved.)

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Five things not to do during a rupture

by Michael Keizer on April 1, 2009

So all your planning has gone for nothing, and for whatever reason you have a rupture in your supply line. What should you not do?

  1. Don’t panic. Take a deep breath. Take your own pulse. Stare at the ceiling. Kick the wall — hard. Kick your supply manager. Kick yourself. But for the sake of whatever you hold holy DO NOT PANIC. Yes, you have your medical director to one side screaming that people are dying and that you NEED! to take ACTION! NOW!, while to your other side your purchaser explains that the only ready source of paravenozole is highly suspect and in any case asks a prohibitive price. And yet you know that if you give in to your first instincts and do whatever can be done as quickly as possible, you will make costly and (more pertinently) dangerous mistakes. Keep that in mind and take some time to work out the possible options and what there results would be.
  2. Don’t play the blame game. Analyse later what went wrong and what can be learned, but for now don’t start blaming people (least of all yourself). The only result will be a lack of cooperation and an atmosphere of distrust that will prevent you from taking decisive and effective action.
  3. Don’t double-order. The temptation to put in an emergency order of paravenozole to get things in fast. However, it will probably mean that you will end up with overstocks once the previous order comes out of your pipeline (unless it has a very long expiry). Instead of double-ordering, first try to expedite the orders that are already in your pipeline. Talk with your suppliers and see what they can do, and how much extra it is going to cost; this is where your previous investments in a good relationship with your suppliers will pay off. Only double-order as a last resort, when nothing else works and it is clear that people will die or suffer if you don’t; but be clear about the likely consequences, which will include expiries and cost.
  4. Don’t change protocols. Discuss with your program managers what temporary changes can be implemented to circumvent or at least mitigate the rupture; but don’t change protocols because your staff will assume that it is permanent and will not thank you when they need to change back again.
  5. Don’t neglect to learn. Remember what I said about the blame game? However, that should not stand in the way of a thorough analysis of the reasons and causes of the rupture, and what can be learnt from them. Should your systems be changed? Should staff get more training? Or more supervision? What went wrong in your communications? Is your supply line as transparent as it should be? All valid and important questions, which (together with many others) you should ask yourself and your co-workers after the rupture has been resolved. If you don’t, you are on your way to the next one.

(Image: the weakest link by Darwin Bell. Some rights reserved.

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Some humourless links

by Michael Keizer on March 26, 2009

Some jottings that have been sitting in my to-do stack for too long.

  • Alanna Shaikh discusses the mechanics of getting rid of HIV/AIDS, and rightly flags the impossible logistics of such a plan. Be sure to scroll down to the comments section for a chuckle and an occasional blood pressure spike.
  • GlaxoSmithKline offers to make drugs more accessible for the world’s poor. It always surprises me that some think that making drug prices lower will automatically dramatically cut total cost. Just calculate the cost of getting a tablet of paracetamol to an Ethiopian patient, and you will see where the it actually is being incurred. Small hint: it is not the amount received by the manufacturer.
  • The European Union allocates an extra EUR 27 million ‘to strengthen global humanitarian preparedness and the response capacity of international organizations’. One of the purposes would be to improve international coordination and integrated logistics. More to come on integration of logistics, courtesy of a very interesting recent doctoral promotion (don’t touch that dial!), but it is already interesting to note how more and more donors see the importance of earmarking funds for logistics.

(Picture: Liquid Links by Desirae. Some rights reserved.)

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Latest job opportunities

by Michael Keizer on March 4, 2009

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Your fundamental rights

by Michael Keizer on March 3, 2009

Transport of artillery early 17th century (Jean Théodore de Bry, 1614)

(This is the first article about the fundamentals of logistics in health and aid. A number of the issues that I outline here will come back in future postings.)

The health of a supply line is often measured by the ‘five rights’:

  1. Are the right goods (including in the right quality[1]) being delivered?
  2. Are they delivered in the right quantity?
  3. Are they delivered to the right location?
  4. Are they delivered at the right time?
  5. Are they delivered at the right price?

Of course, these same five rights are important in health and aid logistics as well, but the emphasis will often be different from ‘normal’, commercial logistics settings.

Starting with health logistics, it will be clear that the first four rights will get much more emphasis than in a commercial setting. E.g., a supermarket chain can decide not to sell lettuce for a day if the lost profit margin would be less than the extra cost of getting it to its stores; ethically, a hospital cannot easily weigh the lives and health of its patients against the costs — and in any case such a trade-off would make an interesting PR exercise. In other words: the constraints in medical health are mainly in the first four rights, and are much more rigid than in most (but not all) commercial settings. However, in resource-constrained settings (like in most developing countries), a lack of efficiency can mean that we have less resources to purchase life-saving supplies: health logistics in developing countries is a constant balancing act, where each error in either direction can mean loss of life or increased suffering.

In emergency aid, this holds true to an even greater extent: ‘the right quantity’ often will be massive, ‘the right quality’ is often not easy to determine in the hectic environment of an aid operation (hence often large amounts of supplies arrive that are in the end not used), and ‘the right location’ more often than not is extremely difficult to access due to shattered infrastructure, natural obstructions, or security issues, and will often be far away from the origin of the goods. This does not leave much space to experiment with ‘cheap’ alternatives. However, that does not mean that we should ignore efficiency: if gains can be made without endangering the effectiveness of our aid, why not use them? This will be the subject of a future posting — for now, let me just make the observation that I feel that we sometimes too easily allow ourselves to forget efficiency in our struggle for aid effectiveness.

In developmental aid[2], we are much more able to emphasise the cost side of logistics. Yes, our target areas still are often to access, and yes, the scale still often is massive, but we now can plan and forecast more easily (allowing to determine the right goods, the right quantity, and the right time more accurately), and hence we can plan our procurement and transport activities much further in advance. This implies that we can also procure much closer to our target areas, which by itself will already help decreasing cost. Most excuses for inefficient logistics that we see in emergency aid do not exist in development aid, and hence inefficient supply lines are a lot less acceptable.

Footnotes

[1] Especially in medical logistics, sometimes a sixth ‘right’ is added: are the goods delivered in the right condition. However, this is arguably included in the first right: e.g. expired drugs will definitely not have the required quality.
[2] Yes, I am aware that this is an artificial distinction and that there is a continuum from emergency to developmental aid. However, please humour me and allow me to use this divide for our analysis.

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Thoughts about food

by Michael Keizer on February 15, 2009

Over at Market Sceptics, Eric deCarbonnel predicts a food catastrophe for 2009. My knowledge of food production is not good enough to really assess whether or not he is right, but he makes a convincing case. For example, have a look at this map:

You will notice that there is a large overlap between the countries that experience the worst droughts and that produce most of the world’s food: China, Australia, and the USA. Not a very reassuring idea.

So what would this mean for us? Well, you can be pretty sure that organisations that deal with food aid, WFP most of all, will be busy. WFP logistics will most likely be strained to its limit, if not beyond. Logisticians in any organisation that deals with the malnourished (and that would include almost any medical or food aid NGO) will have to deal with an increase in the number of feeding programs that will have to be supported, and should already prepare to be able to do so — e.g. by taking a hard look at their procurement and transport capacity for therapeutic food. And manufacturers of therapeutic food can look forward to yet another big year — if their production and logistics capacity can keep up.

Does your organisation have the logistics capacity to deal with this?

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