mttn45 humanitarian logistics sourcing and procurement nonprofit organizations shaping the market of...

MTTN45 Humanitarian Logistics Sourcing and Procurement Nonprofit Organizations shaping the Market of Supplies 12 April 2013

Content

• Purchasing power in the humanitarian sector

• Impact of purchasing power on purchasing strategies

• The case of vaccine procurement • Nonprofit organizations shaping their

supply market

Who has the power to shape the market?

Nonprofit-for profit relationship

• The disdain history

• The mutual need of collaboration

More relationships, collaboration, and dependencies

Distribution of Power: Resource Dependency Theory

Resource dependency theory (RDT)• Focus on core competencies

outsourcing• Exchange relationships dependence• Power as relative dependence more

influence

All organizations strive to maximize their power through reformulating these dependencies.

Issue of power dominance in procurement

1. Understand its power position2. Move toward more favorable position

Buyer power

attributes relative

to supplier

Supplier power attributes relative to

buyer

Buyer dominance

Supplier dominance

Interdependence

Independence

(Cox et al. 2000: 18)

What are drivers of purchasing power?

• Substitutability• Interconnections • Demand share• Information symmetry • Reputation

Lund University / Department of Industrial Management and Logistics / Engineering Logistics

supplier Recipient country

Local distributors

beneficiaries

3PL

Donors

Hum. Orgs

Ultimate supplier

Humanitarian logistics– Added stakeholders with conflicting incentives– Shared management and need for collaboration– Lack of funding– Lack of infrastructure and local capacities


High Income countries

Low and middle Income countriesProduction sophisticationPurchasing sophistication

TransportationCommunication


0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

All Donor countries Total

DAC Countries Total

G7 countries

United States

Year

USD donation

Based on OECD (2011) data

Based on WEF(2010) data

Based on pre-study data

What does the humanitarian sector look like?

What does the humanitarian sector look like?

• The disdain nature of nonprofit (NPO)-for profit relationship

• Scarcity of supplies“The products may not always be

commercially attractive, nor the market transparent. Manufacturers are often not aware of the needs, or may consider the risks associated with entering the market too high.” (UNICEF, 2008)

•The essentiality of supplies•The limited buying power

Purchasing power’s impact on purchasing

• How do you think low purchasing power impacts purchasing decisions and strategies?

• Accept the situation and be weak– Few suppliers with high prices in country X.

Gather funds and buy from

• Accept the situation and safeguard– Few suppliers with high prices in country X. Have

a detailed and strict contract so terms are set for a longer time

• Understand the situation and try to change it

– Few suppliers with high prices in country X. Insource, invest in developing more suppliers maybe local

THE CASE OF VACCINE PROCUREMENT IN THE SECTOR

1234567

Gam

bia, T

he

Mauritania

Kyrgyz R

epublic

Tajikistan

Benin

Burkina Faso

Mali

Cam

bodia

Zam

bia

Uganda

Ethiopia

Bangladesh

Tim

or

-Leste

Cape V

erde

Sw

aziland

Moldova

Arm

enia

Senegal

Paraguay

El Salvador

Côte d'Ivoire

Guatem

ala

Sri Lanka

Ecuador

Morocco

Ukraine

Pakistan

Egypt

Indonesia

China

Montenegro

Macedonia, FYR

Botsw

ana

Albania

Panam

a

Uruguay

Lithuania

Azerbaijan

Bulgaria

Kazakhstan

Algeria

Chile

Colom

bia

Argentina

Venezuela

Mexico

Brazil

Barbados

Brunei D

arussalam

Estonia

Trinidad and T

obago

Latvia

Luxem

bourg

Puerto R

ico

Qatar

Kuw

ait

Hungary

Israel

Hong K

ong SAR

Portugal

Finland

Greece

Taiw

an, C

hina

Norw

ay

Poland

Sw

itzerland

Korea, R

ep.

Canada

Italy

France

JapanHealth Level

Lower income Countries

Lower-middle income Countries

Higher-middle income Countries

High income Countries

Figure 1 Health level of countries in a 1-7 scale according to different economy groups (retrieved from WEF data, 2010)

Delivery of health in humanitarian aid supply chains

Global health SCM– Health a reflection of development and poverty reduction (UN, 2011)– Nature of disease: geographical, weather, culture, social, educational,

economic– The public good nature of the related products– Higher weight of quality– High donor dependency (viewed as a global good)– Different purchase profiles among countries

Based on WEF(2010) data

Boundaries of the study

Vaccine supply chain

for developing countries

Overview of vaccine SCs for developing countries

• Subset of global health SCs• Willingness of governments to pay• Epidemiological justifications• Under valued by governments and market• Some differences between industrial and emerging• Concentrated supply market• Emerging economy producers increasing• Procurement being considered a main issue in

shortage

A schematic view of the positioning of different actors along the vaccine chain in humanitarian networks

Why? The practical instance of the issue

• Strict high quality standards• High fixed and set up costs for production• Monopolistic markets• Limited competition• Mainly in the developed world

Humanitarian organizations

Few suppliersCountry buyers & beneficiaries

System sub-optimalitiesin countries:• Lack of buying capacity• Lack of sophisticated transportation and

communication infrastructure,• Political complication and sensitivities, • Special vaccines required• Un-transparent demand

• Procurement intermediaries• Economies of scale• Aggregating demand• Decreasing prices • Increasing forecast accuracy• Increasing availability• Securing supply

DonorsMonetary donation

Monetary donation

Monetary donation

• Financial collapse of 2008• Fewer funds

So power is shifted to the suppliers

• What are different ways buyers (e.g. different governments and organizations) can buy vaccines the best way in this situation?

Cases based on their sample group and purchase strategy

Sample group Developing countries Humanitarian orgs

Industrial country

Cases Iran LatviaOman (GCC)

Zambia UNICEF IFRCSkane region

(Sweden)

Purchasing

strategies

Self-purchasing with

local productio

n

Self-purchasing without

local productio

n

Cooperative

purchasing

Purchasing through

humanitarian

organization

Humanitarian

organization focusing on

vaccine purchase

Humanitarian

organization not

focusing on vaccine

purchase

Self-purchasing Outside of the context

sample


1

2

3

4

5

6

7

Cha

d

Leso

tho

Uga

nda

Sout

h Afric

a

Tanz

ania

Mau

rita

nia

Gam

bia,

The

Mad

agas

car

Nep

al

Bol

ivia

Mor

occo

Ukr

aine

Dom

inic

an …

Para

guay

Iran

Mal

aysia

Arm

enia

Liby

a

Latv

ia

Mau

ritius

Mex

ico

Sri L

anka

Eston

ia

Uni

ted

Stat

es

Tuni

sia

Pola

nd

Uni

ted

Kin

gdom

Port

ugal

Chi

le

Slov

ak R

epub

lic

Cyp

rus

Ital

y

Bel

gium

Isra

el

Finl

and

Latvia

Country

Level

Iran OmanZambia Sweden


1

2

3

4

5

6

7

Chad

Zam

bia

Burundi

Nigeria

South A

frica

Burkina Faso

Rw

anda

Tim

or

-Leste

Gam

bia, T

he

Nam

ibia

Pakistan

Tajikistan

Bolivia

Kazakhstan

Mongolia

Philippines

Dom

inican R

epublic

Thailand

Colom

bia

Honduras

Malaysia

Russian Federation

Bulgaria

China

Latvia

Panam

a

Brunei D

arussalam

Egypt

Sri Lanka

Saudi A

rabia

Serbia

United A

rab Em

irates

Tunisia

Czech R

epublic

Bosnia and H

erzegovina

Hungary

Portugal

Malta

Hong K

ong SA

R

France

Cyprus

Slovenia

Luxem

bourg

Spain

Israel

Iceland

Sw

eden

Health Transportation Infrastructure Communication infrastructure Purchasing sophistication Production sophistication

Latvia

Country

Level



1

2

3

4

5

6

7

Chad

Zam

bia

Burundi

Nigeria

South A

frica

Burkina Faso

Rw

anda

Tim

or

-Leste

Gam

bia, T

he

Nam

ibia

Pakistan

Tajikistan

Bolivia

Kazakhstan

Mongolia

Philippines

Dom

inican R

epublic

Thailand

Colom

bia

Honduras

Malaysia

Russian Federation

Bulgaria

China

Latvia

Panam

a

Brunei D

arussalam

Egypt

Sri Lanka

Saudi A

rabia

Serbia

United A

rab Em

irates

Tunisia

Czech R

epublic

Bosnia and H

erzegovina

Hungary

Portugal

Malta

Hong K

ong SA

R

France

Cyprus

Slovenia

Luxem

bourg

Spain

Israel

Iceland

Sw

eden


Latvia

Country

Level



1

2

3

4

5

6

7

Chad

Zam

bia

Burundi

Nigeria

South A

frica

Burkina Faso

Rw

anda

Tim

or

-Leste

Gam

bia, T

he

Nam

ibia

Pakistan

Tajikistan

Bolivia

Kazakhstan

Mongolia

Philippines

Dom

inican R

epublic

Thailand

Colom

bia

Honduras

Malaysia

Russian Federation

Bulgaria

China

Latvia

Panam

a

Brunei D

arussalam

Egypt

Sri Lanka

Saudi A

rabia

Serbia

United A

rab Em

irates

Tunisia

Czech R

epublic

Bosnia and H

erzegovina

Hungary

Portugal

Malta

Hong K

ong SA

R

France

Cyprus

Slovenia

Luxem

bourg

Spain

Israel

Iceland

Sw

eden


Latvia

Country

Level



1

2

3

4

5

6

7

Chad

Zam

bia

Burundi

Nigeria

South A

frica

Burkina Faso

Rw

anda

Tim

or

-Leste

Gam

bia, T

he

Nam

ibia

Pakistan

Tajikistan

Bolivia

Kazakhstan

Mongolia

Philippines

Dom

inican R

epublic

Thailand

Colom

bia

Honduras

Malaysia

Russian Federation

Bulgaria

China

Latvia

Panam

a

Brunei D

arussalam

Egypt

Sri Lanka

Saudi A

rabia

Serbia

United A

rab Em

irates

Tunisia

Czech R

epublic

Bosnia and H

erzegovina

Hungary

Portugal

Malta

Hong K

ong SA

R

France

Cyprus

Slovenia

Luxem

bourg

Spain

Israel

Iceland

Sw

eden


Latvia

Country

Level



1

2

3

4

5

6

7

Chad

Zam

bia

Burundi

Nigeria

South Africa

Burkina Faso

Rw

anda

Tim

or

-Leste

Gam

bia, T

he

Nam

ibia

Pakistan

Tajikistan

Bolivia

Kazakhstan

Mongolia

Philippines

Dom

inican R

epublic

Thailand

Colom

bia

Honduras

Malaysia

Russian Federation

Bulgaria

China

Latvia

Panam

a

Brunei D

arussalam

Egypt

Sri Lanka

Saudi Arabia

Serbia

United Arab Em

irates

Tunisia

Czech R

epublic

Bosnia and H

erzegovina

Hungary

Portugal

Malta

Hong K

ong SAR

France

Cyprus

Slovenia

Luxem

bourg

Spain

Israel

Iceland

Sw

eden


Latvia

Country

Level


Based on WEF (2010) data

SEVERAL COUNTRIES WHICH HAVE COMPLETELY OUTSOURCED THEIR PURCHASE TO HUMANITARIAN ORGANIZATIONS (PROCESS AND FUNDING)

Initiator NPO/NPOs Initiative Initiative objective Result in the market

1 PAHO & UNICEF Aggregating demand in high volume purchase

Achieving noticeable discounts Lower pricesDevelopment of product in the market

2 GAVI Securing long term funding Increase production capacity New suppliers to the market

3GAVIUNIVEF & PAHO

Aggregating demand Economies of scaleAttract new suppliers

Increase production capacityNew suppliersBuild up competitionReduce prices

4 WHO, GAVI, UNICEF Enabling manufacturers from developing countries

Securing supplyEnabling developing countries

Better availabilityLower prices

5 WHO National strategies for all Deeper relationships and collaboration between all players including NGOs and business sector

Developed industry incentivesHealthier markets

6 WHO Providing better forecast Improve corporate image and industry incentives

Healthier markets

7 GAVI Collaboration with business sector Bringing a fresh view to the board Increase productionBetter availability

8 IAVI International collaboration between public private sector

Share risks, cost, and benefitsDevelop research and product development

New resources in the market

9 UNICEF Long term arrangements with current & potential suppliers

Introduce and develop new suppliers in the market

New suppliersBetter availabilityLower pricesHigher quality productsGAVI’s consolidation of demand for vaccines secure supply (Gavi, 2009: 16) Price drop of Pentavalent (GAVI, 2009: 16)

NPO initiatives in shaping the market of supplies

QUESTIONS?Thank you!

mttn45 humanitarian logistics sourcing and procurement nonprofit organizations shaping the market of...

Documents

local slide

sector slide

supply market slide

funding slide

shortage slide

content purchasing power

limited buying power

wef2010 data slide