Laan, Erwin

van Dalen, Jan

English

Médecins sans Frontières (Doctors Without Borders) is an NGO with a special mission: to provide medical care in places ordinary physicians can’t reach. Making sure all their long-term clinics have the right amount of the roughly 2,000 stock keeping units (SKUs) with which each is supplied is an enormous logistical challenge

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ROTTERDAM SCHOOL OF MANAGEMENT, ERASMUS UNIVERSITY Effective ads: new  technology answers  old questionsBy Linda Couwenberg Improving the supply chain in humanitarian  logisticsBy Erwin van der Laan and Jan van Dalen Rethinking  managerial roles in change initiativesChris Murray talks with Bas Koene   How can auditors  avoid the perils of  aggressive accounting?By Marcel van Rinsum  Why can’t China clean up its act?By Pursey Heugens   The use and misuse of power and  unethical behaviourBy Laura M. Giurge 2nd Quarter 2017Management Knowledge         RSM DISCOVERYwww.rsm.nl/discovery RSM - a force for positive changesupplies. Finally, stock-outs are never taken lightly, particularly in these hard-to-reach areas, and may literally be a matter of life and death. In an internal report issued in 2015, MSF stated the problem bluntly: We cannot forecast, do not focus enough on timely delivery of goods, no real quality control for medical local purchases ...[we need] an improved ability to consist-ently deliver the right goods when needed.Our first step was to encourage MSF operations to get the field clin-ics to record their consumption. We asked MSF’s Operational Centre in Amsterdam (MSF-OCA) to ask its field personnel to collect details on the con-MSF’s supply chain, insights that we believe may be of value not just to that organisation but to any non-prof-it group that faces supply challenges. Better forecasting and planning reduc-es stock-outs, over-stocking, and ex-piration of goods, which in turn saves time, reduces costs, improves patient care, and may even save lives. In this latest study, our goal was to understand exactly how the sup-ply chain worked in practice – who or-ders the supplies, how they get to their destination, and when the clinic end-ed up with either too few or too many, and what had happened that led to that situation. Constant pressureThe MSF supply chain functions under constant, tremendous strain. They are always short of money. The work is so tough that many of the doctors at these clinics are on one-year rota-tions, which means that it’s difficult to build much institutional memory in the field. To make matters worse, the nature of their mission entails setting up clinics in places with little or no in-frastructure, a desperate population, and often, armed men who may or may not be answerable to a higher au-thority and who may or may not pilfer Médecins sans Frontières (MSF) is such a courageous group it’s easy to forget that they don’t just send médecins; they also send medicines. As an NGO work-ing in often extreme situations, keep-ing their supply chain functioning as optimally as possible is a huge under-taking. For the past decade, a group of us in RSM’s department of technol-ogy and operations management have been involved in a project to make that job a little easier.The engagement began when MSF’s operational centre in Amsterdam con-tacted us 10 years ago, and asked if we had a student who could help them im-prove their information management. We did, and over time, more students followed him. It didn’t take long to re-alise, however, that the challenge went beyond information, straight to the root of MSF’s supply chain. Like many non-profits, MSF had a somewhat out-dated supply chain when compared to the state of the art in the private sector. However, MSF is rapidly making progress and we feel very grateful for having had the opportunity to make a contribution. In our latest study on MSF, we analysed the internal and ex-ternal factors that affect the forecast-ing and order-planning process and identified opportunities to improve Improving the supply chain in humanitarian logisticsBy Erwin van der Laan and Jan van DalenMédecins sans Frontières (Doctors Without Borders) is an NGO with a special mission: to provide medical care in places ordinary physi-cians can’t reach. Making sure all their long-term clinics have the right amount of the roughly 2,000 stock keeping units (SKUs) with which each is supplied is an enormous logistical challenge. 08   |  2nd Quarter 2017Management KnowledgeRSM DISCOVERYSeveral other internal and external factors tended to influence the fore-casting and order-planning process as well. One is systematic over-compen-sation of safety stocks of more critical items. If those stocks could sit on the shelf indefinitely, that would be inef-ficient but arguably a tolerable cost – buffer or suffer, as the saying goes. However, when it comes to medical logistics, not all serve that stand and wait: many items have a limited shelf life and eventually expire. We also found that at the clinic lev-el, people tended to over-forecast their consumption. Ideally, consumption fore-casts should be unbiased, with order planners at the operations centre de-ciding what margin of safety to add to the order. Instead, both the field medi-cal team and the planners in Amsterdam were adding safety stocks, resulting in unnecessarily high stock levels. Part of the tendency toward over-stocking is that the consequences of a supply rupture may go beyond simply being out of a particular item. ‘The im-pact of ruptures, apart from the qual-ity of care, disrupts the supply chain at all levels. A critical rupture means the supply staff in the project, mission and HQ effectively have to stop every-Developing a pictureOnce we had a detailed sense of what materials were used when, we could begin to develop a clearer picture of actual usage patterns, which we mapped against initial forecasts and field orders. Overall, we found that 22 per cent of all medical items suffered a stock-out at some point during the year, 67.8 per cent were at risk, and 38 per cent risked expiration. Forecasting at MSF is part of the order and procurement process, which involved internationally active operations centres, such as MSF’s Amsterdam operations centre, national missions, and local project sites. Each individual project unit orders medical supplies at fixed times during the year from the Amsterdam Procurement Unit, usually every four to six months, from a standardised list of roughly 2,200 medical items.Forecast accuracy, somewhat sur-prisingly, turned out to be highest dur-ing armed conflicts but lower once the shooting stopped. Our theory is that this happened because the nature of the medical emergencies changes when peace breaks out. The demo-graphics and size of the population may also change dramatically. sumption of over 2,000 medical SKUs stocked in 19 long-term MSF projects in 2013. The projects were supplied by missions operating in eight countries: Bangladesh, Congo, Ethiopia, Haiti, Nigeria, Pakistan, South Sudan and Yemen. We ended up with 11,486 us-able records for analysis in all. Simply collecting the consumption data was a challenging project for MSF. As Anna Eschweiler, medical pharma-cy adviser for MSF-OCA, told us, even collecting the consumption data was a challenge: ‘We do this in many con-texts where staff often have poor lit-eracy and numeracy skills. It has been a big effort by all to get this far.’www.rsm.nl/discovery “The MSF supply chain functions under constant, tremendous strain. They are always short of money.”2nd Quarter 2017   |   09Management KnowledgeRSM DISCOVERYthing to identify a source and a quick supply of the product,’ says Nontas Papadimitriou, logistics coordinator for India in the MSF-OCA.In 2016, the MSF Operations Centre responded to these and other observa-tions, and initiated a plan to improve MSF’s supply chain forecasting and planning process. Once proper data collection and analysis programmes are put in place, their supply chain should become much more efficient. Eventually, they may even be able to predict demand after discounting a variety of local contingencies, such as the condition of the physical infra-structure or the political climate (for instance, the relative likelihood of loot-ing if a truck is stopped or blocked by rebel forces). We think their next steps may also include:• Looking more closely at patient needs. How much is used is not the same as how much is needed. The current record system records consumption rather than actual demand, which implies that ac-tual demand may be understated in the case of stock outs, and as a consequence, the risk of rupture is underestimated. • Note the cause of ruptures. The cur-rent system notes when a rupture occurs, but not where in the supply chain it happened. More work lies ahead, but MSF is now definitely on the right track. Today, MSF’s forecasting and planning process is considered best practice in humani-tarian logistics, and its example is now leading to a new phase of development for the sector: standardised data col-lection and planning. Once proper data collection and analytics are in place, it may be possible to even begin pre-dicting demand. Humanitarian supply chains differ from retail supply chains in many respects, but as one of our colleagues has noted, they are simi-lar in other ways – perhaps the most important of which is that as crazy as our world can be, its patterns can be analysed, and our navigation of them improved. This article draws its inspiration from the paper Demand forecasting and order plan-ning for humanitarian logistics: An empiri-cal assessment, written by Erwin van der Laan, Jan van Dalen, Michael Rohrmoser and Rob Simpson, and published in the Journal of Operations Management, Volume 45, July 2016, Pages 114–122. DOI: http://doi.org/10.1016/j.jom.2016.05.004Erwin van der Laan is Associate Professor of Logistics & Operations Management, Department of Technology and Operations Management, Rotterdam School of Management, Erasmus University.  EMAIL  elan@rsm.nlJan van Dalen is Associate Professor of Statistics, Department of Technology and Operations Management, Rotterdam School of Management, Erasmus University.  EMAIL  jdalen@rsm.nl10   |  2nd Quarter 2017“Today, MSF’s forecasting and planning process is considered best practice in humanitarian logistics, and its example is now leading to a new phase of development for the sector…” RSM ExpertiseSpecialising in the disciplines of Supply Chain Management, Business Information Management, and Innovation Management, the Department of Technology & Operations Management deals with the effective management of how to develop, produce and de-liver products and services.  The department’s world-class scholars develop scientific knowl-edge and train students to become reflective practitioners who can suc-cessfully manage and design sup-ply chains, information systems and innovation processes. In doing so, the department combines scientif-ic ambition and rigour with practi-cal relevance, both in research and in teaching. WEB   www.rsm.nl/tom

Improving the supply chain in humanitarian logistics

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Improving the supply chain in humanitarian logistics

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