Manufacturing humanitarian aid supplies near where they will be needed could save time and procurement costs
Imagine a tsunami hitting the coast of Africa tomorrow. Emergency aid agencies would jump into action. Charitable funds would pour in. Relief goods would be dispatched. But how fast would the aid take to arrive? And at what cost?
A recent research paper by Cardiff Business School considers just those questions. The conclusion makes worrying reading for the annual $12bn aid industry: current supply models are not as cheap, efficient or environmentally friendly as they could be.
The paper tracks the steps required to transport goods from the factory floor to a hypothetical disaster zone in Uganda, west Africa. By way of example, it focuses on the humble tarpaulin, an essential non-food product in emergency relief.
“We found that the supply chain is very complex … in terms of logistics, the humanitarian world is a long way behind the commercial world,” says the paper’s author, David Taylor, a pioneer in supply chain modelling.
Taylor’s “spaghetti maps” demonstrate how tarpaulins are sourced primarily from China and India, and to a lesser extent from Europe and North America.
The urgency of the need after an emergency means goods are flown in or shipped at considerable cost, both financial and environmental. In the rush, quality considerations can often fall into second place. Prices may also rise on the back of reduced supply.
Cost of supply
There is “huge scope for improvement” Taylor argues, pointing to research suggesting that supply chain costs can absorb between 40% and 80% of total humanitarian budgets. Commercial best practice runs somewhere between 10% and 15%.
The research remains hypothetical. Not so the solution, according to the non-governmental organisation behind the investigation. Advance Aid, a UK-based charity with backing from logistics giant DHL, believes it has the answer to shorter and quicker supply routes: manufacture locally.
The charity is currently finalising an arrangement with a large South Korean tarpaulin manufacturer to establish a factory in Nairobi, Kenya. The move is the first step in a $14m, five-year strategy to develop 150,000 emergency packs. These include a dozen items, from tarpaulins and mosquito nets to blankets and water carriers.
In addition to the supply efficiencies, local procurement would help provide thousands of new jobs, argues Advance Aid spokesman Howard Sharman. The charity plans a revolving fund that would see sales revenue reinvested in local production. “Don’t donate. Invest,” runs his simple message.
“This is about emergency relief supply, but at the bottom it’s a development project because it’s about building jobs and wealth locally,” he says.
Despite its intuitive good sense, local procurement faces a number of hurdles. The most significant is capacity and cost competitiveness. African manufacturers do not have either. At least, not yet. Local investment by corporations could begin to change that.
Structural financing problems are a second obstacle. Aid money tends to turn up after an event, not before. Large manufacturers can offer credit to humanitarian agencies, allowing them to stockpile ahead of time and pay on use. But cashflow issues effectively keep smaller players out of the market.
“The problem is not one of a shortage of money and products. But the money and products are in the wrong place and the wrong time,” Sharman argues. A dollar invested locally ahead of a disaster would save many dollars more on international procurement afterwards, he says.
The theory makes sense. Let’s hope it faces few tests.