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Procurement Performance
The influence of coordination mechanisms on desired performance
outcomes in the setting of the European refugee crisis
Msc. thesis Supply Chain Management
University of Groningen, Faculty of Economics and Business Supervisor: PhD candidate, N. Dube
Co-assessor: PhD candidate, A.P. Seepma
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Acknowledgements
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Abstract
Humanitarian organizations experience an increased pressure to improve organizational performance. It is known that procurement can contribute to performance improvements. This research explores how coordination mechanisms are used by humanitarian organization within the European refugee crisis and how these influence organizational performance. For this research a multiple case studies was conducted. Results show that the current use of coordination mechanisms positively influences the effectiveness of all organizations. However, in their use of coordination mechanisms organizations also had to make trade-offs between the desire to be efficient and the desire to be accountable for the procurement process. The main conclusion that is drawn from this research is that the current way in which procurement coordination mechanism are employed, results in the procurement process not reaching its full potential in terms of value generation.
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Index
1. Introduction ... 5
2. Theoretical framework ... 7
2.1. Procurement coordination and performance outcomes ... 7
2.2. Context of the European refugee crisis ... 8
2.3. Procurement coordination mechanisms ... 9
3. Methodology ... 12 3.1. Research design ... 12 3.2. Research setting ... 12 3.3. Case selection ... 12 3.4. Operationalization of variables... 13 3.5. Data collection ... 14 3.5. Data analysis... 15
3.6 Safeguard measure to ensure validity, reliability and generalizability. ... 15
4. Results ... 16
4.1. Within case analysis ... 16
Case 1 ... 16
Case 3 ... 24
4.2. Cross case analysis ... 27
5. Discussion and conclusion ... 30
5.1. Discussion ... 30
5.2. Managerial implications ... 31
5.3. Conclusion ... 31
5.4. Limitations and further research ... 32
References ... 33
Appendices ... 39
Appendix I: The interview protocol ... 39
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1. Introduction
Over the last two years more than 1.2 million people have fled to Europe, all of them had to endure a horrendous journey to get there (UNHCR, 2017). Humanitarian organizations (HOs) are trying to help these refugees, by providing them with shelter, food, water, medical attention and whatever more they might need (MSF, 2016; Oxfam, 2016). Procurement is vital in providing this help, as it is concerned with acquiring the good and services needed to help these refugees (Paulraj, Chen and Flynn, 2006; Falasca and Zobel, 2011; Matopoulos, Kovács and Hayes, 2014). Procurement can be defined as finding, acquiring and buying services and goods from a supplier (Weele, 2010). The significance of procurement in the humanitarian sector is reflected in the fact that it accounts for 65% of logistic expenditures (Falasca and Zobel, 2011). The United Nations High Commissioner for Refugees alone has measured a $600 million increase in procurement value between 2010 and 2014 (UNHCR, 2015b). Over the last few years the role of procurement within organizations shifted from being a means to reduce costs, to being a means for improving organizational performance outcomes (Tassabehji and Moorhouse, 2008; Luo et al., 2015). This change is accompanied by an increasing importance of relationships in the procurement process, since studies found that engaging in relationship could increase the value created by the procurement process (Jap, 1999; Chen, Paulraj and Lado, 2004; Paulraj, Chen and Flynn, 2006). This growing importance of relationships, caused the coordination of procurement to become increasingly important (Tassabehji and Moorhouse, 2008; Balcik et al., 2010). Procurement coordination can be defined as organizing activities of actors in the procurement process so that they optimize the way in which they work together (Cao et al., 2008). Mechanisms enabling procurement coordination are contracts, information sharing, IT and other collaborative initiatives (Arshinder, Kanda, & Deshmukh, 2008; 2011). Such mechanisms can be used to optimize performance outcomes (García-Dastugue and Lambert, 2003; Balcik et al., 2010; Arshinder, Kanda and Deshmukh, 2011; Govindan, Popiuc and Diabat, 2013). Procurement in the humanitarian sector is characterized by a low level of coordination, actors do not align their activities, which causes waste (Pettit and Beresford, 2009). Yet, pressure on HOs to improve performance makes improvement in procurement coordination necessary (Pettit and Beresford, 2009; Pazirandeh and Herlin, 2014).
6 for the organization (Weele, 2010; Miocevic, 2011). Flexibility, because HOs operate in a dynamic environment to which they must be able to adapt (Abidi, Leeuw and Klumpp, 2013; Abidi, de Leeuw and Klumpp, 2014; Santarelli et al., 2015).
So far, no research has been conducted regarding the use of coordination mechanisms in the procurement process or its influence on organizational performance outcomes within the European refugee crisis. Gaining insight in the current use of coordination mechanisms in the procurement process is important as it could expose areas for improvement of procurement coordination. These improvements are of high importance since HOs must increase their efficiency, effectiveness and flexibility (Kovács and Spens, 2009, 2011; Santarelli et al., 2015) to be able to cope with the rising number of refugees in need of aid worldwide (UNHCR, 2015a). In order to develop knowledge regarding the current use of coordination mechanisms, the following research question (RQ) is formulated
How are coordination mechanism employed for procurement coordination between organizations active in the European refugee crisis and how does this affect their efficiency, effectiveness and
flexibility?
This research is conducted via a multiple case study as it is suitable for answering ‘how’ questions (Meredith, 1998). Theory on the use coordination mechanism in the procurement process and the influence thereof on performance outcomes will be extended into a humanitarian context. On a theoretical level, this study will contribute to literature on improving humanitarian logistics by means of supply chain management. Because it provides a starting point for research on concrete ways to improve the use of coordination mechanisms when aiming for certain performance outcomes. For practitioners in HOs this research provides insight into the advantages and disadvantages of their current applied coordination mechanisms. Therefore it can assist them in decision-making on coordination issues, when aiming for a certain performance outcomes
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2. Theoretical framework
In this section, first the literature on procurement coordination and its influences on performance outcomes are outlined. Thereafter, the context of the European refugee crisis and its characteristics that could possibly influence the use of coordination mechanisms is discussed, followed by a review of coordination mechanisms. Lastly, the conceptual model is presented.
2.1. Procurement coordination and performance outcomes
Procurement is a core component of organizations as it enables other functions to be carried out by acquiring the goods and services needed to execute those functions (Paulraj, Chen and Flynn, 2006). Procurement strategies are gradually shifting from passive-cost focused to proactive value-focused, as the latter is a means to improve organizational performance (Paulraj, Chen and Flynn, 2006; Moeller, Fassnacht and Klose, 2008; Tassabehji and Moorhouse, 2008). In this shift towards value-oriented procurement, causes relationships to be increasingly important (Akhtar, Marr, & Garnevska, 2012; Tatham & Pettit, 2010; Romano, 2003). Engaging in relationships allows buyers to lower their inventory, mitigate risks, need less staff to coordinate procurement and at increase costs savings (Jap, 1999) by, for example, lowing costs related to sourcing and ordering goods (Balcik et al., 2010), hence increase efficiency. Additionally it can increase a suppliers’ responsiveness (Chen, Paulraj, and Lado, 2004), which might be beneficial in the light of the dynamic operating environment of HOs. As building relationships in procurement becomes increasingly important, so does coordination. Procurement coordination can be defined as, organizing activities of actors in the procurement process so that way in which they work together is optimized (Cao et al., 2008). These actors are interconnected by information-, financial- and product/service flows (Fugate et al., 2006). When these actors operate independently from each other the overall performance of the procurement system can become suboptimal (Sahin and Robinson, 2002; Cao et al., 2008). Therefore, coordination and thus coordination mechanisms such as contracts, information sharing, IT and other collaborative initiatives are needed (Sahin and Robinson, 2002; Cao et al., 2008). Procurement is fully coordinated when all decisions are aligned to accomplish the systems desired performance outcomes (Sahin & Robinson, 2002: 3).
8 reduction (Beamon & Balcik, 2008; Cozzolino, Rossi, & Conforti, 2012; Santarelli, Abidi, Klumpp, & Regattieri, 2015). As HO have limited (financial) resources they need to aim for making the best possible use out of those resources (Thomas and Mizushima, 2005; Beamon and Balcik, 2008; Abidi, Leeuw and Klumpp, 2013). ‘By increasing efficiency, we can shift resources away from draining backroom activities to frontline delivery’ (WHS, 2016: 2). An example of efficient procurement is buying goods in bulk, which allows an organization to achieve economies of scale. The performance outcome ‘effectiveness’ is referred to as the delivery of the relief items of the right quality, in the right quantity at the right time (Janda and Seshadri, 2001; Beamon and Balcik, 2008). When effectiveness is increased, more value is generated for the beneficiaries (Weele, 2010; Miocevic, 2011). Flexibility concerns a systems’ ability to accommodate fluctuations (Beamon, 1999), often indicated by the ability to change volume, delivery dates or the variety of the product procured (Beamon, 1999). HOs aim for flexibility since the environment in which they operate can be characterized as dynamic, requiring the HOs to constantly adapt (Oloruntoba and Gray, 2006; Abidi, Leeuw and Klumpp, 2013; Abidi, de Leeuw and Klumpp, 2014; Santarelli et al., 2015). How the current use of mechanisms in the European refugee crisis influences the desired performance outcomes so far, remains unknown. Exploring this could expose areas for improvement of coordination.
2.2. Context of the European refugee crisis
Characteristics of the operating environment influence how organizations use coordination mechanisms (Xu and Beamon, 2006). For example, when a procurement environment is characterized by uncertainty, you would expect the level of information sharing to go up in order to align activities (Xu and Beamon, 2006). Over the past few years, a lot of research has been devoted to the characteristics of the humanitarian relief environment that influence coordination in the humanitarian sector (Van Wassenhove, 2006; Kovács and Spens, 2007, 2009; Balcik et al., 2010; Moshtari, 2013). Characteristics of the environment of the European refugee crisis that may play a role in the selection of coordination mechanisms within this environment are presented below.
The slow-onset of its nature. In sudden-onset disasters, the required speediness of response allows limited time for establishing coordination of relationships (Dolinskaya et al., 2011; Krejci, 2015). As a contrast, the refugee crisis is a more ongoing crisis (UNHCR, 2013), where time pressure might be less of an issue.
9 et al., 2010; Beamon & Balcik, 2008; Van Wassenhove, 2006) (UNHCR, 2016).
The large number of actors and their diversity. Actors in humanitarian settings (e.g. local government, NGOs and GOs) have the same goal, namely to alleviate the suffering of people in need of aid. However, they do not always coordinate their actions in a way which helps them to reach this goal together, as coordination between these actors might be impeded by organizational, geographical, cultural, and policy differences (Van Wassenhove, 2006; Balcik
et al., 2010).
The funding structures. HOs are relying on donors for funding, so they cannot procure goods or services before funding becomes available. In addition, donors might place restrictions on the operations of HOs (Grandori, 1997; Stephenson and Schnitzer, 2006; Van Wassenhove, 2006; Balcik et al., 2010).
European procurement regulations. The fact that the crisis takes place in Europe might have consequences for procurement coordination as it is obligatory to comply with domestic import and export regulations and legislation on, among other things, quality standards or patents of both the country of origin and destination (European Commission ECHO, 2011). For example, European regulation and legislation is known to be stricter than that of some African countries (Vries, Sanderson, Janta, & Rabinovich, 2009).
2.3. Procurement coordination mechanisms
Procurement coordination is enabled by the use of mechanisms, which can be defined as ‘a set of methods used to manage interdependencies between organizations’ (Xu & Beamon, 2006: 1). Arshinder et al., (2011) distinguish the following coordination mechanisms; contracts, information sharing, IT and other collaborative initiatives.
10 procurement process. They could also opt for contracts which enable joint procurement (Essig, 2000; Balcik et al., 2010; Krejci, 2015), allowing them to achieve economies of scale..
Information sharing entails the distribution of useful information for systems, people or organizational units (Lotfi, Mukhtar, Sahran, & Zadeh, 2013, p 300). Both the nature of the information shared and the degree of interactions are dependent on the level on which actors coordinate their actions (Audy et
al., 2012). For example, in coordinating a transaction sharing only basic information, such as price per
unit, will suffice (Audy et al., 2012). When actors are looking to coordinate joint planning initiatives, more complex information such as (forecasted) customer demand, required performance, inventory information, operational capacities need to be shared (Audy et al., 2012; Lotfi et al., 2013). Overall, it is recognized that the sharing of positively influences the performance of all actors in the procurement process (Ding, Guo and Liu, 2011; Khurana, Mishra and Singh, 2011; Kumar and Pugazhendhi, 2012; Lotfi et al., 2013). Benefits of information sharing can vary from cost reduction and reduced lead time to improved resource utilization (Yu, Yan and Edwin Cheng, 2001; Arshinder, Kanda and Deshmukh, 2011; Audy et al., 2012; Lotfi et al., 2013). Information sharing can also reduce unpredictability from downstream demand (Stevenson and Spring, 2009), thus perhaps decreasing the need for a flexible procurement process. Additionally, it can create opportunities for increasing effectiveness, as it can ensure receiving the right quality of goods at the right time in the right quantity (Audy et al., 2012). Information sharing becomes increasingly important when an organization (or a supply chain) is structured in a decentralized manner, otherwise decisions might negatively influence performance outcomes (Yu, Yan and Edwin Cheng, 2001). For example, a procurement office in the field decides to procure product X locally in order to decrease the lead time, but this is not communicated with the supply center within their organization from who they normally procure product X, resulting in excess stock for the supply center.
11 (Bhatt, 2001; García-Dastugue and Lambert, 2003). Internal IT can facilitate coordination within an organization (Wagner and Sweeney, 2010), and enterprise resource planning (ERP) systems is an example of such an internal IT-system (Arshinder, Kanda and Deshmukh, 2011). An ERP system can be defined as ‘a comprehensive transaction management system that integrates many kinds of information processing abilities and places data into a single database’ (Akkermans et al., 2003: 285). In the perspective of efficiency, IT can reduce the cost of communication and although the setup might be costly, in the long run IT has low marginal costs (García-Dastugue and Lambert, 2003). Concluding, the use of coordination mechanisms influences organizational performance. However, whether they have a positive or negative influence is dependent on how the mechanisms are applied. How organizations use coordination mechanisms is often dependent on the environment in which the organization is operational. To what extent the employment of coordination mechanisms by HOs has a positive effect on their desired performance outcomes, is investigated in this research. Additionally, attention will be paid, to the influence that the environment of the European refugee crisis has on the use of the mechanisms. A visual representation of this research is depicted in figure 2.1.
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3. Methodology
3.1. Research design
This research aims to investigate the use of coordination mechanisms in procurement and their influence on performance outcomes. Theory on these phenomena already exists but has not been looked into within the specific context of the European refugee crises. Therefore, this research will be aimed at expanding theory (Voss, Johnsson and Godsell, 2016). To conduct this research a multiple case study was selected as it is useful for answering ‘how’ and ‘what’ questions (Eisenhardt, 1989; Yin, 1994; Meredith, 1998; Voss, Tsikriktsis and Frohlich, 2002). This makes a multiple case study a suitable approach for identifying how coordination mechanisms are applied in the procurement process of HOs and how this influences the HOs desired performance outcomes. Additionally, a case study provides the opportunities for exploration of specific phenomena in a real life context (Yin, 1994; Meredith, 1998; Eisenhardt and Graebner, 2007; Voss, Johnsson and Godsell, 2016) and gaining understanding of the complexity of the context (Meredith, 1998; Stuart et al., 2002; Yin, 2009), making it suitable for expanding theory into a new context.
3.2. Research setting
The setting of the research is the European refugee crisis. This setting is suitable for conducting this research as it contains many of the salient characteristics of a humanitarian setting, for example, the amount and diversity of stakeholders. However, the relative stability of the European refugee crisis allows for a clear investigation of the phenomena and relationships of interest, as several factors influencing performance in more complex settings can be controlled to a certain extent.
3.3. Case selection
13 selection. Ultimately, two of the mentioned types are included in the case selection. Differentiation between sizes is based on the assumption that larger organizations have a more professional procurement process and hence use coordination mechanisms in a different manner. The distinction made between the geographical scope was based on the assumption that when organizations are internationally active, they have adapted the way in which they coordinate procurement to that.
Case 1 2 3
HO type NGO NGO GO
Size Large Small Large
Geo. scope International National International
Table 3.1: Selected cases
3.4. Operationalization of variables
An important aspect in augmenting construct validity is the operationalization of the variables in the research (Stuart et al., 2002), which is presented in table 3.2
Construct Operationalization Indicators
Coordination mechanisms
‘Methods for managing interdependency between organizations’ (Xu & Beamon, 2006: 1)
Contracts, information sharing, IT or other collaborative initiatives (Arshinder, Kanda and Deshmukh, 2011).
Efficiency ‘Measure of how economically resources are
utilized (Beamon and Balcik, 2008,p13)
Financial outcomes or resource (e.g. time or HR) utilization (Cozzolino, Rossi, & Conforti, 2012; Santarelli et al., 2015).
Effectiveness Is referred to as the ‘right’ quality and
quantity of a products, delivered on the right time (Janda and Seshadri, 2001)
Supply availability and delivery reliability (Beamon and Balcik, 2008; Cozzolino, Rossi and Conforti, 2012; Santarelli et al., 2015)
Flexibility A systems’ ability to accommodate
fluctuations (Beamon, 1999).
Volume-, delivery- and mix flexibility (Beamon, 1999)
Accountability (emergent)
‘The means by which organisations report to recognised authority(ies) and are held responsible for their actions’ (Edwards and Hulme, 1996: 8)
Transparency, compliance with standards and required procedures (Hilhorst, 2002)
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3.5. Data collection
Data has been collected via semi structured interviews and publicly accessible reports. A interview protocol (Voss, Johnsson and Godsell, 2016) was developed based on the literature as presented in chapter 2 (see appendix 1). This protocol was piloted with two interviews, which led to some minor changes in the sequences and introduction of the questions (Yin, 1994; Voss, Tsikriktsis and Frohlich, 2002). All interviewees were approached via phone, e-email or LinkedIn. In total eleven interviews were conducted with people that were either actively involved in the procurement process or had much knowledge on the subject. Ten of which via Skype and one face-to-face. The high number of virtual interviews was due to geographical distance between the researcher and the interviewees. Conducting multiple interviews per case decreased the observer bias and aided the external validity (Eisenhardt & Graebner, 2007; Voss et al., 2002; Meredith, 1998). Interviews were held from 27th of April until the 30th of May. With permission of the interviewees, all interviews were recorded, transcribed and subsequently sent to the interviewees for verification No corrections had to be made. The verification by interviewees increased the internal validity as they verified relation between variables (Yin, 1994; Voss, Johnsson and Godsell, 2016). The secondary source of data were publically accessible documents related to procurement and sites of several organizations on which information on their procurement process could be found. Details of the interviews and the documents are presented in table 3.3. Within the data collection, triangulation was achieved by interviewing multiple individuals per case and combing the interviews and additional documents (Eisenhardt, 1989).
Case Positions of interviewee(s) Min1
Documents used (Pages)
1
(5 org.)
- Executive Supply Chain Secretary - Coordinator Procurement Unit - Head of Logistics and Supply - Humanitarian Program Manager - Deputy Director of Operations
- Policy Lead on Migration & Rights in Crisis - Coordinator Humanitarian & Emergency affairs 60 92 75 61 55 102 43 - Annual review 2014 -2015 (36)
- Ethical Purchasing Policy (7)
- Equipment Catalogue (228)
- Annual Reports and Account 2015/16 (70)
- Supplier Code of Conduct (2)
- Website content of all organizations 2 (2 org.) - Director - Volunteer 48 47 - Website content of both organizations 3 (2 org.) - Program Officer, Emergency Response Unit - Senior Procurement Assistant 67 57 - Procedures for the award of contacts (9)
- Annual report 2014 (22)
- Annual report 2015 (31)
- Regional Refugee and Migrant Response (128)
- Annual Statistical Report on Procurement, 2015 (637)
- Procurement Practitioners Handbook, 2006 (165)
- Implementing Partnership Management Guidance Note (35) - Principles & procedures applicable to procurement contracts (12) - Website content of both organizations
Table 3.3: Sources from which data is gathered
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3.5. Data analysis
All gathered data from document and interviews has been coded, using ATLAS.ti. For the coding process the four stages of coding from Miles and Huberman (1994) were followed. First, all data was read and statements relating to one of the variables in the research question, were assigned a code. This was done via deductive coding. However inductive coding was also used to give room to emerging variables. All emerging codes related to the accountability of the procurement process. As recommended by Miles and Huberman (1994) all codes were valid, mutually exclusive and exhaustive. Eventually, 40 codes were categorized in eleven second order codes which were eventually placed within three aggregated dimensions. Based on these codes and dimensions, a coding tree was created in Microsoft Excel 2010 (see appendix 2). The whole coding process was iterative. The initial step, after the coding process, was within case analysis to become more familiar with the patterns of each case (Eisenhardt, 1989). This familiarity was created by writing case descriptions, which entailed short summaries per case, on each of the second order codes. This within case analysis provides direction for the cross case analysis (Eisenhardt, 1989). This included comparing cases in order to find similarities and differences. The aim of these analyses was to provide generalization (Eisenhardt, 1989; Miles and Huberman, 1994; Yin, 1994).
3.6 Safeguard measure to ensure validity, reliability and generalizability.
Throughout the methodology section several approaches were mentioned to ensure the validity and reliability of this research. A clear overview of them is provided in table 3.4.
Test Measures taken
Generalizability Use of multiple cases
Use of replication logic
Construct validity Operationalize researched constructs
Internal validity Use multiple sources of evidence; triangulation
Have interviewees check the interview transcript Pattern matching
Reliability Use of an interview protocol
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4. Results
This section outlines the findings of this study. First, the within case analysis is presented, in which context, use of coordination mechanisms and emerging themes are outlined. Thereafter, the cross-case analysis is presented.
4.1. Within case analysis
Case 1Case 1 is a group of international operational NGOs who offer aid such as shelter, sanitation and food to refugees in Greece, Croatia and Italy. The environment of the European refugee crisis is experienced as one with little uncertainty, making forecasting of both the quantity and location of demand quite easy. Additionally, the environment is perceived as stable, meaning internal markets are intact and good infrastructure is present, enabling local sourcing. European regulatory mechanisms are also seen as enablers of local sourcing as they ensure availability of high quality products which can be used throughout Europe. European procurement regulations are perceived as extensive but clear, as a result, organizations know exactly what is expected from them. However, regulations raise a threshold for procurement from overseas since they require organizations to have suppliers who meet European standards and pay income tax over imported goods. The NGOs’ procurement regulations and procedures are experienced as a dominant factor in shaping the use of procurement coordination mechanisms. These regulations and procedures are created in response to NGOs´ dependency on private, public donors with the aim of ensuring an accountable and transparent procurement process. This accountability, was an emergent factor of this research and is a performance outcome which NGOs aim for. Moreover, the NGOs’ regulations concern the ethics of the procurement process, entailing both supplier and product requirements. These are often created in collaboration with other NGOs and GOs, to ensure sector-wide supplier and product standards.
Coordination mechanisms and performance outcomes
17 Duration of contracts generally lies between 6 months to 2 years. In creating their tender request, NGOs need to define detailed specification on product-, delivery-, price-, supplier- and many more requirements. Tendering contracts are effective in the sense that accepted bid meets all set requirements, hence the NGO receives the right quality and the right quantity. However, due to these detailed specifications which are agreed upon by the buyer and supplier, there is almost no room to change delivery dates, requested volume or product kind. However, a negotiated tender can increase the flexibility as it facilitates negotiations on volume, product requirements, delivery date and other matters. Therefore this use of contracts negatively influences flexibility. Additionally, tendering procedures negatively influence efficiency, as much time and human resources are needed to complete such procedures. On the other hand, it does stimulate suppliers to engage in competitive pricing. When the contract value is below a certain amount, no tendering is required and a simple request for quotation suffices to close a contract, hereby saving time and requiring less human resources.
Two organizations mentioned that they engage in long-term contracts for some complex and strategic products. These projects revolved around building relationships in order to jointly develop customized products for the NGOs, which they keep on stock. For accountability reasons, these long-term contracts have to be commercially reviewed every few years As these products are exactly ‘right’ for the NGO, they have a positive influence on the effectiveness and on flexibility in terms of product variety. Establishing such relations contract did require much resources in the beginning, however, in the long run it increased efficiency as no time needed to be spent looking for a product which met the vary special requirements of the HO. Moreover, two occasions were mentioned of NGOs entering into a contract with other NGOs. On the first occasion, they jointly procured plane tickets and on the second, satellite phones. On both occasions, the reason was to achieve economic efficiency. Finally, NGOs can also procure from other NGOs, who have been rewarded the status of Humanitarian Procurement Centre (HPC). Before a NGO can receive such a status, their procurement process is thoroughly checked to see whether it complies with all regulations and procedures. If an NGO decides to buy from a HPC, they are assured that their products meet all required standards and they do not have to engage in a tendering procedure themselves, so it can be both effective and efficient and they are assured of a procurement procedure which can be accounted for by the HPC.
18 and hence ensure a fair procurement process. In return, suppliers send in their bids in (sealed) envelopes. In case of open tendering, no information is shared between the buyer and supplier during the evaluation period. For negotiated tendering, information exchange does take place as buyers and supplier engage in a negotiation on the further specifications of the contract. These negotiations must be clearly documented to ensure transparency and accountability. The information exchange that surrounds the tendering procedure ensures that both the supplier and the buyer know what it expected of him. Therefore this way of information sharing increases the effectiveness. The process of information sharing is time consuming as much time is needed to specify detailed requirements and evaluate all the information in every received bid. To ensure an ethical procurement process, the NGOs share a supplier code of conduct.
‘This code of conduct sets out a set of simple principles and behaviours that should guide our suppliers, their sub-contractors, and each of us in the everyday conduct of business, ensuring that
internationally recognized procurement ethics are followed.’
19 contract with a supplier, all the information concerning the purchase must be communicated back to the finance departments. This entails information on the chosen supplier and argumentation for the choice. This process takes up time, human resources and is perceived as inefficient. Yet, the exchange and verification of all transactions in the procurement process does increase the accountability. Additionally, this information sharing process ensures that re that the procurement department buys the right product in the right quantity, as specified by the budget, thus increases effectiveness. The procurement department also shares information with people in the field on how they should plan for demand to guarantee timely delivery and thus increase effectiveness.
‘If they know how the procurement process works, they can learn to plan ahead. If they can plan ahead, I can plan ahead and make sure goods are delivered on time’
In turn, the people in the field inform the procurement department on their (forecasted) demand. At the beginning of each project an assessment for the refugees’ needs is done by all HOs operating in that area. The outcomes are then discussed jointly by participating HOs in a meeting, after which a task division takes place, clarifying which HO should attend to which need. This assessment is the basis for the demand that the field communicates to the procurement department and hence informs them to a certain degree which are the ‘right’ products to buy.
20 facilitated direct contact with suppliers and other NGOs, this was experienced as time efficient. Finally, the NGOs do not have an IT system which allowed for electronic tendering.
A summary of the findings for Case 1 is presented in table 4.1. The ‘+’, indicates that the coordination mechanisms has a positive influence in the desired performance outcome, the ‘-’ indicates a negative influence. Furthermore, ‘+/-’ means that the coordination mechanism positively influences some aspects of the desired performance outcomes, while negatively influences others. Finally, ‘x’ means that no relationship between the coordination mechanism and the performance outcome was found.
21 Case 2
Case 2 consists of small local operative NGOs, who are active in several refugee camps in Greece, where create little shops for refugees, enabling them to become more in control of their own life by allowing them to purchase their own goods. The environment is experienced as one with much uncertainty, as fluctuations in quantity and location of demand have a big effect on their operation due their relatively small capacity. This uncertainty is strengthened by the unpredictability of other actors such as the government and other HOs.
‘’We do not know if this camp will still be here in two week. The government might shut it down, or other organization come in and take over.’’
The local NGOs are primarily dependent on public and private funding, whereas occasionally they receive funding from other NGOs. Yet, their dependence on these donations does not result in strict internal procurement regulations or procedures. All goods and services that they procure are purchased locally, therefore regulations on import is not perceived as an issue. However, it was acknowledged that European regulations on production quality does guarantee high quality products
Coordination mechanisms and performance outcomes
For the procurement of goods, these NGOs barely use contracts, they do not deem it necessary on account of their size. When they need goods, they compare some suppliers on price and quality and subsequently buy what they need. When the NGOs intent to buy goods from a supplier more frequently, they conclude a verbal agreement to ensure that the supplier has the right goods and are that they are available at the needed. These verbal agreements are concluded in a manner, which allows the NGOs to increase their procurement volume, and make changes in terms of product variety and delivery dates if needed. If a supplier is not able to facilitate these changes in demand, for example due to stock-out, the NGOs select a second supplier. Because, being able to ensure timely deliver for the refugees is the most important performance goals for these NGOs. Their aim is to bridge the gap in time, where needs of refugees have been established but no formal agreements are made about which HO should attend those needs
‘Heating needed to be applied to prepare camps for the winter. Large NGOs and GOs were busy
deciding who should be responsible for the wiring and generators, meanwhile there was no electricity and it was freezing. We stepped in, phoned up the local gas supplier, ordered 80 heaters and
22 On occasions, these NGOs do enter into a contract with suppliers, but only when this is requested by the supplier. For example, a car rental or telecommunication firm. For these contracts, the NGOs make sure that the contracts can be adjusted or terminated each month. This means that they do receive very competitive prices, but it does ensure flexibility, which they find important as they experience the environment as uncertain.
Information sharing is done both intra-organizational and intra-organizational, both in an informal manner. Inter-organizational information sharing between the NGO and its suppliers concerns negotiations and agreements on price, quantity, delivery dates and lead time. Direct communication via phone and mail makes that decisions on procurement can be made quickly, making it time efficient. Sharing information on procurement between NGOs is done when the local NGO is trying to receive funding for a larger, international NGO. To receive this funding, the local NGOs present a plan containing information on their proposed operations. This plan does contain information on what they need to procure but not on how they will do it. Intra-organizational information sharing is done in the form of meetings between the people responsible for procurement. In these meetings, possible decisions on procurement are discussed. Such meeting are only necessary when the value of the purchase is high or the purchase itself is out of the ordinary. If this is not the case, procurement managers are empowered to procure items without consulting others, this positively influences time efficiency. Employees and volunteers are allowed to procure items themselves with organization funds, after consulting with procurement managers. In this consultations managers inform the employees or volunteers on what specific product might meet their needs and where this can be bought, resulting in increased effectivity.
23 A summary of the findings for Case 2 is presented in table 4.2. The ‘+’, indicates that the coordination mechanisms has a positive influence in the desired performance outcome, the ‘-’ indicates a negative influence. Furthermore, ‘+/-’ means that the coordination mechanism positively influences some aspects of the desired performance outcomes, while negatively influences others. Finally, ‘x’ means that no relationship between the coordination mechanism and the performance outcome was found.
24 Case 3
Case 3 consists of international operational GOs, functioning on public funding. They provide aid to refugees via shelter, food, education etc. However, they also take a pro-active role in coordinating activities of other actors in the crisis and provide funding to some NGOs. GOs experience the environment as one with little uncertainty, making the forecasting easy.
‘We are used to worse; in Europe we are able to make annual and monthly demand forecasts. If something unexpected happens we have enough capacity to mitigate that’.
They do not perceive the European procurement regulations as hindering, as the larger parts of their suppliers are based in Europe and thus possess all needed certificates and qualifications. Additionally, they are exempted from taxes worldwide, which enable them to procure overseas from supplier that adheres to European regulations, without an increase in costs. Their internal regulations and procedures are strict, as they are dependent on public funding and therefore need to be able to account for their spending. Hence, they aim for a transparent procurement process. The regulations and procedures concern requirements for product, supplier, and NGOs applying for funding. The GOs are checking the NGOs’ procurement process meets the GO’s requirement before funding them.
Coordination mechanisms and performance outcomes
25 needed. These long-term agreements have a positive effect on flexibility as volume, and delivery date can be altered. The product variety however, cannot be altered. Additionally, these agreements are economically efficient as the supplier provides competitive prices since there is something in it for the supplier in the long haul. The tendering procedure preceding the signing the long-term agreement ensures that the GO receives the right product and that the supplier meets all requirements, ensuring a degree of effectiveness.
Information sharing is done both inter-organizational and intra-organizational. Inter-organizational information exchange between the GO and NGOs concerned requirements which the NGOs must meet in order to become a partner and consequently receive funding. Between the GO and their suppliers with whom they have a short-term contract, information on tendering requirements and bids is exchanged. The GO publishes a tendering request, in which all (open tendering) or some (closed tendering) details on what is required of the supplier are specified. Such details concern, among others, product, price, quantity, payment and warranty specifications. Suppliers subsequently, respond to that tender request with a bid, which is then evaluated by the buyer. Finally, the winning bid is chosen and the buyer contacts the corresponding supplier. The process of formulating and tender request and evaluating all bids is inefficient as a lot of time and people are needed for the process. It is effective as it ensures that the buyer receives right quality of products in the right quantity and time. Between the GOs and the suppliers, with whom they have a long-term agreement, information on demand is shared during the entire term of the agreement. The GO shares information on the quantity needed and when it is needed. Contrary to short-term contracts, where information is only shared with the supplier once demand has actually occurred, long-term agreements allow for sharing forecast. This gives the supplier a chance to prepare for the actual demand. This increases the effectiveness as this information exchange results in the GOs receiving the right quantities at the right time. Also, it increases flexibility, since sharing of forecast provides the supplier with the opportunity to adapt their capacity to the forecasts, making it possible for the GO to change their demand when needed, without having to fear supplier stock out.
26 An ERP system is used to support the requisitioning, solicitations, and contract/purchase order creation. By documenting all transactions, the accountability of the GOs’ procurement process is increased. After, all the data that is needed to create a contract, such as quantities, product numbers, supplier details, is imported in the system, the systems automatically generates a contract. This contract is automatically send to the e-mail address of the supplier. Before the ERP-systems were in place, such documents needed to be created manually, hence efficiency increased. Additionally, these ERP-systems make it easy to access information from various departments, therefore it increases time efficiency. All in all, the ERP system mostly function as a creator and storage space of documents. The information which is needed to complete all steps in the procurement process is acquired via phone or mail contact between the buyer and supplier. Moreover, a site is managed by the umbrella organization, which functions as an online marketplace on which suppliers can register and users can register and find each other. As all this data on appropriate suppliers is stored centrally and accessible to all employees, it increases time efficiency by reducing the need to look for an approved supplier. Moreover, it increases accountability as it provides access to all awarded contracts. The use of e-mail increases efficiency as it allows for direct communication.
A summary of the findings for Case 3 is presented in table 4.3. The ‘+’, indicates that the coordination mechanisms has a positive influence in the desired performance outcome, the ‘-’ indicates a negative influence. Furthermore, ‘+/-’ means that the coordination mechanism positively influences some aspects of the desired performance outcomes, while negatively influences others. Finally, ‘x’ means that no relationship between the coordination mechanism and the performance outcome was found.
27
4.2. Cross case analysis
All cases experienced European regulations on production as an enabling factor in local procurement. Local procurement was actively strived for by both the international and local NGOs, because it is seen as a way to stimulate the local economy and lower lead time and transportation costs. Moreover, all cases were reliant on public and private donors. This dependency caused ´accountability´ to be an emergent performance outcome for the international NGOs and GOs. In conclusion, all cases experienced the context as one where many actors, government and other NGOs, were active. This resulted in a need to clearly coordinate actions among one and other, to guarantee similar aid was provided to refugees and duplication of actions in the field was reduced.
When comparing both the international NGOs and the GOs, it becomes apparent that they both perceive the context as rather predictable, decreasing their need to strive for flexibility. Also, they are dependent on donors, which causes accountability to be an emerging desired performance outcome. This aim for accountability is reflected in how they use their coordination mechanisms, making tendering contracts the dominant manner of procurement. These tendering contracts have a positive influence on effectiveness and accountability, but a negative influence on flexibility and efficiency in terms of time and human resources. International NGOs state that tendering leads to competitive prices. However, this is contradicted by the GOs, who state that engaging in long-term agreements leads to more favourable prices. International NGOs and GOs also engage in long-term contracts and agreements. The NGOs long-term contracts, of which they only have a few, is revolving around joint-development of customized products. These contracts have a positive influence on flexibility, effectiveness and efficiency and, to some extent, on accountability as the contracts are commercially reviewed every year. Even though the long-term agreements of the GOs have the same positive influence on performance outcomes, its nature is different. These long-term agreements mean that the GO is able to call-of products from the buyer whenever they are needed, at a pre-set price. The reason why the procurement of international NGO is mostly coordinated via short-term contracts and that of international GOs via long-term contracts, is that the first can only start procuring after a project budget is approved. The international GOs, however, do not coordinate procurement per project separately, but rather close long-term agreements from which all project managers can call of their products when needed.
28 similar fashion, with similar results. The international NGO does however engage in information exchange with other NGOs or GOs in order to procure with them or from them. The information exchange between the GO and the supplier with whom they have a long-term agreement, is the only instance in which information sharing has a positive influence on flexibility. The international NGOs and GOs also approach their intra-organizational information sharing in a similar fashion, resulting in similar influences on performance outcomes for both organizations. The use of IT for both cases has no influence on effectiveness and flexibility but does positively influence the efficiency. This was because information is easily accessible and because it is an time efficient way to distribute information. Moreover, the use of IT positively influences accountability, as it creates some transparency in the NGOs and GOs operations, which shows that publicly took responsibility for their procurement process.
Contrary to the large, international NGOs and GOs, the small, local NGOs do not have accountability as an emergent performance outcome. For them, flexibility and efficiency are the most important performance outcomes. Flexibility is important because they did view the environment as one characterized by uncertainty. Efficiency is important because the local NGOs aim to bridge the gap in time between when the needs of refugees are identified and when internal NGOs and GOs have established who will attend to those needs. The local NGO wants to be able to respond very quickly and this is reflected in their use of coordination mechanism. The use of verbal agreement, information sharing and IT all positively influence the NGOs efficiency. The use of these mechanisms also positively influences the effectiveness. However, the product requirement which the local NGOs have are not as strict as those of the international NGOs and GOs, which might make it easier to buy the right product of the right quality. The only mechanisms influencing flexibility are the verbal contracts. The nature of the information and the way it is shared has no influence on flexibility as it does not facilitate any changes in the operations of the supplier, which allows the supplier to respond to changes in demand. Therefore, the local NGOs cannot simply contact the supplier and adjust their demand and then be guaranteed that they are still able to receive it.
29 A summary of the findings of the cross case analysis is presented in table 4.4. The ‘√’, indicates that the mechanism was applied in the case, when the mechanism was not applied this was marked with an ‘x’. When a mechanism was not applied, there are no indicators for influence given in the table. When a mechanism was used, indicator for the influence of the mechanism on performance is given. The symbols underneath the performance outcomes mean the following. The ‘+’, indicates that the coordination mechanisms has a positive influence in the desired performance outcome, the ‘-’ indicates a negative influence. Furthermore, ‘+/-’ means that the coordination mechanisms positively influences some aspects of the desired performance outcomes, while negatively influences others. To conclude, ‘x’ means that no relationship between the coordination mechanism and the performance outcome, was found.
30
5. Discussion and conclusion
5.1. Discussion
By studying the coordination mechanisms applied in the procurement process of HOs, operational in the European refugee crisis, this study provides insight into how these mechanisms were used and how this influences organizational performance outcomes. It stands out that the large and international NGOs and GOs use their coordination mechanisms in a way that ensures the accountability of the procurement process and additionally, improves effectiveness. The small and local NGOs use their coordination mechanisms in a manner that positively influences the most important performance outcomes for them; flexibility and efficiency.
Within regard to performance outcomes, this study confirms the findings of Beamon and Balcik, (2008), Kovács and Spens (2011), Cozzolino, Rossi and Conforti (2012) and Santarelli et al., (2015), as it shows that effectives and efficiency are indeed important performance outcomes, which all HOs strives for in their procurement process. This study also showed that flexibility is important when an environment is characterized by uncertainty (Oloruntoba and Gray, 2006; Abidi, de Leeuw and Klumpp, 2014), as it was also acknowledged as an important performance outcome, by the smaller, local NGO, who indeed perceives the environment as uncertain.
31 The fact that HOs have still have much to learn from the commercial setting is also reflected in the individualistic manner in which the HOs operate. Literature states that when an organization strives to create value with their procurement process, they should engage in relationships (Jap, 1999; Yu, Yan and Edwin Cheng, 2001; Balcik et al., 2010). However, result show that HOs do not use their coordination mechanisms in a way that facilitates the building of such relationships. Even though, the slow-onset nature (Van Wassenhove, 2006) of the European refugee crisis, which is characterized by its predictability and the stability of local markets, provides HOs with the time necessary to establish such relationships.
Also remarkable was that literature states that relationships are becoming increasingly important in procurement, as they are seen as a means to improve organizational performance (Romano, 2003; Tatham and Pettit, 2010; Akhtar, Marr and Garnevska, 2012). Another benefit if engaging in relations is that they can be employed to improve performance outcomes system-wide, rather than just for organizations themselves (Kovács and Spens, 2009), However, this study showed that the organizations did not engage in close relationships with their supplier. Reason for this was that, by doing so they would decrease their accountability. All HOs have contract which revolve around the transaction of goods, as is reflected by the high use of tendering contracts. None of the organizations had implemented and IOS and information sharing mostly revolved around contractual details. However, results also showed that information sharing sector wide, did allow for a certain standard for quality of care, which might benefit the whole system.
5.2. Managerial implications
Procurement managers can use this study to gain insight in how decision on coordination mechanisms affect their desired performance outcomes. Managers should be aware that when aiming for accountability in procurement, this negatively influences their efficiency and hence the value that is created within the procurement process. Finally, as engaging in relationships positively influences the value created for the system as a whole, they should use their coordination mechanism in a way which facilitates the building of such relationships.
5.3. Conclusion
32 shared facilitates the close of such contracts. Additionally, the use of IT systems increases organizational efficiency. However, the use of IT could be significantly expanded for the benefit of the organizations. For example, organizations could use e-tendering as way to be accountable and at the same time experience an increase in efficiency. Moreover, additional value could be generated by the procurement process when organizations embraced a well known SCM concept in their procurement coordination, namely engaging in relationships.
5.4. Limitations and further research
This study has some important limitations which need to be considered. First, data was not gathered from all types of HOs present in the European refugee crisis. Unfortunately, PVOs could not be included due to time constraints on their side. This limits the generalizability of the data. Second, this , generalizability data also limited by the setting in which phenomena have been researched. As the European refugee crisis poses an environment in which other factors that might influence performance, can be controlled. This is not the case in most humanitarian relief environments. Third, all data has been coded, and analyzed by analysis has been performed by one single researched. The same researcher interpreted that data and looked which conclusions could be drawn from it. Despite the use of safeguard measures for reliability, having one researcher do the whole analysis could result in an observer bias.
33
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