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 ID: 562281
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Slide1
MTTN45 Humanitarian Logistics
Sourcing and Procurement Nonprofit Organizations shaping the Market of Supplies 12 April 2013Slide2
Content
Purchasing power in the humanitarian sectorImpact of purchasing power on purchasing strategiesThe case of vaccine procurement Nonprofit organizations shaping their supply market Slide3
Who has the power to shape the market? Slide4
Nonprofit-for profit relationship
The disdain history
The mutual need of collaboration
More relationships, collaboration, and dependenciesSlide5
Distribution of Power: Resource Dependency Theory
Resource dependency theory (RDT)Focus on core competencies outsourcingExchange relationships dependencePower as relative dependence
more influence
All
organizations strive to maximize their power through reformulating these dependencies.Slide6
Issue of power dominance in procurement
Understand its power positionMove 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)Slide7
What are drivers of purchasing power? Substitutability
Interconnections Demand shareInformation symmetry Reputation Slide8
Humanitarian logistics
Added stakeholders with conflicting incentivesShared management and need for collaborationLack of fundingLack of infrastructure and local capacities
Based on OECD (2011) data
Based on WEF(2010) data
Based on pre-study data
What does the humanitarian sector look like? Slide9
What does the humanitarian sector look like?
The disdain nature of nonprofit (NPO)-for profit relationshipScarcity 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 suppliesThe limited buying powerSlide10
Purchasing power’s impact on purchasing How do you think low purchasing power impacts purchasing decisions and strategies?
Accept the situation and be weakFew suppliers with high prices in country X. Gather funds and buy fromAccept the situation and safeguardFew suppliers with high prices in country X. Have a detailed and strict contract so terms are set for a longer timeUnderstand the situation and try to change itFew suppliers with high prices in country X
. Insource, invest in developing more suppliers maybe local Slide11
the case of vaccine procurement in the sectorSlide12
Delivery of health in humanitarian aid supply
chainsGlobal health SCMHealth a reflection of development and poverty reduction (UN, 2011)Nature of disease: geographical, weather, culture, social, educational, economicThe public good nature of the related productsHigher weight of qualityHigh donor dependency (viewed as a global good)
Different purchase profiles among countries
Based on WEF(2010) dataSlide13
Overview of vaccine SCs for developing countries
Subset of global health SCsWillingness of governments to payEpidemiological justificationsUnder valued by governments and marketSome differences between industrial and emergingConcentrated supply marketEmerging economy producers increasingProcurement being considered a main issue in shortage Slide14
A schematic view of the positioning of different actors along the vaccine chain in humanitarian networksSlide15
So power is shifted to the suppliersWhat are different ways buyers (e.g. different governments and organizations) can
buy vaccines the best way in this situation? Slide16
Cases based on their sample group and purchase strategy
Sample group
Developing countries
Humanitarian orgs
Industrial country
Cases
Iran
Latvia
Oman (GCC)
Zambia
UNICEF
IFRC
Skane region (Sweden)
Purchasing strategies
Self-purchasing
with
local production
Self-purchasing
without
local production
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
Based on WEF (2010) dataSlide17Slide18
Several countries which have completely outsourced their purchase to humanitarian organizations (process and funding) Slide19
Initiator NPO/NPOs
Initiative
Initiative objective
Result in the market
1
PAHO & UNICEF
Aggregating demand in high volume purchase
Achieving noticeable discounts
Lower prices
Development of product in the market
2
GAVI
Securing long term funding
Increase production capacity
New suppliers to the market
3
GAVI
UNIVEF & PAHO
Aggregating demand
Economies of scale
Attract new suppliers
Increase production capacity
New suppliers
Build up competition
Reduce prices
4
WHO, GAVI, UNICEF
Enabling manufacturers from developing countries
Securing supply
Enabling developing countries
Better availability
Lower prices
5
WHO
National strategies for all
Deeper relationships and collaboration between all players including NGOs and business sector
Developed industry incentives
Healthier 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 production
Better availability
8
IAVI
International collaboration between public private sector
Share risks, cost, and benefits
Develop 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 suppliers
Better availability
Lower prices
Higher quality products
GAVI’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
Slide20
Questions?Thank you!