Investing for a better humanitarian response
Preparedness: we know its importance but what about the impact? How is it measured? And what should we be focusing on?
Today, we speak to Jonas Stumpf from HELP Logistics, an organisation that, for a little of two years have been looking at exactly this.
“Being involved in the complete cycle - from the development of the model to the application in the studies, and now making real investment to measure impact - is an outstanding and unique experience.”
As the Director of Global Programs at HELP Logistics, Jonas is responsible for overlooking projects conducted in collaboration with partners headquartered in Europe. Two years ago, he and his team started reaching out to other organisations to undertake Return on Investment (RoI) studies to measure the impact of preparedness investments in humanitarian supply chain.
Below we chat with Jonas as he tells us more about the project’s history, it’s approach, and how it has the potential to change the way we think about humanitarian logistics.
How did you come up with the idea for the studies? What were your motivations to undertake this project?
In preparation for the World Humanitarian Summit in 2016 a cross-sector collaboration group consisting of the Global Logistics Cluster, Kuehne Logistics University (KLU), HELP Logistics, Action Contre la Faim (ACF) France and various other international humanitarian organisations came together to discuss how the relevance of logistics and supply chain management can be better explained and better emphasized.
As a result, the group drafted and shared the report Delivering in a Moving World which gained a lot of attention in the sector. The report discusses the potential impact of preparedness measures and quotes UNDP’s 2012 statement that, “every dollar spent reducing people’s vulnerability to disaster saves around seven dollars in economic losses.”
Jean-Baptiste Lamarche, ACF’s Head of Logistics and co-author of the report, challenged the group with the question whether this 1:7 ratio would also prove to be right in the context of supply chain preparedness investments. HELP Logistics and KLU accepted the challenge, developing a dynamic simulation model which compares scenarios with and without investments and calculates RoI from a cost and lead time perspective. We based the model on an existing preparedness framework from Wassenhove (2006) and considered the inter-connectedness amongst different investment elements and their impact on the supply chain performance.
Ultimately the studies were undertaken to show the impact of preparedness investments in the supply chain based on realistic scenarios.
What are some of the main highlights so far?
The model has been tested in studies with ACF France on their relief operations in Haiti (2011) and Nepal (2016), Save the Children and IFRC’s responses to Typhoon Haiyan (Philippines 2013) and UNICEF’s emergency operation in South Sudan (2017).
All studies found that supply chain preparedness investments have enormous potential to make humanitarian operations more effective and efficient by reducing response time and cost.
The maximum RoI ratio across all studies ranged between 1:3 and 1:7. Naturally, the RoI varies heavily depending on the time horizon between when the investment decision was made and the moment the disaster strikes. If the disaster occurs too early investments have not fully unfolded, and the impact will not be as large. If the disaster happens very far in the future the RoI decreases as running costs such as holding costs for prepositioning can add up.
With our dynamic model we’re able to simulate different timelines and interestingly, the findings show that even if the disaster happens relatively far in the future – for example 1200 days after the investments were first made - the RoI is still positive.
This is because many elements such as investing in local staff and market capacity have long-term impacts, strengthening the local economy and increasing resilience.
Another critical finding in all studies was that combined investment strategies always generated better results than isolated investments. Besides the general recommendation to humanitarian organisations and donors to invest more into supply chain preparedness overall, a key conclusion was that these investments should also be looked at from a holistic perspective.
What were some of the challenges you encountered?
A major challenge was data availability, in particular in relation to the potential impact of investments on the supply chain. Many of the investments we included in the study were not carried out before and if they were, no data was collected to compare before and after to actually measure the impact.
We worked a lot with assumptions and hypotheses which at first couldn’t be considered as robust. However, the more studies we conducted including numerous interviews with field experts, the more those assumptions were confirmed or adjusted. Ultimately, by having run the studies with Red Cross, UN agencies and NGOs with different types of disasters we consider the model to be pretty strong.
What is the next step for HELP Logistics and what do you think the impact of the studies will be on the broader humanitarian community?
I believe these studies really have the potential to bring change and re-channel the traditional funding streams towards more preparedness and more supply chain investments to reduce lead time and save costs.
We’ve presented the results at various public events and also to the Humanitarian Liaison Working Group chaired by the European Civil Protection and Humanitarian Aid Operations (ECHO) back in September 2018.
The feedback received by donors was very positive. To go further in confidence, HELP Logistics has also decided to invest into one of the studies ourselves. The investments are currently being implemented and at the same time we are developing a measurement framework which will show us the actual impact this time, not in a theoretical model but in reality. With those results we hope to further demonstrate that funding for emergencies should be focused on supply chain preparedness for maximum social impact and economic strengthening.
The four RoI studies are featured in the new Research section on the Preparedness page of the Logistics Cluster website. Read them here.