Geopolitical crises with armed conflicts, global pandemics and supply shortages, disasters caused by natural forces: Humanitarian aid organizations are currently under great strain worldwide.

This makes it all the more important to realize that of every euro spent on humanitarian aid, an average of 75 cents is spent on supply chain management (SCM). Procurement, transport and personnel costs make up the three largest cost blocks within SCM.

This is the conclusion of Prof. Dr. Maria Besiou, Professor of Humanitarian Logistics and Director at the Center of Humanitarian Logistics and Regional Development (CHORD) at Kühne Logistics University (KLU), in a study launched in the aftermath of the first World Humanitarian Summit 2016 in Istanbul.

Together with Dr. Jonas Stumpf (HELP Logistics, Kühne Foundation) and Prof. Tina Wakolbinger, Ph.D. (Vienna University of Economics and Business), Besiou set out on a mission to investigate the thesis, often cited in humanitarian aid but never verified to date, that 60 to 80 percent of the total costs of humanitarian aid operations in disaster relief missions are attributable to SCM. Potential savings should also be identified, and the role of logistics in aid organizations should be examined in general.

Wars and pandemics: Logistics for aid missions particularly expensive

Five aid organizations provided data from a total of 20 disaster relief operations that took place in 14 countries between 2005 and 2018. On this basis, Besiou made calculations in 2021, and numerous discussions with experts took place in parallel. The “60 to 80 percent thesis” held up to the analyses: around 203 million of the total of around 276 million euros spent by the five organizations in the 20 aid campaigns went to SCM – an average of 75 percent. In the case of armed conflicts and epidemics, the share of logistics costs was particularly high. In the eyes of the researchers, this finding represents clear evidence of the important role played by supply chain managers in successful, because efficient, aid operations.

Cost-saving approaches: local, preventive, cooperative

Besiou and her fellow researchers also developed approaches to reduce the logistical costs of aid organizations. Preparation is the central keyword here: “Training local forces in advance is a sensible investment, for example,” says Besiou. “In the event of a disaster, there is then no need to bring in external forces, which are five to 15 times more expensive.” In addition, local employees know the prevailing security and market structures better.

Long-term agreements with suppliers also pay off. The same applies to special cash and voucher programs that enable the people affected to select the items they need themselves or to exchange them among themselves. After all, there are no transport and storage costs – and local markets, if they are still functioning, are not brought to a complete standstill by external aid supplies. Cooperation between aid organizations in the form of shared capacities or joint procurement strategies can also reduce SCM costs, according to the study. Not to mention meticulous planning in the preparation phase, which requires appropriate co-determination rights and responsibilities of SCM employees.

Bring supply chain managers into the leadership team

While the study focuses on large, international aid organizations with traditional structures and headquarters in Europe, the next step is to investigate supply chain costs at the local level to identify further potential savings. “Supply chains become an issue in the public eye whenever something doesn’t work – as with the non-deliverable medical masks at the beginning of the Corona pandemic or when a container ship blocks the Suez Canal for days,” Besiou sums up. The critical importance of supply chains is often underestimated by the general public, he says, and consequently too little attention, time and money is invested in logistics. It is also why those responsible for supply chain management in aid organizations are still often underrepresented on management committees. “Our study shows: In order for donations to be used optimally for aid on the ground, experienced logistics experts from the field must be involved as early as possible in the planning stage so that disaster relief operations can be carried out efficiently and effectively.”