EC/64/SC/CRP.4. Report on supply management. Executive Committee of the High Commissioner s Programme. Standing Committee 56 th meeting.

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1 Executive Committee of the High Commissioner s Programme Standing Committee 56 th meeting Distr. : Restricted 12 February 2013 English Original : English and French Report on supply management Summary This paper outlines actions taken to ensure the timely and efficient delivery of humanitarian relief items in emergency and non-emergency situations, including efforts to enhance planning processes and procedures, optimize inventory and assets management, and strengthen procurement services. It also reviews progress made in the implementation of UNHCR s supply management strategy, which was presented to the Standing Committee in 2011, and introduces the next phase Supply Chain 2015 including specific deliverables.

2 Contents Paragraphs Page Chapter I. Introduction II. Supply Chain III. Planning IV. Emergency response V. Inventory/assets management actions and warehouse optimization VI. Procurement VII. Audit and oversight VIII. Training IX. Conclusion

3 I. Introduction 1. The provision of humanitarian relief items remains a critical aspect of UNHCR s ability to meet the basic needs of persons of concern, including in situations of protracted displacement as well as in emergency situations. The aim of the Supply Management Service (SMS) is to accomplish this task in a rapid, intelligent and reliable way. 2. Since its last report (see EC/62/SC/CRP.4) 1 on supply chain management at the 50 th Meeting of the Standing Committee in 2011, UNHCR has progressed significantly in meeting the following targets set two years ago: i. Ensuring that orders are delivered on time and in the required quantities for all operations; ii. Ensuring the timely delivery of core relief items 2 in emergencies, including immediate delivery when requested; iii. Ensuring an effective and efficient management of property, plant and equipment (PPE); iv. Ensuring that the supply chain is managed by skilled, professional personnel at headquarters and in the field; and v. Establishing a strategic network of emergency stockpiles around the world to ensure emergency stocks of core relief items for 600,000 persons of concern. 3. Over the past year, the focus has been on ensuring the timely delivery of core relief items in emergencies. In 2012, 92 per cent of all airlifts dispatched were delivered in less than 72 hours from the time the requests were received. This year, SMS is working to improve the delivery lead time for non-emergency operations. Guidance to accomplish these goals will form part of new standard operating procedures for supply chain planning, which will be rolled out in the second half of UNHCR has taken several measures to ensure the reliability of PPE data as a prerequisite for compliance with the International Public Sector Accounting Standards (IPSAS) and effective PPE management. This included a comprehensive physical verification of all PPE in some 125 country operations. In addition, UNHCR performed a survey of land and buildings owned, leased or granted to the organization in some 420 locations. The appointment of a Senior Engineering and Property Manager provides UNHCR with the necessary technical competency to optimize the management of its lands and buildings. A review of all PPE items that are idle or beyond their useful life was performed, and operations were instructed to dispose of such items if economically preferable. 5. The Global Stock Management system, adopted in 2010, is now well established, with the network of regional warehouses expanded to include seven hubs located strategically in Accra, Amman, Copenhagen, Douala, Dubai, Isaka and Nairobi. These hubs are located near historically crisis-prone regions and ongoing operations, as well as in proximity to airports. This Global Stock Management system makes it possible for UNHCR to assist up to 600,000 people within 72 hours, if needed. 6. The three-pronged supply chain approach (air transport, sea/land transport, and white stocks 3 ) has demonstrated real advantages in responding to the crises UNHCR faced in 2011 and For example, in response to the refugee influx in countries 1 Available from 2 Core relief items include blankets, jerry cans, buckets, kitchen sets, sleeping mats or mattresses, and mosquito nets. 3 White stocks refer to stocks held with suppliers, at their expense, rather than in UNHCR warehouses. 3

4 neighbouring the Syrian Arab Republic, UNHCR has been able to immediately move relief items by air and land from the Amman and Dubai emergency stockpile warehouses, while at the same time, white stocks in Dubai replenished supplies through direct delivery to UNHCR s warehouse. Equally, shipments by road have been implemented from the global stockpile in Accra to the operations in Burkina Faso and Mali, and from the global stockpiles in Nairobi and Isaka to the operations in Ethiopia, Rwanda and South Sudan. 7. The four pillars of the supply management structure are now firmly in place and include the Supply Operational Support Section (front office); Supply Infrastructure Support Section (back office); Business Support Section (policy development and business support); and the Asset and Fleet Management/Compliance Section. The Compliance Section was expanded in 2012 to include asset and fleet management. This enabled UNHCR to carry out a thorough asset/inventory verification exercise, contributing to an IPSAS-compliant status at the beginning of An emergency unit and an air transport unit were also established within SMS to improve the quality and speed of service to emergency operations and ensure that the Office was able to meet its goal of reaching 600,000 persons of concern within 72 hours. 9. UNHCR also prioritized professionalization of its procurement service, recruiting a Chief of Section with experience in the private sector as well as with other UN agencies emergency operations. Technically proficient and academically qualified middle managers also joined the team, bringing with them supply and procurement experience in global operations from other UN agencies. II. Supply Chain Following the successful implementation of the five targets outlined in paragraph two, and in order to capitalize on progress already made in the restructuring of the supply function, the next phase of the supply strategy, Supply Chain 2015, was introduced at the beginning of This phase includes specific deliverables for the next two years, as follows: Reliable Delivery is the principle objective of global stock management and improved planning. The ability to manage stock globally and control the flow in the pipeline will ensure the availability of core relief items and other frequently purchased items for both standard operations and emergencies. These items will be delivered with shortened and more reliable lead times, while improved supply chain planning will result in reduced purchasing, operational and working capital costs. Strengthened Emergency Response capacity aims to provide a more comprehensive and predictable supply chain response to support UNHCR s emergency operations and to improve work with partners, expanding human resources capability. Enhanced Human Resources Management aims to build, through training and certification of senior level positions, a team of supply staff with the required knowledge, skill set and competencies to manage an increasingly complex supply chain. 11. Additional Supply Chain 2015 objectives include: better planning procedures, tools and processes; improvements to the management of one of UNHCR s most costly assets, its vehicle fleet; and a strengthened procurement service to handle the high volume of procurement processes. III. Planning 12. Core to the Supply Chain 2015 concept is prioritization of better planning and order management within UNHCR. The objective is to have effective planning processes and procedures in place in three areas: needs assessment by operation; minimum stocks to be maintained at each warehouse at all times; and replenishment plans by operation, which 4

5 consider both forecasted needs and stocks in place. Positive results are expected in relation to the optimization of stocks, improved order-size management and the efficient use of warehouse space. 13. As noted, the Office will issue standard operating procedures on supply chain planning and will seek to improve planning tools and update processes. The aim is to link any procurement with the identified needs on the ground and with the existing stock and replenishment choices (i.e. local procurement, global procurement or replenishment from available stock). This will ensure that all core relief items will reach the persons in need in the shortest time frame possible and at minimal cost. 14. The new processes for achieving the Reliable Delivery objective will ensure that orders are managed by both size and time, and that they are placed in anticipation of future demands to reduce lead times. To optimize the organization s delivery process, UNHCR has engaged the MIT-Zaragoza Logistics Center 4 to research demand-supply planning, with a view to identifying a means of improving the planning processes and procedures at all levels. IV. Emergency response 15. UNHCR has also enhanced its capacity for emergencies by establishing, in 2012, an emergency response unit. The Office has expanded its freight options by participating in a joint UN global freight forwarding tender, which involves the United Nations Children s Fund, the United Nations Development Programme (UNDP), the World Food Programme (WFP) and others. This joint tendering resulted in four global frame agreements for land/air and sea transport. V. Inventory/assets management actions and warehouse optimization 16. In 2012, SMS carried out regular analysis of the inventory usage by each country operation to identify excess inventory in warehouses. The results of this analysis allowed SMS to work with the country operations to decrease obsolete and surplus inventory. This has permitted the Office to more effectively use existing inventories while maintaining (and sometimes increasing) service levels. 17. Additionally, an analysis model has been developed, in cooperation with Lund University in Sweden, for a strategic review of UNHCR s current warehouse network. The model accounts for factors such as time in transit and cost elements (fixed vs. variable and warehouse vs. transport). It also addresses qualitative aspects such as climate, accessibility and the safety of specific locations. Based on these elements, the model is able to determine which demand can best be served from which location. In 2013, this will be applied to future needs in existing operations and eventually to all new needs. Using this model provides UNHCR with a better overview of the various factors involved, and allows it to evaluate different alternatives and make more appropriate decisions. 18. UNHCR s fleet of vehicles is one of the largest asset categories for the organization. A Global Fleet Management Project, launched in January 2013, aims to provide UNHCR field offices and operations with appropriate, cost-effective, safe vehicles and professional fleet management services to support optimum programme delivery. 4 The Zaragoza Logistics Center is a research institute established by the Government of Aragon, Spain, in partnership with the Massachusetts Institute of Technology and the University of Zaragoza. 5

6 VI. Procurement 19. In 2012, the Supply Infrastructure Support Section (SISS) was organized into three main components - goods procurement, service contracting, and quality management - and several key improvements were made to solidify them. 20. Procurement and contracting practices within the organization were harmonized and related rules, regulations and processes were updated and enhanced. All global frame agreements and contracts were collected, electronically archived and consolidated. A number of tools were developed in 2012 to establish quality assurance in the acquisition process: a new quality policy, a quality manual, quality control standard operating procedures for visual inspection, and a supplier factory assessment methodology. 21. UNHCR s Core Relief Item Catalogue was enhanced with further specifications and a change to an electronic platform, making it more user-friendly. The Core Relief Item Catalogue, which serves as a product specification repository, will be updated further over the coming year to support the dependable acquisition of goods in UNHCR s operations around the world. 22. Cooperation and harmonization of the procurement and contracting function in the United Nations system was enhanced through various inter-agency forums. SISS actively participated in the High Level Committee on Management Procurement Network (HLCM-PN) working groups and the Harmonization Working Group, the Steering Team for the United Nations Global Marketplace Vendor Registration Reform Project, and the Quality Management Inter-Agency Technical Group with UNICEF, the International Federation of Red Cross and Red Crescent Societies (IFRC), the International Committee of the Red Cross (ICRC) and Médecins Sans Frontières (MSF). 23. In 2013, procurement services will be separated from SMS and a fourth component will be added to enhance field procurement and service contracting. Additional guidance will be developed regarding several specific areas of the acquisition process (e.g. drafting clear terms of reference, carrying out technical evaluations, managing global frame agreements, establishing lease and rental contracts, and developing guidance on UNHCR s Committee on Contracts review process). Data on global frame agreements and contracts will continue to be collected and catalogued from all UNHCR field operations and other UN agencies operating in those markets, in order to identify gaps and opportunities with respect to local and regional procurement. VII. Audit and oversight 24. The Compliance Section was created in 2011 with the goal of addressing a number of compliance issues which SMS faced as a result of organizational changes and the introduction of IPSAS. The Section became operational in April 2011, with the assignment of a Senior Compliance Manager. 25. The Compliance Section acts as the key contact for all audits relevant to supply performed by the United Nations Board of Auditors (UNBOA), internal audits performed by the United Nations Office of Internal Oversight Services (OIOS) and reviews conducted by the United Nations Joint Inspection Unit (JIU). It acts as a key source of information for the various audit functions, ensures that audit recommendations are responded to in a timely manner, and monitors the implementation of accepted recommendations. VIII. Training 26. SMS and the Global Learning Centre conducted functional as well as technical training in different locations. A logistics assessment workshop was held in Nairobi with a commercial freight forwarding partner. UNHCR provided certified training for some 30 staff in 2012, using the Chartered Institute of Procurement and Supply (CIPS) certification 6

7 program, which has been adopted by the HLCM-PN and is currently utilized by 31 other agencies. 27. In 2013, UNHCR will support additional trainings to further CIPS certification for supply staff around the world. Tailor-made trainings in the areas of logistics and emergency support are also planned for IX. Conclusion 28. The transformation of the UNHCR supply chain function, including the development of the Global Stock Management system, is well underway. The Supply Chain 2015 strategy provides the road map for UNHCR to reach the level of excellence it strives for in the rapid, intelligent and reliable delivery of relief items to persons of concern in emergencies and in protracted humanitarian situations, in coordination with other UN agencies and partners. 7

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