In general terms, three strategic objectives need to be evaluated and balanced in order to maximize the performance of a supply chain operating in a business environment: reduction of operating costs, reduction of capital investment and improvement in the level of service.
The cost reduction objective is aimed at minimizing costs primarily associated with transport, handling and storage activities. Capital reduction focuses on reducing investments in resources used in logistics activities, thus maximizing return on assets. The strategic objective of improving the level of service seeks to maximize the value provided to the customer, associated with the potential maximization of revenues and the consequent sustainability of the business in the long term. In this way, the strategic objective of a business supply chain can be defined based on the financial returns provided to shareholders and the value delivered to the customer, that is, the production of profit and high quality products and/or services, aligned with the objectives and values perceived by customers.
In a crisis situation, however, the objectives are particularly different. Supply chains operating in an emergency environment have an urgent priority on maximizing the level of service in an environment where pressures for a precise accommodation in time are present.
In crisis situations, the primary objective is the effectiveness of operations. Specifically, this translates to needs for rapid movement and delivery of food, water, shelter, vaccines, reduction of human suffering, medical treatment; in the creation of temporary structures for transport, storage and information; in the development of public campaigns, etc.
Another difference with respect to traditional supply chains is the need to run operations in an environment of extreme resource, capital and infrastructure constraints. Generally, in crisis situations, the infrastructure is destroyed (or at least extensively damaged), resulting in difficulties in transportation, communication, shelter, food and basic sanitary conditions, making the performance of logistical activities a challenge.
Initiated in 2009, this line of research has been developed at the Institute of Graduate Studies in Administration at the Federal University of Rio de Janeiro (Coppead-UFRJ), with the aim of unifying the theoretical and practical references present in different areas of knowledge: from humanitarian and disaster/crisis response logistics, military logistics and business logistics. In the commercial field, the interest lies in situations where time pressures are present. A closer research collaboration between these areas of knowledge can facilitate the structuring of more effective chains to deal with the logistical complexities in the current context, both in the private sector and in emergency situations.
The objective of this article is to present preliminary results of this line of research. In this context, the present study seeks to propose a theoretical framework that helps assistance and response organizations to crisis situations to achieve better performance. For this, the proposed theoretical framework highlights the necessary skills at each stage, as well as associated performance measures.
In terms of conceptual validity, in addition to the academic effort of extensive literature review, this framework was developed with the critical assistance of professionals from the military area (through contacts with officers from the Naval War College - EGN), from the business area (through lectures at specialized conferences – such as the ILOS Annual Forum) and professionals directly involved in anticipating and responding to crisis situations (through contacts with the administrative bodies present at the Rio de Janeiro Operations Center – CoR).
The article is divided into two parts. In this first part, the motivation and relevance for the development of this research project will be presented, as well as an overview of the proposed framework in its three phases (Preparation, Immediate Response and Reconstruction). The second part of the article will detail the proposed framework, presenting the processes involved and a discussion on performance measurement.
Motivation and relevance
Two motivating factors for the development of this line of research, in addition to directly improving crisis response systems, are the recent increase in the number of natural disasters and the fact that commercial supply chains are also affected when these catastrophes occur. .
In recent years, the world has seen an increase in the number of reported disasters. These constitute a pattern of rising volatility and are commonly attributed to changes in climate and human occupation patterns in hazardous locations. If previously these changes were considered anomalies, they are currently constant and with a tendency to increase.
Cred (Centre for Research on the Epidemiology of Disasters), a collaborating research center with WHO (World Health Organization) and UCL (Université Catholique de Louvain), in Belgium, maintains a comprehensive database with the aim of providing support to international humanitarian actions. The initiative seeks to streamline decision-making in disaster preparedness, as well as provide vulnerability assessments and prioritization of needs. The EM-DAT (Emergency Events Database) contains essential data on the occurrence and effects of more than 18 disasters in the world from 1900 to the present date. The database is constructed through a variety of sources, including United Nations agencies, non-governmental organizations, insurance companies, research institutes and news agencies. Over the past 50 years, the number of reported disasters has grown by more than 1.000% (Figure 1).
Figure 1 – Number of disasters in the world
Source: International Disaster Database – EM-DAT
In the case of Brazil, using information from the EM-DAT between the years 2000 and 2010, disasters resulting from floods and droughts are the most representative in terms of the number of people affected, as shown in Table 1.
Table 1 – EM-DAT: Natural disasters in Brazil 2000-2010
This pattern influences commercial supply chains, which are also affected by events. In addition to natural disasters, man-made crises (wars, acts of terrorism, etc.) have similar effects on populations and interrupt these supply chains. As previously presented, supply chains that operate in an emergency situation have a priority in maximizing the level of service in an environment in which the pressures for a precise accommodation in time are present. As a consequence of these pressures, crisis situations require strategies that consider better anticipation of risk events and, when the event is occurring, the need to quickly structure a temporary supply chain that is agile, adaptable and aligned.
An agile supply chain aims to respond quickly to short-term changes in both demand and supply flows, while buffering external disruptions in the chain. In order for this objective to be achieved, the solutions need to consider the use of anticipation strategies (postponement of activities, strategic positioning of stock and early structuring of flexible and resilient logistics systems) in balance with the use of reaction/adaptation strategies (plans of contingency and crisis management teams).
To achieve the goal of adaptability, the supply chain needs to have the ability to adjust its structure (changes in partnership relationships, supply strategies, use of technologies) to better meet needs. This capacity is developed by monitoring risk areas and supply sources, using intermediaries and service providers, which bring increased flexibility in operations, in addition to quickly identifying the needs to be met.
Finally, the alignment objective seeks to develop incentives that aim to unify efforts around the desired performance. This happens through an effective exchange of information between those responsible for supply and demand and the development of collaborative relationships that consider a clear definition of responsibilities, roles and tasks, in addition to the sharing of risks, costs and benefits.
The development of managerial strategies that consider the characteristics of agility, adaptability and alignment is a motivating factor for the development of this study. The private sector can and must learn these skills from crisis management to better achieve strategic social, environmental and economic outcomes.
In recent decades, companies have focused their initiatives on increasing speed and reducing costs. This accelerating trend can be exemplified by the emergence of business arrangements such as time-based management, lean manufacturing, high-speed management, cycle time compression, fast cycle time, agile production, etc. Commonly found examples are: just in time (JIT) and efficient customer response (ECR).
Similarly, experiences gained in applying these business practices can serve as a source of knowledge for planning and organizing operations in crisis situations. However, focusing solely on these goals of accelerating and minimizing costs does not ensure long-term competitive advantage in today's dynamic business environment. Supply chains can be fast and efficient in their cost management, but have the difficulty of adapting to structural changes in the market.
In this way, issues of sustainability and resilience at the business level can also be improved through the study of crisis situations. The increasing level of complexity in managing global supply chains requires companies to have the same capabilities as humanitarian agencies, such as agility, adaptability and flexibility. Global chains have longer and more uncertain performance cycles than domestic chains, and are more susceptible to uncertainty, interruptions, delays and increased risk.
Proposed benchmark
Following a hierarchical view of processes, the proposed theoretical framework is shown in Figure 2.
Figure 2 – Proposed benchmark – Overview
The framework assumes that both processes and their relevant performance measures need to be aligned with different types of crisis situations. Although there are several classifications of disasters and types of crisis, a generic conceptualization considers the probability of the event happening, the period that it lasts, the magnitude or impact of its consequences and the way in which the system recovers after its occurrence. Using this abstraction, the combination of these factors characterizes different types of crisis.
Crisis logistics management can be seen as a process divided into phases, in which the set of processes and their associated performance measures change in priority, adapting to each specific phase. Thus, more than a simple classification, the different phases imply a more dynamic management of the system, translating into different prioritization of activities over time.
Generally speaking, three distinct phases are commonly specified: (1) Preparation; (2) Immediate Response; and (3) Reconstruction. In Brazil, for example, the master plans of the National Secretariat of Civil Defense cover specific programs for the so-called four “global aspects”: (1) disaster prevention; (2) emergency and disaster preparedness; (3) disaster response; and (4) reconstruction.
Logistic activities are present in all phases of crisis management and, in each of them, different resources and skills are needed. In the preparation phase, logistical planning is fundamental for the elaboration and execution of prevention measures and evacuation plans, when it is possible to follow the evolution of the phenomenon. During the response phase, the speed with which basic survival items (such as water, food, hygiene items and medicine) reach victims can mean saving thousands of lives. In reconstruction, logistical support is needed to optimize the use of scarce resources that are normally allocated to the last phase. Additionally, the reconstruction phase anticipates the next occurrence of the same event, with the aim of mitigating risks and increasing agility in the presence of the event.
Preparation
The preparation phase mainly involves risk prevention and drawing up action plans in case of disasters. According to the United Nations International Strategy for Disaster Reduction (ISDR), the term mitigation is defined as “the reduction or limitation of the adverse effects of threats and related disasters”. These are, therefore, actions such as, for example: reinforcing containment dikes, which could have prevented much of the flooding that followed Hurricane Katrina; avoid occupation of slopes, which in the case of Rio de Janeiro is responsible for most landslides; installing underground (rather than overhead) power cables in regions that suffer from recurrent storms, which can prevent power outages and accidents with people being electrocuted.
As with mitigation, action plans naturally depend on the disasters that typically occur in a given region. Places near volcanoes, like Iceland, or experiencing periods of storms and hurricanes, like the Gulf of Mexico coast, need to have well-developed evacuation plans.
In addition, it is possible to plan the items that will be needed after the occurrence of a disaster. The main products demanded are: water, medicines, chlorination tablets, tents, blankets and protein biscuits for malnourished children. Some aid agencies purchase such items so frequently that they have developed stronger relationships with their suppliers and long-term purchasing agreements, as well as positioning items in anticipation in areas commonly hit by critical events. The International Federation of the Red Cross (IFRC) – and its counterpart in the Islamic world Red Crescent –, for example, has storage and distribution centers around the world with stock of products in anticipation of disaster situations (Figure 3).
Figure 3 – Red Cross and Red Crescent logistics centers for anticipating crises
In academic terms, several systems and planning models have been developed to make disaster response more agile. Complex mathematical models can also be found in the literature for planning inventories in cases of disasters and ruptures in the supply chain.
Prompt answer
Once a crisis event occurs, the plans drawn up by aid agencies are put into effect. In terms of management priorities, at this stage the goal is speed at any cost, as the first 72 hours are crucial. Large-scale disasters require a rapid response from a set of actors who must collaborate to create a supply chain that delivers needed goods to victims as quickly as possible. However, with all the complexity involved, action plans are often not followed and the lack of coordination and cooperation between actors makes management chaotic.
Much is said about the challenges of establishing an agile, flexible and temporary supply chain, about the critical role of cooperation between actors and about partnerships between private companies and humanitarian agencies.
For example, after a catastrophe occurs, local (or global, depending on the size) aid agencies send a team of experts to carry out an initial assessment of the extent of damage and the number of people affected. This assessment forms the basis for developing lists of specific items and quantities needed to provide immediate relief to affected populations. However, this information tends to be quite uncertain and limited, especially in the early stages and, consequently, many actions are guided by estimates and assumptions of needs. When supplies arrive, local transport, storage and distribution must be organized, which is a challenge given the remote locations where disasters tend to occur, the uniqueness of each disaster's needs in terms of knowledge and assets, and the fact that that the site is often in a state of chaos, with roads, airports and bridges destroyed, severely limit distribution capacity.
Faced with so much complexity, cooperation between actors becomes a critical factor. The United Nations, in order to promote a coordination mechanism between humanitarian aid agencies in large-scale disasters, created the United Nations Joint Logistics Center (UNJLC), which brings together key partners inside and outside the UN, with the aim of increasing the alignment of operations.
A successful response also depends, to a large extent, on local capacity building and local government collaboration in enabling the entry of foreign people and agencies. Political issues are huge obstacles (or triggers) for organizations to act in crisis situations.
Reconstruction
Finally, as large-scale disasters can substantially destroy housing and local infrastructure, or even trigger slow-onset disasters such as famine and epidemics, the recovery phase is extremely important to rehabilitate the site and promote the well-being of the community. population. This is, however, the phase that receives the least attention from scholars and the media. Consequently, the number of donations is also reduced and cost containment becomes a mandatory issue.
The main challenges of this phase include: the need to rebuild houses, bridges and hospitals without the support of a transport infrastructure (a huge challenge for civil engineers); promoting the reunion of family members and friends who were separated by the disaster; the provision (in an economical way) of food, medicine, construction material and other items that are not yet available from local suppliers; and the rehabilitation of the local economy.
Appropriate crisis management must therefore consider the successes and failures of the response and reconstruction phases so that action plans are updated and the risks that are present are mitigated, promoting the integration of knowledge and learning throughout the various crisis events. crisis.
In part 2 of this article, to be published in the July issue of Tecnologística, the processes involved and the associated performance systems will be detailed.
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