Coordinating the Relief Chain in the Chinese Context
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Coordinating the Relief Chain in the Chinese Context Graduation Project by Danqi Liu For MSc Engineering and Policy Analysis At Faculty of Technology Policy & Management Delft University of Technology Coordinating the relief chain in the Chinese context Master thesis report Author: Danqi Liu Student number: 4032241 Program: Engineering and Policy Analysis Graduation date: 26 th of July, 2011 Graduation Committee Chairman: Prof. Dr. Ben Ale Section Safety Science First supervisor: Dr. ir. Ellen Jagtman Section Safety Science Second supervisor: Dr. Marisa de Brito Section Transport and Logistics Third supervisor: Dr. Mark de Bruijne Section, Policy, Organization, Law & Gaming Acknowledgement Acknowledgement This report is the result of a graduation assignment for the master study Engineering & Policy Analysis at Delft University of Technology in the Netherlands. It included a six month research on the topic of coordination issue in the Chinese disaster relief chain context. This master thesis research explores the coordination prospects in the disaster relief chain for the Chinese actors. This insight provides added value for the Chinese relief responders and helps them to better deal with the logistics arrangement in future disasters. Before rushing into presenting the content of this master thesis research, I would like to express my appreciation to those without whom this project could not have been completed successfully. I would like to thank Ellen Jagtman, whose support and encouragement become a power source of my constant motivation and energy. She devoted a lot of her time in this project. It is impossible for me to image completing this work without her guidance. Her constructive feedbacks and insights played an indispensable role in shaping this thesis. Her pragmatic comments and encouragement always enlightens me, making our regular meeting on every Tuesday my favorite working day in a week. Also, I am grateful to Marisa de Brito and Mark de Bruijne, who were involved in the project on a regular basis. They provided me with valuable knowledge and data regarding the research problem. Thank you for the contribution of their time, useful comments, relevant books and background reading materials. Also, they kept me challenging my own work, in order for it to be further improved all the time. Furthermore, I am thankful to Professor Ben Ale, the chair of the graduation committee, for the valuable insights he provided regarding the scope and contents of the project. His efforts enabled the project to produce scientifically relevant results in the end. At last but not the least, I want to thank you for all the interviewers who provided their valuable insights. Although I have never seen them in person, they still kindly provide their generous help to me. I would also like to thank my friends Sebastian van Kessel, Jeremy Ghilain and Sharon Goh who helped me on the reviewing. Thank you all. Danqi Liu 06.07, 2011 I List of abbreviations List of abbreviations SC: Supply Chain SCM: Supply Chain Management NGO: Non-governmental Organization INGO: International non-governmental organization JP: Joint Procurement QR: Quick response CRP: Continuous Replenishment Program VMI: Vendor Managed Inventory JMI: Joint Managed Inventory CFPR: Continuous, Forecasting, Planning and Replenishment VICS: Voluntary Inter industry Commerce Standards TPL: Third Party Logistics UN: United Nation OCHA: Office for the Coordination of Humanitarian Affairs USAID: United Stated Agency for International Development II Executive Summary Executive Summary In the past decade, there has been an increasing number of natural disasters that led to catastrophic damage to mankind. China is one of the countries most affected by natural disasters in the world. Although logistics activities account for a large percentage of total operations in aftermath relief, they have frequently not been recognized as key levers for improving the effectiveness and efficiency of humanitarian organizations and as being crucial to operational excellence. Meanwhile, due to the large number of relief actors involved in the Chinese context, the coordination among various players becomes a very prominent challenge to cope with. Therefore, this master study aims to explore how to improve the coordination among actors in the Chinese relief chain context. This research consists of theoretical and empirical parts. In the theoretical party, this thesis explores the prospects of transferring lessons learnt from the commercial supply chain to the relief chain by finding out the existing coordination mechanisms in the commercial logistics operations. Some coordination mechanisms- i.e. Joint Procurement, Quick Response, Continuous Replenishment Program, Vendor Managed Inventory, Joint Managed Inventory, Continuous Planning, Forecasting and Replenishment and 3 rd party logistics are the practiced coordination mechanisms in procurement, inventory and transportation processes together with corresponding characteristics and requirements to adopt them. Besides specific coordination mechanisms, generic lessons learnt from the commercial supply chain are also abstracted. They are Resource Sharing, Joint Decision Making and Outsourcing, which can be performed on strategic, tactical or operational levels based on the orientations of relationships among coordinating alliance. These experiences from the commercial supply chain come as a foreground for relief actors to step on. Although the objective of the relief chain and commercial supply chain remains the same i.e. delivering right amount of materials to the right places, some factors existing after major disasters distinguish the relief chain from the commercial supply chain fundamentally. These factors are 1) Urgency 2) Uncertainty 3) Complexity of operation conditions 4) Co-existence of various actors. Due to the existence of these challenging factors in disaster aftermath, the current practicing coordination mechanisms in the commercial supply chain can’t be transferred directly into the relief chain. As the application level for these coordination mechanisms are evaluated respectively in this thesis, it turns out Joint Procurement, Quick Response and 3 rd party logistics are those promising mechanisms with a high level of application prospect in the relief chain. Meanwhile, the generic lessons from the commercial supply chain still hold in the relief chain and especially when they are put in practice operationally or tactically among organizations. The theoretical study provides the research a direction to further explore the reality. The Wenchuan earthquake case study is conducted to test the prospects of these coordination methods in Chinese context. Through this case study, all the specific promising coordination mechanisms are found with some changes adapted to specific situations. Some coordination initiatives that reflect the generic approaches (Resource Sharing) in commercial chain are also discovered i.e. demand information sharing and inventory capacity sharing. Meanwhile, some new coordination initiatives are invented uniquely by relief actors. They are coordination to have a complementary supply effect and coordination for the sake of legal operation. In order to better involve actors in the relief chain, the following recommendations are offered to humanitarian organizations during the preparation phase 1) Non-governmental can be incorporated into existing relief system to achieve an overall complemented effect to governmental relief 2) Build up sustainable relations with suppliers on emergency supply 3) NGOs Identify strategic alliance before emergency. During response phase, it is advisable for NGOs to 1) Spot their position in less attention areas to avoid media’s framing effect 2) Coordination by standing by when information is unclear. III Table of Contents Table of Contents ACKNOWLEDGEMENT .........................................................................................................................................................I LIST OF ABBREVIATIONS ................................................................................................................................................... II EXECUTIVE SUMMARY .................................................................................................................................................... III TABLE OF CONTENTS ........................................................................................................................................................ IV 1. INTRODUCTION ......................................................................................................................................................... 1 1.1. PROBLEM CONTEXT ................................................................................................................................................. 1 1.1.1. Disaster relief ............................................................................................................................................ 1 1.1.2. Actors in the Chinese relief context .......................................................................................................... 2 1.2. RESEARCH OBJECTIVES ............................................................................................................................................. 5 1.3. DEFINITION OF KEY CONCEPTS AND RESEARCH BOUNDARY .............................................................................................. 5 1.3.1. Key concepts