What Can Humanitarian Supply Chains Learn from the Private Sector? - SCTL at the University of Washington
For-profit corporations have spent the past 20+ years optimizing their supply chains to provide superior customer service, improve responsiveness and cash flow and, ultimately, to boost profits. And a handful of stand-out enterprises like Amazon have actually altered expectations about the sort of results a best-in-class supply chain can deliver. Consumers, in both their personal and professional lives, now expect to receive not just on-time delivery but perfect orders (the right product delivered on-time, undamaged, and with the correct paperwork).
For a number of reasons, humanitarian supply chains have generally been slower than their corporate counterparts to re-engineer their global supply chains. Without a profit motive, most humanitarian organizations have focused on serving their constituencies by bringing them food and medicine above doing so at the lowest possible cost. When faced with famines and disease, this prioritization is pretty understandable. However, as donors begin to focus on allocating their funds to organizations who can deliver results by making the best use of every donated dollar, this has started to change.
As they seek greater supply chain efficiencies, many humanitarian organizations are now looking to the private sector for ideas. Optimizing a global supply chain, especially one that must function in low-infrastructure environments, is no small task. Some such improvements require massive investments. Selecting, configuring, and deploying an Enterprise Resource Planning system (ERP) costs millions for a large organization and full implementation can take years. Are there any inexpensive "quick-hits" that can still deliver significant results in service levels and cost? Yes.
Performance management is a term that has been around forever in the business world. At the top level, every business manages top level metrics like profits and customer satisfaction. But these performance management programs often fail to deliver the results they should as they move further down in the organization. Almost everyone in the business world has probably worked for a company that measures its employees on outcomes they cannot individually control—the fellow who installs transmissions on an assembly line may be measured and incentivized based on the total number of automobiles that leave the factory each year.
Humanitarian supply chains have an opportunity to employ best practices in performance management to make their donor dollars go far further than they do today. If you lead a humanitarian supply chain, what can you do?
- Think about the functional groups within your organization, like warehousing or transportation. Work with each group to define the outcomes they deliver, calculate baseline performance, establish performance targets, and measure these individuals on performance in reaching those targets.
- Design an incentive program for achievement of performance targets. A pizza party (or whatever) is nice, but nothing drives improvement like money. Invariably, the value of the increased efficiencies far outweighs the cost of the incentives paid out.
- Repeat this process at each level of your internal supply chain operation. Be sure to develop metrics and targets that the workers can actually control. Pickers are measured on their individual results. Individuals who manage the pickers are measured on their collective results. Warehouse managers are measured on the speed and accuracy with which inbound orders are filled.
- At each successive level of the supply chain, the metrics and targets become more cross-functional. An upper level supply chain executive might be measured on perfect orders delivered to customers. Obviously this requires the forecasting, procurement, manufacturing, and distribution functions to work in harmony to achieve these targets.
Every supply chain executive seeks iterative improvement in cost, cycle time, accuracy, and quality. This approach to developing a cascading performance management program is the surest way to align the disparate functions in your supply chain. Measure people on results they can control and they will figure out more efficient and effective ways to do their jobs.
For a humanitarian supply chain, unlike a corporate supply chain, this means fewer hungry children, fewer sick mothers—quite literally the difference between life and death.