Data-drivien optimization of OFDA's disaster response capacity: Phase II - Workshop IV

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Data-driven optimization of OFDA’s

disaster response capacity

Phase II – Workshop IV

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Agenda

• _Introduction

• Inventory optimization

• Recommendations

• Discussion

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A three-step process

• Optimize the current inventory allocation for the current total inventory

• Determine performance for the implied risk portfolio

• Determine performance against various other risk portfolios • Create OFDA’s risk portfolio with

target beneficiaries.

• Collect OFDA’s supply lead time estimators.

• Create scenarios, i.e. vary OFDA’s risk portfolio

• Define objective • Adjust inventory levels • Identify optimal allocation • Recommend actions

OFDA’s risk portfolio Inventory optimization Recommendations

1 2 3

Today

• Work through Steps 1 & 2 for each item • Determine if further analyses are necessary.

2A 2B

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Disaster scope Disaster scale Risk portfolio(s)

Step 1 – Risk portfolio development

• Mix of geographical location of disasters

• Mix of disaster types • Total affected population

I

II

III

• Share of population targeted by OFDA

• Resulting risk portfolio OFDA seeks to serve

O

pt

io

n

1 • Mix of disaster locations and _{disaster types from OFDA’s past}

operations

• Total affected population from UN reports

• TAP size dependent scaling of targeted population based on OFDA’s past response activities

• Risk portfolio represents typical mix of response activities of OFDA • Varying the size of disasters in the portfolio to show impact of various risk exposure

O

pt

io

n

2 Predict• a mix of potential disaster types and locations, and

• associated total affected population

• TAP size dependent scaling of targeted population based on OFDA’s past response activities

• Risk portfolio represents typical mix of response activities of OFDA • Varying the size of disasters in the portfolio to show impact of various risk exposure

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Inventory allocation – the intuition

Given inventory level – varying risk portfolio

Consolidate Diversify

Given risk portfolio – varying inventory level

Consolidate Diversify

Relative to the expected risk exposure the total inventory in the system determines if a disaster response agency should operate a diversified or a consolidated network

!

low scale medium scale

high scale low inventory medium inventory high inventory

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Impact and implications for decision-makers

Depending on OFDA’s risk exposure expectations, OFDA has to decide what service they want to achieve.

!

• higher service levels • lower response times • lower logistics costs • lower service levels

• higher response times • higher logistics costs

• higher service levels • lower response times • lower logistics costs • lower service levels

• higher response times • higher logistics costs

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Scenarios vs. optimization

Risk portfolio Degree of diversification Total system inventory Optimal inventory allocation effectiveness and service metrics +

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Step 2A – Optimal allocation for current ops

% of targeted TAP served % of cycles fully served Average response time

Blankets Buckets Hygiene kits Kitchen sets Plastic sheeting Water

Current inventory allocation metric *

Inventory balance metric Implied risk portfolio ** 0.9 0.5 1.2 0.9 0.65 0.5 Average costs 96% 98% 95% 96% 98% 98% 15.4h 14.7h 16.1h 15.4h 15.2h 14.7h $4,910 $2,620 $14,000 $16,400 $157,700 $26,100 81% 91% 67% 81% 86% 91% 97% 98% 93% 97% 97% 98% (-4%) (-2%) (-5%) (-4%) (-2%) (-2%) (-6%) (-4%) (-8%) (-6%) (-3%) (-4%)

* Based on OFDA’s current inventory allocation

** Identified by evaluating multiple risk portfolios and finding the optimal allocation that results in the same inventory allocation metric Implied risk portfolio

Corresponding optimal performance metrics

If we consider the current inventory distribution as a starting point and assume an appropriate risk portfolio, OFDA can gain lead time and cost reductions through inventory reallocation!

Mean Stand. Dev. 82,000 15,300 50,000 7,200 87,000 16,500 83,000 15,200 194,000 54,600 50,000 7,200

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To capture the benefits, OFDA should consider reallocating inventory

Subang, MY Miami, USA

Blankets Buckets Hygiene kits Kitchen sets Plastic sheeting Water

Dubai, UAE Pisa, I 34,800 28,464 18,400 17,400 4,340 28,464 34,800 20,800 6,600 17,400 4,340 20,800 3,900 20,800 0 1,700 2,320 20,800 0 3,436 0 0 0 3,436 (+158%) (+54%) (-34%) (+168%) (+74%) (+54%) (-90%) (-4%) (-92%) (-51%) (+4%)

* Percent change relative to OFDA’s current allocation in the respective WH Optimal inventory levels*

Step 2B: Is the risk portfolio appropriate for each item and are the effectiveness and service metrics acceptable?

(+74%) (+23%) (+74%) (+32%) (-16%)

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Blankets

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Disaster portfolio and OFDA’s past actions

• Disaster responses in the past • TAP and location

• Adjust TAP according to OFDA’s disaster response activities

Disasters OFDA’s responses in the past

• Evaluate OFDA’s disaster responses in the past

beneficiaries served percent served vs. TAP

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OFDA’s risk portfolio scenarios – blankets

• Adjust TAP according to OFDA’s disaster response activities • Use past activities to estimate

mandate

Disasters OFDA’s responses in the past Risk portfolios: blankets

Medium-Large Large

Small-Medium Medium Small

• Creating different item-specific scenarios = OFDA’s future risk portfolio scale

• Characterize different exposure to disaster sizes Mean Std. Dev. Cap 60,000 9,400 Small 62,000 80,000 14,500 Small -Medium 84,000 180,000 48,900 Large _200,000 140,000 33,300 Medium -Large 152,000 100,000 Medium 106,000 20,100 A B C

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Blankets

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Metrics – medium scale risk portfolio

Balance metric

Inventory allocation 80 - 100%

0 - 2

Results

• Reallocating inventory benefits OFDA • Response time reduction: 3% • Cost reduction: 4%

• 75% of beneficiaries served

• 93% of all disaster scenarios served

 Current inventory levels result in mixed service levels.

 Current inventory allocation is close to optimum. 97% 75% 93% 1.02 - 3% - 4% 15.7h $5,056 Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory levels result in lower service and strong consolidation.

 Reallocation benefits for response time and cos. 94% 57% 80% 1.73 - 6% - 9% 16.5h $5,468 Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Results

 Current inventory is sufficient to run a diversified response network effectively.  Cost and response time benefits from

reallocating inventory. Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small 96% 88% 97% 058 - 4% - 6% 14.9h $4,625

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Metrics – comparing risk portfolios

Results

At current inventory levels and with a larger scale risk portfolio

• OFDA should consider to run a more consolidated network.

• Service levels drop.

• Cost and lead time increase.

Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small

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Optimal inventory allocation

• A larger scale risk portfolio means that OFDA expects to serve more beneficiaries in each disaster and the variation of beneficiaries increases.

• The current inventory allocation seems to reflect that OFDA expects risk portfolios to be lower scale.

• OFDA benefits from inventory reallocation towards Dubai and Miami to reduce response time and cost.

• At current inventory levels, OFDA should consider to consolidate the inventory if they expect a larger scale risk portfolio.

Results

Medium-Large Large

Today Small Small-Med_OptimumCurrent Medium Med-_Large Large

Inv. Allocation Metric 0.9 0.6 0.8 0.9 1.0 1.4 1.7 Dubai, UAE 20,000 24,800 33,600 34,800 42,400 60,800 73,500 Miami, USA 13,500 24,800 33,600 34,800 31,100 12,700 0 Pisa, Italy 40,000 23,900 6,300 3,900 0 0 0 Subang, Malaysia 0 0 0 0 0 0 0

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Choosing appropriate service levels

• Directionally, what is the scale of the risk portfolio that OFDA expects for blankets?

smaller scale < > larger scale • Considering this risk portfolio, is OFDA

satisfied with the service metrics, response times, and logistics cost?

higher < > lower Questions

Medium-Large Large

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Buckets

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OFDA’s risk portfolio scenarios – buckets

mandate

Disasters OFDA’s responses in the past Risk portfolios: buckets

Medium-Large Large

• Characterize different exposure to disaster sizes Mean Std. Dev. Cap 60,000 9,400 Small 62,000 80,000 14,500 Small -Medium 84,000 180,000 48,900 Large _200,000 140,000 33,300 Medium -Large 152,000 100,000 Medium 106,000 20,100 A B C

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Buckets

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Metrics – medium scale risk portfolio

Balance metric

0 - 2

Results

 OFDA should consider to consolidate

inventory to reduce response time and save logistics costs. 97% 75% 93% 1.02 - 3% - 5% 15.7h $2,920 Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory levels result in lower service metrics.

 A more consolidated network results in lower response times and saves logistics costs. 94% 57% 80% 1.73 - 6% - 12% 16.5h $3,160 Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Results

 Current inventory is sufficient to run a diversified response network effectively.  Some benefits of reallocating inventory.

Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small 96% 88% 97% 058 - 4% - 6% 14.9h $2,665

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Metrics – comparing risk portfolios

Results

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Optimal inventory allocation – buckets

Today _OptimumCurrent Small Small-Med Medium Med-_Large Large

Inv. Allocation Metric 0.5 0.5 0.6 0.8 1.0 1.4 1.7 Dubai, UAE 31,600 28,464 24,800 33,600 42,400 60,800 73,500 Miami, USA 13,500 20,800 24,800 33,600 31,100 12,700 0 Pisa, Italy 20,000 20,800 23,900 6,300 0 0 0 Subang, Malaysia 8,400 3,436 0 0 0 0 0

• The current inventory allocation seems to reflect that OFDA expects a rather small scale risk portfolio.

Results

Medium-Large Large

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Choosing appropriate service levels

• Directionally, what is the scale of the risk portfolio that OFDA expects for buckets?

Medium-Large Large

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Hygiene Kits

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OFDA’s risk portfolio scenarios – hygiene kits

mandate

Disasters OFDA’s responses in the past Risk portfolios: hygiene kits

• Characterize different exposure to disaster sizes Mean Std. Dev. Cap 30,000 3,300 Small 30,500 60,000 9,400 Small -Medium 62,000 130,000 29,700 Large _140,000 100,000 20,100 Medium -Large 106,000 80,000 Medium 84,000 14,500 A B C Medium-Large Large Small-Medium Medium Small

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Hygiene Kits

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Metrics – medium scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory allocation is close to optimum. 97% 70% 93% 1.1 - 3% - 5% 15.9h $13,800 Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory levels result in lower service and higher costs and response time.  OFDA should strongly consolidate their

hygiene kits inventory.

89% 54% 79% 1.73 - 11% - 17% 16.5h $14,600 Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Balance metric

0 - 2

Results

- 2% - 3% 14.6h 98% 94% 99% 0.37 $11,900

 Current inventory is sufficient to run a diversified response network effectively.  OFDA should consider to diversify the

inventory across the network to reduce cost and response times.

Medium-Large Large Small-Medium Medium

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Metrics – comparing risk portfolios

Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Results

At current hygiene kits inventory levels and with a larger scale risk portfolio

Large Small-Medium Medium

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Optimal inventory allocation

Today Small Small-Med Medium _OptimumCurrent Med-_Large Large

Inv. Allocation Metric 1.2 0.4 1.0 1.1 1.2 1.4 1.7 Dubai, UAE 15,000 9,332 12,400 16,800 18,400 21,200 25,000 Miami, USA 10,000 6,700 12,400 8,200 6,600 3,800 0 Pisa, Italy 0 6,100 200 0 0 0 0 Subang, Malaysia 0 2,868 0 0 0 0 0

• The current inventory allocation seems to reflect that OFDA expects risk portfolios to be in the medium to large scale.

• OFDA can reduce response time and cost by reallocating some inventory to Dubai.

Results

Medium-Large Large Small-Medium Medium

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Choosing appropriate service levels

• Directionally, what is the scale of the risk portfolio that OFDA expects for hygiene kits?

Medium-Large Large

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Kitchen sets

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OFDA’s risk portfolio scenarios – kitchen sets

mandate

Disasters OFDA’s responses in the past Risk portfolios: kitchen sets

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Kitchen sets

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Metrics – medium scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory allocation is close to optimum.

 Some cost and response time benefits through reallocation. 97% 75% 93% 1.02 - 3% - 5% 15.7h $16,850 Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 At current kitchen sets inventory levels, service is low and cost and response times are higher.

 OFDA should consider to consolidate inventory. 94% 56% 80% 1.73 - 6% - 9% 16.5h $18,240 Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Results

 Current inventory is sufficient to run a diversified response network effectively.  OFDA should consider to diversify the

allocation more. Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small 96% 88% 97% 058 - 4% - 6% 14.9h $15,410

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Metrics – comparing risk portfolios

Results

At current hygiene kits inventory levels and with a larger scale risk portfolio

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Optimal inventory allocation

Today Small Small-Med_OptimumCurrent Medium Med-_Large Large

Inv. Allocation Metric 0.9 0.6 0.8 0.9 1.0 1.4 1.7 Dubai, UAE 10,000 12,400 16,800 17,400 21,200 30,400 36,500 Miami, USA 6,500 12,400 16,800 17,400 15,300 6,100 0 Pisa, Italy 20,000 11,700 2,900 1,700 0 0 0 Subang, Malaysia 0 0 0 0 0 0 0

• The current inventory allocation seems to reflect that OFDA expects risk portfolios to be in the medium scale.

• OFDA can reduce response time and cost by reallocating some inventory from Italy.

Results

Medium-Large Large

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Choosing appropriate service levels

• Directionally, what is the scale of the risk portfolio that OFDA expects for kitchen sets?

Medium-Large Large

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Plastic sheeting

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OFDA’s risk portfolio scenarios – plastic sheeting

mandate

Disasters OFDA’s responses in the past Risk portfolios: plastic sheeting

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Plastic sheeting

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Metrics – medium scale risk portfolio

Balance metric

0 - 2

Results

 OFDA should consider to consolidate

inventory to reduce response time and cost.

98% 73% 94% 1.07 - 2% - 3% 15.7h $166k Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory levels result in lower service.

 OFDA should consider to consolidated

inventory to lower reduce cost and response time. 91% 56% 82% 1.65 - 9% - 14% 16.0h $172k Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Results

 Current inventory is sufficient to run a diversified response network effectively.

Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small 99% 96% 99% 032 - 1% -2% 14.2h $140k

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Metrics – comparing risk portfolios

Results

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Optimal inventory allocation

Today Small _OptimumCurrent Small-Med Medium Med-_Large Large

Inv. Allocation Metric 0.65 0.3 0.65 0.7 1.1 1.5 1.7 Dubai, UAE 3,280 4,240 4,340 4,480 6,980 9,600 10,617 Miami, USA 2,500 2,520 4,340 4,480 4,020 1,400 383 Pisa, Italy 4,760 2,120 2,320 2,040 0 0 0 Subang, Malaysia 460 2,120 0 0 0 0 0

• The current inventory allocation seems to reflect that OFDA expects a small-medium scale risk portfolio.

Results

Medium-Large Large

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Choosing appropriate service levels

• Directionally, what is the risk portfolio that OFDA expects for plastic sheeting?

smaller < > larger

• Considering this risk portfolio, is OFDA satisfied with the service metrics, response times, and logistics cost?

Medium-Large Large

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Water

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OFDA’s risk portfolio scenarios – water

mandate

Disasters OFDA’s responses in the past Risk portfolios: water

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Water

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Metrics – medium scale risk portfolio

Balance metric

0 - 2

Results

 OFDA should consider to consolidate inventory 97% 75% 93% 1.02 - 3% - 5% 15.7h $29,100 Medium-Large Large Small-Medium Medium Small

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Metrics – large scale risk portfolio

Balance metric

0 - 2

Results

 Current inventory levels result in lower service

 OFDA should consider to strongly

consolidate inventory in order to reduce cost and response time.

92% 57% 80% 1.73 - 8% - 13% 16.5h $31,500 Medium-Large Large Small-Medium Medium Small

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Metrics – small scale risk portfolio

Results

 Current inventory is sufficient to run a diversified response network effectively.

Balance metric Inventory allocation 80 - 100% 0 - 2 Medium-Large Large Small-Medium Medium Small 96% 88% 97% 058 - 4% - 6% 14.9h $26,600

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Metrics – comparing risk portfolios

Results

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Optimal inventory allocation

Today _OptimumCurrent Small Small-Med Medium Med-_Large Large

Inv. Allocation Metric 0.5 0.5 0.6 0.8 1.0 1.4 1.7 Dubai, UAE 31,600 28,464 24,800 33,600 42,400 60,800 73,500 Miami, USA 13,500 20,800 24,800 33,600 31,100 12,700 0 Pisa, Italy 20,000 20,800 23,900 6,300 0 0 0 Subang, Malaysia 8,400 3,436 0 0 0 0 0

• A larger scale portfolio means that OFDA expects to serve more beneficiaries in each disaster and the variation of beneficiaries is higher.

• The current inventory allocation seems to reflect that OFDA expects a small scale risk portfolio.

Results

Medium-Large Large

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Choosing appropriate service levels

• Directionally, what is the risk portfolio that OFDA expects for water?

Medium-Large Large

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A three-step process

• Optimize the current inventory allocation for the current total inventory

• Determine performance for the implied risk portfolio

• Determine performance against various other risk portfolios • Create OFDA’s risk portfolio with

target beneficiaries.

• Collect OFDA’s supply lead time estimators.

• Create scenarios, i.e. vary OFDA’s risk portfolio

• Define objective • Adjust inventory levels • Identify optimal allocation • Recommend actions

OFDA’s risk portfolio Inventory optimization Recommendations

1 2 3

Today

• Work through Steps 1 & 2 for each item • Determine if further analyses are necessary.

2A 2B

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Options

There are different options to shed further light that need to be driven by OFDA’s decision-makers

• acceptable risk portfolio

• acceptable service metrics

• keep total inventory

• reallocate inventory to reap response time/cost benefits

• no change in diversification

1

• higher/lower risk portfolio

• acceptable service metrics

• keep total inventory

• change diversification

2

• acceptable risk portfolio

• higher/lower service/effectiveness metrics

• higher/lower total inventory

• change diversification

3

• … • …

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