Shopping For Aid: Inside The Global Business Of Hunger And Crisis Relief
For the world’s major humanitarian aid organizations, saving human lives has a core business, as well as altruistic, element. Supply and demand matter. So do prices. And like in any other major industry, there are huge logistical concerns to factor in as
NAIROBI -- The red and white boxes are the first thing you see. They're stacked by the hundreds, the thousands, on shelves, floor to ceiling. The whole warehouse appears to be stocked with nothing but these boxes, which contain "Plumpy'nut" – a peanut paste that aid organizations distribute to malnourished people.
The paste contains ingredients the human body uses for energy: peanut butter, powdered milk, oil, sugar and vitamins. The paste can be eaten straight from the pack so it won't come in contact with impure water. Mainly, however, the advantage of "Plumpy'nut" is that it can be safely stocked for years – until the next humanitarian disaster.
The warehouse where the energy-giving paste awaits shipment is reminiscent of the stock area in an IKEA store. The floor is polished concrete, and so clean that you could eat off of it. The huge metal shelving units are all perfectly labeled, the boxes aligned practically millimeter perfect. The order in this Kühne und Nagel transport company warehouse would appear, at first glance, to have nothing to do with something messy like starving people, much less with the noise and chaos on the streets outside in Nairobi, the capital of Kenya.
This big, East African city is one of the main hubs worldwide for aid products. The planes and trucks leave from here, bringing food, tents and other items crucial for the survival of people in places like Somalia, or in the refugee camps in northern Kenya.
"Purchasing and distribution of aid goods is an enormous logistical challenge," says Simone Pott, spokeswoman for the German organization Welthungerhilfe (which translates as World Hunger Aid). "Within a very short period of time we have to be able to get hold of large numbers of items and transport them."
Balancing profit and altruism
The sheer scale, thus, makes it inevitable that large transport companies like the Swiss-German multinational Kühne und Nagel, which deliver everywhere with professional savvy, will end up playing an essential role in humanitarian aid. Getting aid goods out, in other words, requires industrial-scale support.
If humanitarian aid is to be carried out, there have to be companies that can make products like blankets and cooking pots, stock and sell them, and ultimately get them to the places where they're needed. It's a "normal" business – sort of. The aid industry works according to the same basic rules of supply and demand that govern other business. The difference is that at the end of the day, the aid items industry is about human lives. It's a constant balancing act between making a profit and altruism.
Companies like Kühne und Nagel react accordingly. Its annual report dedicates just a short paragraph to "aid goods logistics." The report notes rather dryly how Kühne und Nagel supports international aid organizations in crisis areas with know-how. Tariq Arain, who heads the company's Nairobi branch, reacts with similar matter-of-factness. "In tough situations we sometimes have to find unconventional solutions," he says.
Tough situations can include rain-flooded roads in northern Kenya that no normal truck can drive across. In that case, the aid material that humanitarian organizations have stocked with Kühne und Nagel can only be delivered to destination with four-wheel drive vehicles. Either that or entirely different routes to destination must somehow be found.
With his handful of staffers, Arain makes calls and organizes for as long as it takes to get items to the right place. He practically never leaves his office near Nairobi's airport. Even if individual cases can be extremely time-consuming and complex, it's what transportation logistics are ultimately all about.
Still, the aid supplies sector does not work the way normal freight business does. For example, the aid organizations work out long-term contracts with transport companies so that, in an emergency, factors like supply and demand don't determine prices.
Another difference is that the calculations pertaining to the transport services in question have a transparency seldom seen in the sector. The clients can see clearly that while the companies are charging for their services, they are not going to be able to make extra profits in an emergency. For the companies, this is a niche market – real money in the transport sector is earned elsewhere.
An aid items ‘superstore"
Entrepreneur Vijay Ojha is another person in the business of responding to catastrophes. The 53-year-old Indian businessman's main source of profit is providing construction materials for development projects. But over the years he has developed something called "Techno Relief," which is the first place everybody turns to in an emergency. Techno Relief offers everything required in cases of flooding or famine: tents, blankets, cooking utensils, soap, basins, water filters, and shovels. All such items are permanently in stock.
"We're a supermarket for aid organizations, the largest in East Africa," says Ojha as he opens up a door across from his office leading to an exhibition area that looks like a combination of the do-it-yourself, camping and household sections of a department store.
Here, mosquito nets cost 3 euros, metal cooking pots for a five-member family 10 euros, with a cheaper plastic model also available. A pair of flip flops can be had for 50 cents, a bicycle (with a double crossbar that makes it possible to transport heavy loads) for 70 euros. None of this is any more expensive than it would be elsewhere in Kenya. Techno Relief's specialty is filling aid organization orders to spec, putting items together in individual packages and delivering them.
"When there's a disaster, you need everything at once," says Ojha. "The organizations can't go purchasing from individual manufacturers. We offer everything in one place." On the ceiling of the display area hang synthetic bags bearing the logos of virtually all the well-known aid organizations.
Ojha sees no problem with advertising what he does: the more people who know about him, the better. It's taken about 10 years for his aid products business to turn a profit, he says, adding that profit isn't everything. "Sometimes we donate things," he says. "Our goals are humanitarian."
Christoph Klitsch-Ott, head of the Africa division of Caritas International, agrees with Ojha about the complications of sourcing materials from more than one place: "It's very time-consuming to purchase from several sources." But the organization still maintains its own purchasing department with two staffers who buy essential items – from sources that include Techno Relief – when there is an emergency. They are subject to strict German rules with regard to aid organizations that operate on donations and tax money: Caritas International and others like it have to ask for several offers to compare price and quality.
Making sure the price is right
Things have to move at top speed, Klitsch-Ott says, but price still plays a role. "If we can save thousands of euros because delivery is going to take up to a week, we'll wait." But not too long: otherwise, the suppliers could run out. "In major catastrophes like the earthquake in Haiti, the rule is: whoever hasn't made up their mind about what they want to buy within the first four weeks has a problem." With tents, for example, it's a good idea to reserve a batch right away just to be sure. It's different with items such as basins, blankets or eating utensils: these are nearly always widely available – even in crisis zones.
Aid organizations do not get reduced prices from transport companies or other suppliers; the same conditions apply to them as do for other clients. "It's supply and demand," says Klitsch-Ott. "There's only room for negotiation if there's too much supply." Generally most of the profits of warehousing aid items get eaten up again – keeping thousands of items on hand and not knowing when they will be needed costs money. Nairobi is in this respect cheaper than Dubai, another major crossroads for aid shipments.
Getting the goods to destination is usually the most complicated part of it. "Not every truck driver is willing to drive in South Sudan," says Klitsch-Ott. Even beyond the risks from local conflicts, the roads are so bad that the vehicle could end up damaged. "It works best when we sign contracts that state that we'll only pay for items that reach destination."
Read the original article in German
Photo - Giro555SHO