- Email: [email protected]
Issues in managing disaster relief inventories
ARTICLE IN PRESS
Int. J. Production Economics 108 (2007) 228–235 www.elsevier.com/locate/ijpe
Issues in managing disaster relief inventories D. Clay Whybark University of North Carolina, Chapel Hill, NC 27599-3490, USA Available online 25 January 2007
Abstract This essay is concerned with the inventories that are held for disaster relief and the need for research into their management. Though forecasting is difficult, the evidence is that the number of disasters, natural and political, is increasing. Thus the need for disaster relief is increasing along with the desire to improve the process, including management of disaster relief inventories. Despite decades of enterprise inventory research, little literature is available on disaster relief inventories. In this article the nature of disaster relief, some of the research on disaster relief and on disaster relief inventories is presented. Characteristics of disaster relief inventories important to their management, from acquisition through storage and distribution, are described. Some of the developments in related fields that affect the management of these inventories are also pointed out. As the frequency of disasters increase, the management of disaster relief inventories is an increasingly important area for scientific research. r 2007 Elsevier B.V. All rights reserved. Keywords: Inventory management; Disaster relief; Inventory characteristics
1. Introduction The need for disaster relief arises from some misfortune that deprives a group of people of their food, housing, livelihood and other means of sustaining themselves. It requires the delivery of food, medicine, tents, sanitation equipment, tools and other necessities to the people in distress, often for considerable periods of time (a crop cycle, for example). The event that triggers the need for disaster relief can be natural or political/economic. Natural disasters include volcanic eruptions, wild fires, floods, earthquakes, epidemics and other disturbances to the natural environment. Another category of natural disaster is famine due to crop failure, particularly in the developing countries of the world. Famine is often related to the effect of E-mail address: [email protected].
adverse weather on crop production, although it can also be a consequence of long-term human activity. Political/economic disasters arise when people are displaced by war, genocide, political insurrection or other failures of government. These displacements can lead to large populations who are forced from their homes and even their countries. Natural and political disaster can strike nearly anywhere. Just consider recent happenings that included floods (Bangladesh, Central America, China, India), earthquakes (China, Iran, Japan, Turkey), volcanic eruptions (Philippines, United States), tsunamis (Malaysia, Thailand, Indonesia), famine (Ethiopia, Somalia, Sudan), forest fires (Malaysia, United States), and political displacement (Bosnia, Liberia, Rwanda, Sierra Leone, Sudan). The need for disaster relief is clear. People affected by disaster are at considerable risk without relief supplies.
0925-5273/$ - see front matter r 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2006.12.012
ARTICLE IN PRESS D. Clay Whybark / Int. J. Production Economics 108 (2007) 228–235
The response of the world community has been to create international agencies (governmental and non-governmental) and other organizations to provide the relief. There are now more than 100 organizations each with budgets over $1 million involved in disaster research, planning and relief. And there are many more with smaller budgets (The University of North Texas, 2004). One of the jobs of these organizations is to deliver the needed items to the victims rapidly, often in very remote parts of the world under difficult circumstances. The difficulty of accomplishing this job has been well documented (Drabek, 1986), but the job is important to society in general. Their success may be the basis of survival in cases of disaster, displacement, or disease. Thus there is an incentive to improve the performance of the disaster relief organizations. 2. Disaster relief A considerable body of literature has been developed on the management of disaster relief organizations. Much of it has to do with the social and organizational implications of responding to disasters in every part of the world, in areas which might lack infrastructure and/or may be involved in hostilities. Reviews of this literature have provided useful generalizations for managing the coordination required between organizational levels and different organizations during the response effort (Drabek and McEntire, 2003). The management issues involved in disaster relief have even entered the MBA classroom through the development of cases at the French Management Institute INSEAD (van Wassenhove et al., 2002a b). Critiques of the performance of these organizations’ responses to past disasters have been developed. Studies of these works have lead to improved planning and performance (McEntire, 1997). Information systems applications for disaster relief have improved greatly over the last several years (Turoff, 2002). As these improvements have taken place, the coordination among agencies has gotten much better (Turoff et al., 2004). These and other improvements have meant that much has been done to mitigate the toll of such natural disasters as earthquakes, forest fires, and floods. Better communication, early warning systems, evacuation procedures, building codes, improved fire fighting and rescue equipment have all helped reduce the impact of such events. Offsetting this, however, are the forces of increasing population, human
229
encroachment into ‘‘at risk’’ areas, and changing climate patterns. Despite the progress that disaster planning, mitigation and new management systems have made, the need for relief when such disasters occur still remains. As tragic as it is to contemplate, despite the improvements in disaster response, the evidence is that frequency of natural and political disasters is increasing (McEntire, 1999). Moreover, studies by the International Institute for Applied Systems Analysis (IIASA) and others over several decades point out that many areas of the world are barely able to feed themselves in good years. They suggest that per capita food production may be declining to critical levels for many people and generally conclude that the outlook for global food production is very pessimistic (Rosenzweig et al., 1995). Such studies suggest that famine will occur again in Ethiopia and other parts of Africa. Large parts of Asia and areas of South America are all prone to famine. In many of these places, it is not a question of whether famine will occur, but when and how extensive it will be. There is no question that it is important to continue the work of improving disaster relief planning and management. Even with this effort, however, the need to quickly and efficiently respond to disasters in all parts of the world is not diminishing. To provide relief rapidly requires access to the needed items and the logistics capabilities to move them to where they are needed. The role of disaster relief inventories in this chain of events is critical, but not well researched nor understood. 3. Disaster relief inventories Disaster relief inventories are one form of ‘‘social’’ inventories (Whybark, 2004). Other forms include strategic and defense inventories. Social inventories serve broad social objectives as opposed to being used for the benefit of an individual enterprise. Most often, national or regional needs for economic stability or defense are served by strategic and defense inventories. Like these inventories, disaster relief inventories serve social goals, but they are broader than national or regional goals. Given the importance of disaster relief, it is surprising that very little research is available on the role inventories play in responding to a disaster. The amount of research available on inventories that serve some business objective is in stark
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contrast to the lack of research on disaster relief inventories. Decades of work by academic researchers has provided a rich body of knowledge on the management of inventories in retail stores, production facilities, warehouses and other enterprise facilities. At the macro level, economists have long studied the relationship between aggregate inventory levels and economic behavior. But disaster relief inventory research is very limited. One exception is in the area of health services. The medical community has studied the management of stockpiles of medicines, blood, and medical supplies for quite some time (Bechtel et al., 2000). Some of the medical community approaches could serve as models for the management of other disaster relief inventories. One operational aspect of disaster relief where a research literature has been developed is in the area of logistics support. Logistics questions concerning location, transportation and storage are all related to the management of disaster relief inventories. In one study of the logistics needs for famine relief, the role of inventory is explicitly mentioned (Long and Wood, 1995). In another study of the logistics support for providing relief to the Kurds in the Persian Gulf, the role of information in matching supply and demand is explored (Long, 1997). These and other logistics studies do describe the complex environments in which disaster relief logistics systems must operate. The studies also help set the framework within which the management of disaster relief inventories must be managed. The interrelationships of demand, location, supply availability, transportation, and other logistics factors complicate the management task. Researchers have developed mathematical models to provide insights into the issues. The effects of uncertainty were studied explicitly by modeling the response to a disaster in an urban environment using stochastic programming (Barbaroso and Arda, 2004). Using a two-stage approach the authors first solve the response problem with stochastic estimates of transportation capacities, supply availabilities and demand, based on alternative disaster scenarios. In the second stage actual values are used as they are revealed. Actual data from an earthquake in Turkey were used to evaluate the results of using this model and to estimate the value of perfect information. In a distribution model for famine relief in North Korea, inventory allocation and vehicle routing alternatives were explicitly accounted for (Hwang,
1999). The model uses an objective function that minimizes starvation instead of distribution costs, thereby providing different, but very acceptable solutions. The argument that the annual number of incidents of natural and political disaster is likely to increase is a strong incentive for increasing the efficiency and effectiveness of disaster relief. Research into the means for achieving this point out that planning, including effective procurement planning, is a key component (Kelly, 1995). Of course, procurement relates directly to the investment in inventory, a key component in the management of enterprise inventories. Why is it that, with the exception of the medical community, there is so little literature on the management of disaster relief inventories? The fundamental questions of inventory management are how much to buy, when to buy it and (to a certain extent) where to store it. These questions apply whether the objectives are social or enterprise. The issue of where to store the inventory might even be more important in the disaster relief inventory world, but the same three questions are applicable. In the enterprise world, there is considerable theory to help answer these questions. Why then, is not there a parallel literature on inventory management in the disaster relief inventory world? There are differences between the enterprise and disaster relief inventory worlds. They are significant enough that the existing body of research literature on enterprise inventories is not directly transferable to the management of disaster relief inventories. These differences are found in the environment and characteristics of disaster relief inventories in all areas from acquisition through storage and distribution. They are important impediments to the transfer of the existing theory to the disaster relief world. Moreover, understanding the differences is clearly a useful avenue for research. 4. Disaster relief inventory characteristics Important characteristics of disaster relief inventories distinguish them from enterprise inventories and need to be understood in order to improve disaster relief inventory management. The differences act as inhibitors to the application of the enterprise inventory theory that is so abundant. Some of the important differences from enterprise
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inventories in the areas of acquisition, storage and distribution will be described in this section. A summary of these differences are found in the Appendix. 4.1. Acquisition There are two aspects to the acquisition of disaster relief items. The first is acquisition and storage of these items in anticipation of a disaster. The second is the development of sources for acquisition of items for distribution during a disaster relief operation. This second activity involves finding sources for commonly needed items which are located near potential disaster areas. This is an important element of disaster planning. The identification of potential sources that are possibly never used is not as frequently required in the management of enterprise inventory. In managing disaster relief inventories, however, it is important to consider how these potential sources would trade-off with inventory since they represent a form of ‘‘capacity.’’ An additional concern for disaster relief inventories is that sources in certain countries may compromise the ability to respond to disasters in certain other countries for political reasons. In an enterprise setting, determining when to place an order and the amount of inventory to buy or make is based on estimations of future demand. Estimates of the expected future need are a major component in calculating the quantity to purchase or produce. The amount of uncertainty in the estimates is a major component in deciding when to make the purchases or do the production. By ordering or producing the inventory a little early there will be extra on hand to act as a buffer against higher than expected demand. This logic is not very applicable to the disaster relief inventory world. There is very little in the enterprise setting that is the equivalent of predicting the occurrence of a disaster. Fashions have highly uncertain demand, spare parts have uncertain timing, and medicines have highly-uncertain timing and demand. Among these, only medicine may offer some useful parallels. Like medicines, disaster relief inventories are subject to uncertain demand and timing plus the added uncertainty of location. For instance, where will the next earthquake strike? The characteristics of demand are clearly an important distinguishing attribute of disaster relief inventories. An emerging
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body of work on risk management in operations may provide valuable future tools for dealing with uncertainty (Seshadri and Subrahmanyam, 2005). Ownership of disaster relief inventories is another distinguishing characteristic. It is lodged in local governments, international or nongovernmental organizations (NGOs), or other private relief organizations. As a consequence, not much is known about disaster relief inventories in the aggregate. In an attempt to address this problem, the United Nations has formed an office to centralize disaster relief resource information, including data on inventories available for emergencies. The registry is maintained by the Office for the Coordination of Humanitarian Affairs (United Nations, 2004). Because of the diffusion of ownership, it is important to have communication between disaster relief organizations. The Internet revolution has provided a platform for this need. There have been substantial inroads in the use of the Internet among agencies involved in disaster relief and extending the use to the management of disaster relief inventories is essential. For managers of disaster relief inventories it is also important to know, for political reasons, if an inventory in one country is or is not available to meet a need in another country. This is a concern that does not arise in managing enterprise inventories. 4.2. Storage In deciding where to store the inventory the time and cost of transportation to the potential demand points is an important consideration. Political considerations may also affect the plans for inventory location as well. Indeed, ownership may also dictate physical location. The tradeoff between sources of supply and owned inventory comes into play here. The physical location of the inventory must take into account the need to have the inventory accessible for monitoring or shipping when the need arises. It must incorporate considerations of security, corruption in the government or other factors that are not usually contemplated in the management of inventories for enterprises. Many inventories, such as food and medicine, have expiry dates that must be honored. This has several implications for their day-to-day management. The expiry dates on time-dependent
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inventories must be monitored constantly in order to ensure that they are still useful for their purpose when the need arises. Products that are closest to their expiry date should be used first when possible. Linking information on inventories of the same product would facilitate the use of products nearest the expiry date, a task that is generally performed by local enterprise inventory managers. Since the timing of need is so uncertain, it is possible that some items will need to be replenished with fresh supplies. This has some important implications, particularly for disaster relief inventories that may be located in numerous facilities. Location is important because the inventories must be accessible as removals are scheduled. Removed items can either be placed in a legitimate market (requiring information on alternative demand sources) or be destroyed in a safe fashion. The latter may mean that the inventories should be located in secure geographical areas. These areas would have minimum political corruptness, would prevent expired goods from entering the black market, and would assure proper disposal should it be necessary. Another issue that must be managed for some of the items, like medical and communication equipment, is technological obsolescence. For example, a cache of hand-crank telephones would be of no use today in disaster relief activities since the infrastructure to support such equipment no longer exists. The management of inventories subject to technological obsolescence requires sophisticated information processing and communication capabilities. The monitoring required here is both external (what items or parts need replacement) and internal (where are they located). Inventory accessibility is needed as well to do the replacement. A different level of concern is the necessity to replace an obsolete part in an item in inventory. This requires a different level of skill than simply removing and replacing an item that has reached an expiry date. Technological obsolescence of disaster relief inventories is a complicated question. In general the issue is not one of having the latest technology available, but having technology that is supported by the infrastructure available in the areas of likely need. There are circumstances where newer might be better, for instance in medical supplies and in the provision of sanitary facilities. But the appropriateness of the technology is usually more
important. For managers of disaster relief inventories, the question of whether or not an item should be monitored for technological obsolescence must be answered and, if so, the item must be monitored. Again the issue of when and with what to replace it is a difficult management question. Bringing technology to bear on critical items can substantially change their storage life, thereby changing the inventory management needs. Examples of this would include items like dried milk and other forms of dehydrated foods, the development of improved preservatives for food and medical supplies, and modularizing medical equipment to localize technological obsolescence concerns. As these techniques extend storage life for critical items, the need for monitoring those items decreases substantially. These are not of such concern to enterprise inventory managers, since they do not usually store unused items for as long a period of time. 4.3. Distribution In determining the amount, location and use of inventory, an enterprise inventory manager uses estimates of the costs and benefits of the inventory to the enterprise. Enterprise managers will argue that determining the costs and benefits of holding inventories for their organizations is difficult. The theory is well developed, however, so a calculus is available to them to make the estimates. The theory also provides guidelines for the use of proxy variables for managing inventory. The proxies would include measures like the percentage of demand that can be met from inventory or length of time that a production line is down for lack of material. Such theory is not available for disaster relief inventories. For them the costs and benefits are, by definition, social and are spread among different groups. Moreover, they incorporate many hard to quantify factors. The benefits of disaster relief inventories include saved lives, restored infrastructure, recovered livelihood opportunities and other humanitarian outcomes. Adding to the complexity of quantification, these benefits may not be associated with the organizations that hold the inventories and may be distributed across geographic, ethnic, religious, and political divisions. The investment in disaster relief inventories can possibly be measured if there
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has been a cost of acquisition, but frequently relief goods are donated. Determining the cost of storing the inventory is complicated by the distributed ownership and location of the goods. Direct costs might be available for things like space, administration and so forth, but the opportunity cost of funds tied up in inventory is difficult to measure and can vary greatly by location and owner. These considerations are nothing like those of the enterprise manager in contemplating where inventories might be stored. Complicating the issues of distribution are the political relationships between countries of inventory location and countries of destination. Often, despite the need, the governments in the countries of the disaster will refuse the disaster relief because of the source of the inventories that are part of the relief. Multiple sources may mitigate this problem, but could increase the costs of the relief. Obviously the issue of acceptability is related to the decisions on the initial locations but may be a dynamic concern. This is not a common question for an enterprise manager who would not be in business with someone for whom source would be an issue. In preparing for distribution there is the concern of timeliness, but that is a common concern with enterprise inventory managers as well. Nevertheless, the warehouse activities of picking, packing and preparing for shipment have different considerations in disaster relief circumstances. Certainly, the correct items need to be picked and the ‘‘order’’ needs to be assembled and packed. It may be quite a different requirement to pack a shipment for an aerial drop than for a truck delivery to another warehouse. Packaging must contemplate the final delivery means, any exposure to the elements and the possibility of attempted theft. Shrinkage in hostel environments can be substantially greater than enterprise inventory managers need to deal with. Managing disaster relief inventories requires that they be first ‘‘pushed’’ out to their storage locations as part of the disaster planning activities. The distribution of relief items in response to a disaster may also start by pushing estimated needs into the stricken area. As the actual conditions at the disaster area are determined, much better estimates of the needs can be made. This enables the managers at the site to ‘‘pull’’ the needed items to the area. This shift in technique from push to pull is virtually unknown in enterprise
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inventory management circles. It requires moving control to the decentralized managers and having the communication systems in place to get the information. This sampling of the differences between the worlds of disaster relief and enterprise inventory management shows that there are significant differences. These differences partly explain why the enterprise inventory management literature is not very helpful to the managers of disaster relief inventories. The differences also provide insights into areas of needed academic research to improve the disaster relief inventory management efforts. 5. Conclusions Disaster relief is an extraordinarily important activity in our world today. The need to respond to human need in the event of disease, dislocation, or disaster is not diminishing and may even be increasing. Our ability to meet these needs is highly dependent on our ability to manage disaster relief inventories successfully. Unfortunately, little of what has been learned about managing enterprise inventories can be applied to disaster relief inventories. A number of the characteristics of disaster relief inventories described here have illustrated why. The differences between disaster relief and enterprise inventories are significant but are not well understood. This opens up the opportunity for expanding the scope of inventory research to meet the needs of disaster relief inventory managers. Some of what has been identified here could serve as elements of a research agenda. Can the management of inventories in the face of highly uncertain demand be improved? Can distributed ownership and location be used to advantage? What criteria should be used for making disaster relief inventory decisions? Can the management of the physical items in storage be improved if there were more effective tracking and monitoring systems? What are the trade-offs between inventory and ancillary activities in logistics, procurement, technology improved products and communications capabilities? The development of better theory, systems, and management guidelines is clearly a useful and noble task. This is an area where inventory researchers could provide a real service to humanity.
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Appendix A. Summary of the differences in characteristics between enterprise inventories and disaster relief inventories Characteristic
Enterprise inventories
Disaster relief inventories
Amount of research
Extensive
Very limited
Acquisition
Close relations with suppliers Few unknown peaks of demand Orders placed with uncertainty in mind Ownership is clearly defined Supplies can be used for entire enterprise
Need suppliers with capacity at time of need Future demand quantities highly uncertain Demand uncertain in time and space Ownership is diffuse and not always known Some supplies could have restricted use
Storage
Location of storage is a business decision. Security is mostly an internal issue Information available to manage expiry Market demand consumes oldest items Obsolescence defined by business needs Storage life not a major concern
Location of storage is a political decision Security can involve government corruption Information on inventory not integrated Product expiry requires special attention Obsolescence defined by infrastructure Technology used for extending storage life
Distribution
Costs and benefits used for decisions Theory available for quantification Enterprise decides what inventory to use Commercial transportation usually used ‘‘Pull’’ systems can be used for inventory
Cost may be real but benefits are social Very little theory to guide decisions Inventory use decisions may be political Transportation may require special carriers Demand knowledge may not permit pull
References Barbaroso, G., Arda, Y., 2004. A two-stage stochastic programming framework for transportation planning in disaster response. The Journal of the Operational Research Society 55 (1), 43. Bechtel, G.A., Hansberry, A.H., Gray-Brown, D., 2000. Disaster planning and resource allocation in health ervices. Hospital Material Management Quarterly 22 (2), 9. Drabek, T.E., 1986. Human System Responses to Disaster: an Inventory of Sociological Findings. Springer, London. Drabek, T.E., McEntire, D.A., 2003. Emergent phenomena and the sociology of disaster: lessons, trends and opportunities from the research literature. Disaster Prevention and Management 12 (2), 97.
Hwang, H.-S., 1999. A food distribution model for famine relief. Computers and Industrial Engineering 37 (12), 335, 4 pgs. Kelly, C., 1995. A framework for improving operational effectiveness and cost efficiency in emergency planning and response. Disaster Prevention and Management 4 (3), 25. Long, D.C., Wood, D.F., 1995. The logistics of famine relief. Journal of Business Logistics 16 (1), 213, 17 pgs. Long, D.C., 1997. Logistics for disaster relief. IIE Solutions 29 (6), 26. McEntire, D.A., 1997. Reflecting on the weaknesses of the international community during the IDNDR: some implications for research and its application. Disaster Prevention and Management 6 (4), 221.
ARTICLE IN PRESS D. Clay Whybark / Int. J. Production Economics 108 (2007) 228–235 McEntire, D.A., 1999. Issues in disaster relief: progress, perpetual problems and prospective solutions. Disaster Prevention and Management 8 (5), 35. Rosenzweig, C., Parry, M.L., Fischer, G., 1995. World food supply. In: Strzepek, K., Smith, J.B. (Eds.), As Climate Changes: International Impacts and Implications. Cambridge University Press/Cambridge,, UK, pp. 27–56. Seshadri, S., Subrahmanyam, M., (Eds.), 2005. Special Issue on Risk Management. Production and Operations Management, vol. 14, no 1, Spring. Turoff, M., 2002. Past and future emergency response information systems. Communications of the ACM 45 (4), 29–33. Turoff, M., Chumer, M., Van de Walle, B., Yao, X., 2004. The design of a dynamic emergency response management information system (DERMIS). JITTA: Journal of Information Technology Theory and Application 5 (4), 1.
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United Nations. Office for the Coordination of Humanitarian Affairs (OCHA), 2004. Central Register of Disaster Management Capacities. URL: http://www.reliefweb.int/cr/, last access: January. The University of North Texas, Denton, Texas, 2004. The Emergency Administration and Planning Program, Disaster links. URL: http://www.unt.edu/eadp/disaster_links.htm, last access: January. Van Wassenhove, L.N., Samii, R., Kumar, K., Becerra-Fernandez, I., 2002a. IFRC—Choreographer of Disaster Management: Preparing for Tomorrow’s Disasters. INSEAD, Fontainebleau. Van Wassenhove, L.N., Samii, R., Kumar, K., BecerraFernandez, I., 2002b. IFRC—Choreographer of Disaster Management: the Gujarat Earthquake. INSEAD, Fontainebleau. Whybark, D.C., 2004. The Management of Social Inventories. In: + Czako´, E., Dobos, I., Kohegyi, A. (Eds.), Papers in Honor of Attila Chika´n: Enterprise Competitiveness, Logistics, Inventories. Budapest.
Int. J. Production Economics 108 (2007) 228–235 www.elsevier.com/locate/ijpe
Issues in managing disaster relief inventories D. Clay Whybark University of North Carolina, Chapel Hill, NC 27599-3490, USA Available online 25 January 2007
Abstract This essay is concerned with the inventories that are held for disaster relief and the need for research into their management. Though forecasting is difficult, the evidence is that the number of disasters, natural and political, is increasing. Thus the need for disaster relief is increasing along with the desire to improve the process, including management of disaster relief inventories. Despite decades of enterprise inventory research, little literature is available on disaster relief inventories. In this article the nature of disaster relief, some of the research on disaster relief and on disaster relief inventories is presented. Characteristics of disaster relief inventories important to their management, from acquisition through storage and distribution, are described. Some of the developments in related fields that affect the management of these inventories are also pointed out. As the frequency of disasters increase, the management of disaster relief inventories is an increasingly important area for scientific research. r 2007 Elsevier B.V. All rights reserved. Keywords: Inventory management; Disaster relief; Inventory characteristics
1. Introduction The need for disaster relief arises from some misfortune that deprives a group of people of their food, housing, livelihood and other means of sustaining themselves. It requires the delivery of food, medicine, tents, sanitation equipment, tools and other necessities to the people in distress, often for considerable periods of time (a crop cycle, for example). The event that triggers the need for disaster relief can be natural or political/economic. Natural disasters include volcanic eruptions, wild fires, floods, earthquakes, epidemics and other disturbances to the natural environment. Another category of natural disaster is famine due to crop failure, particularly in the developing countries of the world. Famine is often related to the effect of E-mail address: [email protected].
adverse weather on crop production, although it can also be a consequence of long-term human activity. Political/economic disasters arise when people are displaced by war, genocide, political insurrection or other failures of government. These displacements can lead to large populations who are forced from their homes and even their countries. Natural and political disaster can strike nearly anywhere. Just consider recent happenings that included floods (Bangladesh, Central America, China, India), earthquakes (China, Iran, Japan, Turkey), volcanic eruptions (Philippines, United States), tsunamis (Malaysia, Thailand, Indonesia), famine (Ethiopia, Somalia, Sudan), forest fires (Malaysia, United States), and political displacement (Bosnia, Liberia, Rwanda, Sierra Leone, Sudan). The need for disaster relief is clear. People affected by disaster are at considerable risk without relief supplies.
0925-5273/$ - see front matter r 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2006.12.012
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The response of the world community has been to create international agencies (governmental and non-governmental) and other organizations to provide the relief. There are now more than 100 organizations each with budgets over $1 million involved in disaster research, planning and relief. And there are many more with smaller budgets (The University of North Texas, 2004). One of the jobs of these organizations is to deliver the needed items to the victims rapidly, often in very remote parts of the world under difficult circumstances. The difficulty of accomplishing this job has been well documented (Drabek, 1986), but the job is important to society in general. Their success may be the basis of survival in cases of disaster, displacement, or disease. Thus there is an incentive to improve the performance of the disaster relief organizations. 2. Disaster relief A considerable body of literature has been developed on the management of disaster relief organizations. Much of it has to do with the social and organizational implications of responding to disasters in every part of the world, in areas which might lack infrastructure and/or may be involved in hostilities. Reviews of this literature have provided useful generalizations for managing the coordination required between organizational levels and different organizations during the response effort (Drabek and McEntire, 2003). The management issues involved in disaster relief have even entered the MBA classroom through the development of cases at the French Management Institute INSEAD (van Wassenhove et al., 2002a b). Critiques of the performance of these organizations’ responses to past disasters have been developed. Studies of these works have lead to improved planning and performance (McEntire, 1997). Information systems applications for disaster relief have improved greatly over the last several years (Turoff, 2002). As these improvements have taken place, the coordination among agencies has gotten much better (Turoff et al., 2004). These and other improvements have meant that much has been done to mitigate the toll of such natural disasters as earthquakes, forest fires, and floods. Better communication, early warning systems, evacuation procedures, building codes, improved fire fighting and rescue equipment have all helped reduce the impact of such events. Offsetting this, however, are the forces of increasing population, human
229
encroachment into ‘‘at risk’’ areas, and changing climate patterns. Despite the progress that disaster planning, mitigation and new management systems have made, the need for relief when such disasters occur still remains. As tragic as it is to contemplate, despite the improvements in disaster response, the evidence is that frequency of natural and political disasters is increasing (McEntire, 1999). Moreover, studies by the International Institute for Applied Systems Analysis (IIASA) and others over several decades point out that many areas of the world are barely able to feed themselves in good years. They suggest that per capita food production may be declining to critical levels for many people and generally conclude that the outlook for global food production is very pessimistic (Rosenzweig et al., 1995). Such studies suggest that famine will occur again in Ethiopia and other parts of Africa. Large parts of Asia and areas of South America are all prone to famine. In many of these places, it is not a question of whether famine will occur, but when and how extensive it will be. There is no question that it is important to continue the work of improving disaster relief planning and management. Even with this effort, however, the need to quickly and efficiently respond to disasters in all parts of the world is not diminishing. To provide relief rapidly requires access to the needed items and the logistics capabilities to move them to where they are needed. The role of disaster relief inventories in this chain of events is critical, but not well researched nor understood. 3. Disaster relief inventories Disaster relief inventories are one form of ‘‘social’’ inventories (Whybark, 2004). Other forms include strategic and defense inventories. Social inventories serve broad social objectives as opposed to being used for the benefit of an individual enterprise. Most often, national or regional needs for economic stability or defense are served by strategic and defense inventories. Like these inventories, disaster relief inventories serve social goals, but they are broader than national or regional goals. Given the importance of disaster relief, it is surprising that very little research is available on the role inventories play in responding to a disaster. The amount of research available on inventories that serve some business objective is in stark
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contrast to the lack of research on disaster relief inventories. Decades of work by academic researchers has provided a rich body of knowledge on the management of inventories in retail stores, production facilities, warehouses and other enterprise facilities. At the macro level, economists have long studied the relationship between aggregate inventory levels and economic behavior. But disaster relief inventory research is very limited. One exception is in the area of health services. The medical community has studied the management of stockpiles of medicines, blood, and medical supplies for quite some time (Bechtel et al., 2000). Some of the medical community approaches could serve as models for the management of other disaster relief inventories. One operational aspect of disaster relief where a research literature has been developed is in the area of logistics support. Logistics questions concerning location, transportation and storage are all related to the management of disaster relief inventories. In one study of the logistics needs for famine relief, the role of inventory is explicitly mentioned (Long and Wood, 1995). In another study of the logistics support for providing relief to the Kurds in the Persian Gulf, the role of information in matching supply and demand is explored (Long, 1997). These and other logistics studies do describe the complex environments in which disaster relief logistics systems must operate. The studies also help set the framework within which the management of disaster relief inventories must be managed. The interrelationships of demand, location, supply availability, transportation, and other logistics factors complicate the management task. Researchers have developed mathematical models to provide insights into the issues. The effects of uncertainty were studied explicitly by modeling the response to a disaster in an urban environment using stochastic programming (Barbaroso and Arda, 2004). Using a two-stage approach the authors first solve the response problem with stochastic estimates of transportation capacities, supply availabilities and demand, based on alternative disaster scenarios. In the second stage actual values are used as they are revealed. Actual data from an earthquake in Turkey were used to evaluate the results of using this model and to estimate the value of perfect information. In a distribution model for famine relief in North Korea, inventory allocation and vehicle routing alternatives were explicitly accounted for (Hwang,
1999). The model uses an objective function that minimizes starvation instead of distribution costs, thereby providing different, but very acceptable solutions. The argument that the annual number of incidents of natural and political disaster is likely to increase is a strong incentive for increasing the efficiency and effectiveness of disaster relief. Research into the means for achieving this point out that planning, including effective procurement planning, is a key component (Kelly, 1995). Of course, procurement relates directly to the investment in inventory, a key component in the management of enterprise inventories. Why is it that, with the exception of the medical community, there is so little literature on the management of disaster relief inventories? The fundamental questions of inventory management are how much to buy, when to buy it and (to a certain extent) where to store it. These questions apply whether the objectives are social or enterprise. The issue of where to store the inventory might even be more important in the disaster relief inventory world, but the same three questions are applicable. In the enterprise world, there is considerable theory to help answer these questions. Why then, is not there a parallel literature on inventory management in the disaster relief inventory world? There are differences between the enterprise and disaster relief inventory worlds. They are significant enough that the existing body of research literature on enterprise inventories is not directly transferable to the management of disaster relief inventories. These differences are found in the environment and characteristics of disaster relief inventories in all areas from acquisition through storage and distribution. They are important impediments to the transfer of the existing theory to the disaster relief world. Moreover, understanding the differences is clearly a useful avenue for research. 4. Disaster relief inventory characteristics Important characteristics of disaster relief inventories distinguish them from enterprise inventories and need to be understood in order to improve disaster relief inventory management. The differences act as inhibitors to the application of the enterprise inventory theory that is so abundant. Some of the important differences from enterprise
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inventories in the areas of acquisition, storage and distribution will be described in this section. A summary of these differences are found in the Appendix. 4.1. Acquisition There are two aspects to the acquisition of disaster relief items. The first is acquisition and storage of these items in anticipation of a disaster. The second is the development of sources for acquisition of items for distribution during a disaster relief operation. This second activity involves finding sources for commonly needed items which are located near potential disaster areas. This is an important element of disaster planning. The identification of potential sources that are possibly never used is not as frequently required in the management of enterprise inventory. In managing disaster relief inventories, however, it is important to consider how these potential sources would trade-off with inventory since they represent a form of ‘‘capacity.’’ An additional concern for disaster relief inventories is that sources in certain countries may compromise the ability to respond to disasters in certain other countries for political reasons. In an enterprise setting, determining when to place an order and the amount of inventory to buy or make is based on estimations of future demand. Estimates of the expected future need are a major component in calculating the quantity to purchase or produce. The amount of uncertainty in the estimates is a major component in deciding when to make the purchases or do the production. By ordering or producing the inventory a little early there will be extra on hand to act as a buffer against higher than expected demand. This logic is not very applicable to the disaster relief inventory world. There is very little in the enterprise setting that is the equivalent of predicting the occurrence of a disaster. Fashions have highly uncertain demand, spare parts have uncertain timing, and medicines have highly-uncertain timing and demand. Among these, only medicine may offer some useful parallels. Like medicines, disaster relief inventories are subject to uncertain demand and timing plus the added uncertainty of location. For instance, where will the next earthquake strike? The characteristics of demand are clearly an important distinguishing attribute of disaster relief inventories. An emerging
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body of work on risk management in operations may provide valuable future tools for dealing with uncertainty (Seshadri and Subrahmanyam, 2005). Ownership of disaster relief inventories is another distinguishing characteristic. It is lodged in local governments, international or nongovernmental organizations (NGOs), or other private relief organizations. As a consequence, not much is known about disaster relief inventories in the aggregate. In an attempt to address this problem, the United Nations has formed an office to centralize disaster relief resource information, including data on inventories available for emergencies. The registry is maintained by the Office for the Coordination of Humanitarian Affairs (United Nations, 2004). Because of the diffusion of ownership, it is important to have communication between disaster relief organizations. The Internet revolution has provided a platform for this need. There have been substantial inroads in the use of the Internet among agencies involved in disaster relief and extending the use to the management of disaster relief inventories is essential. For managers of disaster relief inventories it is also important to know, for political reasons, if an inventory in one country is or is not available to meet a need in another country. This is a concern that does not arise in managing enterprise inventories. 4.2. Storage In deciding where to store the inventory the time and cost of transportation to the potential demand points is an important consideration. Political considerations may also affect the plans for inventory location as well. Indeed, ownership may also dictate physical location. The tradeoff between sources of supply and owned inventory comes into play here. The physical location of the inventory must take into account the need to have the inventory accessible for monitoring or shipping when the need arises. It must incorporate considerations of security, corruption in the government or other factors that are not usually contemplated in the management of inventories for enterprises. Many inventories, such as food and medicine, have expiry dates that must be honored. This has several implications for their day-to-day management. The expiry dates on time-dependent
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inventories must be monitored constantly in order to ensure that they are still useful for their purpose when the need arises. Products that are closest to their expiry date should be used first when possible. Linking information on inventories of the same product would facilitate the use of products nearest the expiry date, a task that is generally performed by local enterprise inventory managers. Since the timing of need is so uncertain, it is possible that some items will need to be replenished with fresh supplies. This has some important implications, particularly for disaster relief inventories that may be located in numerous facilities. Location is important because the inventories must be accessible as removals are scheduled. Removed items can either be placed in a legitimate market (requiring information on alternative demand sources) or be destroyed in a safe fashion. The latter may mean that the inventories should be located in secure geographical areas. These areas would have minimum political corruptness, would prevent expired goods from entering the black market, and would assure proper disposal should it be necessary. Another issue that must be managed for some of the items, like medical and communication equipment, is technological obsolescence. For example, a cache of hand-crank telephones would be of no use today in disaster relief activities since the infrastructure to support such equipment no longer exists. The management of inventories subject to technological obsolescence requires sophisticated information processing and communication capabilities. The monitoring required here is both external (what items or parts need replacement) and internal (where are they located). Inventory accessibility is needed as well to do the replacement. A different level of concern is the necessity to replace an obsolete part in an item in inventory. This requires a different level of skill than simply removing and replacing an item that has reached an expiry date. Technological obsolescence of disaster relief inventories is a complicated question. In general the issue is not one of having the latest technology available, but having technology that is supported by the infrastructure available in the areas of likely need. There are circumstances where newer might be better, for instance in medical supplies and in the provision of sanitary facilities. But the appropriateness of the technology is usually more
important. For managers of disaster relief inventories, the question of whether or not an item should be monitored for technological obsolescence must be answered and, if so, the item must be monitored. Again the issue of when and with what to replace it is a difficult management question. Bringing technology to bear on critical items can substantially change their storage life, thereby changing the inventory management needs. Examples of this would include items like dried milk and other forms of dehydrated foods, the development of improved preservatives for food and medical supplies, and modularizing medical equipment to localize technological obsolescence concerns. As these techniques extend storage life for critical items, the need for monitoring those items decreases substantially. These are not of such concern to enterprise inventory managers, since they do not usually store unused items for as long a period of time. 4.3. Distribution In determining the amount, location and use of inventory, an enterprise inventory manager uses estimates of the costs and benefits of the inventory to the enterprise. Enterprise managers will argue that determining the costs and benefits of holding inventories for their organizations is difficult. The theory is well developed, however, so a calculus is available to them to make the estimates. The theory also provides guidelines for the use of proxy variables for managing inventory. The proxies would include measures like the percentage of demand that can be met from inventory or length of time that a production line is down for lack of material. Such theory is not available for disaster relief inventories. For them the costs and benefits are, by definition, social and are spread among different groups. Moreover, they incorporate many hard to quantify factors. The benefits of disaster relief inventories include saved lives, restored infrastructure, recovered livelihood opportunities and other humanitarian outcomes. Adding to the complexity of quantification, these benefits may not be associated with the organizations that hold the inventories and may be distributed across geographic, ethnic, religious, and political divisions. The investment in disaster relief inventories can possibly be measured if there
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has been a cost of acquisition, but frequently relief goods are donated. Determining the cost of storing the inventory is complicated by the distributed ownership and location of the goods. Direct costs might be available for things like space, administration and so forth, but the opportunity cost of funds tied up in inventory is difficult to measure and can vary greatly by location and owner. These considerations are nothing like those of the enterprise manager in contemplating where inventories might be stored. Complicating the issues of distribution are the political relationships between countries of inventory location and countries of destination. Often, despite the need, the governments in the countries of the disaster will refuse the disaster relief because of the source of the inventories that are part of the relief. Multiple sources may mitigate this problem, but could increase the costs of the relief. Obviously the issue of acceptability is related to the decisions on the initial locations but may be a dynamic concern. This is not a common question for an enterprise manager who would not be in business with someone for whom source would be an issue. In preparing for distribution there is the concern of timeliness, but that is a common concern with enterprise inventory managers as well. Nevertheless, the warehouse activities of picking, packing and preparing for shipment have different considerations in disaster relief circumstances. Certainly, the correct items need to be picked and the ‘‘order’’ needs to be assembled and packed. It may be quite a different requirement to pack a shipment for an aerial drop than for a truck delivery to another warehouse. Packaging must contemplate the final delivery means, any exposure to the elements and the possibility of attempted theft. Shrinkage in hostel environments can be substantially greater than enterprise inventory managers need to deal with. Managing disaster relief inventories requires that they be first ‘‘pushed’’ out to their storage locations as part of the disaster planning activities. The distribution of relief items in response to a disaster may also start by pushing estimated needs into the stricken area. As the actual conditions at the disaster area are determined, much better estimates of the needs can be made. This enables the managers at the site to ‘‘pull’’ the needed items to the area. This shift in technique from push to pull is virtually unknown in enterprise
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inventory management circles. It requires moving control to the decentralized managers and having the communication systems in place to get the information. This sampling of the differences between the worlds of disaster relief and enterprise inventory management shows that there are significant differences. These differences partly explain why the enterprise inventory management literature is not very helpful to the managers of disaster relief inventories. The differences also provide insights into areas of needed academic research to improve the disaster relief inventory management efforts. 5. Conclusions Disaster relief is an extraordinarily important activity in our world today. The need to respond to human need in the event of disease, dislocation, or disaster is not diminishing and may even be increasing. Our ability to meet these needs is highly dependent on our ability to manage disaster relief inventories successfully. Unfortunately, little of what has been learned about managing enterprise inventories can be applied to disaster relief inventories. A number of the characteristics of disaster relief inventories described here have illustrated why. The differences between disaster relief and enterprise inventories are significant but are not well understood. This opens up the opportunity for expanding the scope of inventory research to meet the needs of disaster relief inventory managers. Some of what has been identified here could serve as elements of a research agenda. Can the management of inventories in the face of highly uncertain demand be improved? Can distributed ownership and location be used to advantage? What criteria should be used for making disaster relief inventory decisions? Can the management of the physical items in storage be improved if there were more effective tracking and monitoring systems? What are the trade-offs between inventory and ancillary activities in logistics, procurement, technology improved products and communications capabilities? The development of better theory, systems, and management guidelines is clearly a useful and noble task. This is an area where inventory researchers could provide a real service to humanity.
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Appendix A. Summary of the differences in characteristics between enterprise inventories and disaster relief inventories Characteristic
Enterprise inventories
Disaster relief inventories
Amount of research
Extensive
Very limited
Acquisition
Close relations with suppliers Few unknown peaks of demand Orders placed with uncertainty in mind Ownership is clearly defined Supplies can be used for entire enterprise
Need suppliers with capacity at time of need Future demand quantities highly uncertain Demand uncertain in time and space Ownership is diffuse and not always known Some supplies could have restricted use
Storage
Location of storage is a business decision. Security is mostly an internal issue Information available to manage expiry Market demand consumes oldest items Obsolescence defined by business needs Storage life not a major concern
Location of storage is a political decision Security can involve government corruption Information on inventory not integrated Product expiry requires special attention Obsolescence defined by infrastructure Technology used for extending storage life
Distribution
Costs and benefits used for decisions Theory available for quantification Enterprise decides what inventory to use Commercial transportation usually used ‘‘Pull’’ systems can be used for inventory
Cost may be real but benefits are social Very little theory to guide decisions Inventory use decisions may be political Transportation may require special carriers Demand knowledge may not permit pull
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