Case Study: Logistics of Supply Chain Challenges for the Red Cross

The Red Cross, a humanitarian organization, faces logistical challenges that far surpass that of Walmart or Dell. Up to 80% of their costs are in logistics, so it is not surprising that they should seek excellence in their supply chains. But their operations are fraught with uncertain and urgency, so many of the principles that apply to business supply chains do not fit as readily. The International Federation of Red Cross Red Crescent Societies (IFRC) is the largest humanitarian organization in the world, composed of 186 separate National Societies. Coordinating such a dispersed organization is no easy feat, as was made clear when Hurricane Mitch struck Honduras in 1998. IFRC was very slow to organize relief efforts. Its aid did not begin reaching victims until weeks after the event, long after other aid organizations were already on the ground. This lackluster performance caused donors to wonder whether their dollars were well spent and whether the IFRC was capable of managing a world-class supply chain that could respond to disasters in an efficient and cost-effective way.

The early version of IFRCs Supply Chain IFRCs cumbersome supply chain was centrally managed in its headquarters in Geneva, Switzerland. Whenever disaster struck, a team from Geneva would go evaluate the damage and send back information to create the Relief Mobilization Table, which described what was needed and where. Tents, blankets, food, water, medical supplies, and thousands of other items might be on the table. The data is then sent out to suppliers, the separate National Societies, and also to donors, letting everyone know where to send relief supplies. These agents would then ship the goods to IFRCs emergency units near the disaster area, handling custom clearances, inventory, warehousing and other logistics duties. Then the emergency units would distribute the supplies to local partners, who transported them to the beneficiaries. This centralized supply chain model stumbled badly, especially because of poor information flow and lack of transparency about who was sending what. The disaster side might be flooded with blankets and tents, yet never receive desperately needed telecom equipment. Many organizations send unsolicited goods, which often hindered IFRCs ability to obtain and distribute the needed relief supplies. Failure to coordinate transportation led to unnecessarily high costs for multiple transatlantic flights and shipments. It is clear that IFRC needs a supply chain that is able to handle uncertainty. IFRCs New Supply Chain Management System To improve its performance, IFRC began to transform its supply chain into a decentralized model, creating three regional logistics units in Dubai, Kuala Lumpur and Panama. These units pre-position supplies in warehouses for the most common disasters in their areas, so they can ramp up quickly. For the Information System, IFEC deployed the Humanitarian Logistics Systems (HLS), created especially for disaster recovery by the Fritz Institute. Although Enterprise Resource Planning (ERP) vendors offer supply chain modules along with their core modules for finances and human resources, their products are not designed for situations with so much uncertainty. Instead, IFRC needed a relatively simple system with a single data repository that could handle rapid mobilization. It also needed a system that could be accessed in real time in the field by its regional units, emergency teams, and also the local National Societies.

The HLS is a web-based software that supports several essential functions that helped transform the IFRC supply chain. First, it maintains country and disaster data for the regional units, so they can intelligently pre-position supplies. Once disaster strikes, the system can aggregate the items needed and generate the mobilization table. The software also manages appeals to potential donors, helping to avoid the duplication that plagued earlier efforts. For procurement, the software helps manage supplier relationships by tracking agreements and requests for bids, as well as generating standard purchase orders and invoices. HLS includes tables for tracking shipping information, and it can generate shipping documents, receipts for goods, and reports on where items in the pipeline are currently located and where they can be expected. Testing the New Supply Chain Management System The IFRCs new supply chain was first tested when an earthquake struck Indonesia and the justopened Kuala Lumpur Regional Unit took the lead. Although glitches, occurred, the supply chain was in motion in just three days, less than a third of the time it took IFRC to mobilize for the earthquake in Pakistan the previous year. The operation was also much more cost-effective, an estimation that it reduced cost by half. A Portal for Reporting Getting needed supplies to disaster-affected areas as quickly as possible is the first step toward helping as many people as possible survive. But the Red Cross also helps reduce psychological stress by offering an online-people finding and reporting service called the Safe and Well Website. When bombs exploded at the finish line for the Boston Marathon in 2013, spectators and runners could quickly visit the website with their mobile phones to report they were safe and well, reassuring their family members. The IFRC continues to improve its technology-supported supply chain and communications, to help people who need it around the world.

Discussion Questions:

1. What were the deficiencies in the previous Red Cross supply chain? (Provide at least 3 deficiencies)

2. What role did IT play in the new Red Cross supply chain? (Provide at least 3 roles)

3. What other elements are part of the new Red Cross supply chain? (Provide at least 3 examples)

4. What were the business results for the Red Cross? (Provide at least 3 results)

5. What complimentary assets would Red Cross need in order to reap the full benefits of the new information system deployed. (Provide at least 3 complementary assets)