Fleet sizing for UNHCR country offices

• DOI: http://doi.org/10.1002/joom.1013
• Published date: 01 April 2019
• Date: 01 April 2019

ORIGINAL ARTICLE

Fleet sizing for UNHCR country offices

Nathan Kunz

1

| Luk N. Van Wassenhove

2

1

Department of Management, Coggin

College of Business, University of North

Florida, Jacksonville, Florida

2

INSEAD Humanitarian Research Group,

Fontainebleau, France

Correspondence

Nathan Kunz, Coggin College of Business,

University of North Florida, 1 UNF Drive,

Jacksonville, FL, 32224.

Email: nathan.kunz@unf.edu

Handling Editor: Aravind Chandrasekaran

Abstract

Vehicles are important assets generating significant costs. Relief organizations fre-

quently struggle to define the appropriate number of vehicles to support their oper-

ations. The high level of decentralization giving country offices the autonomy to

decide on the size of their fleet complicates the issue. This study follows a design

science approach in collaboration with the Office of the UN High Commissioner

for Refugees (UNHCR). We develop a prediction model to support UNHCR's fleet

sizing problem. A stepwise linear regression approach is used to construct a model

able to predict the number of vehicles required by each country office based on

data from comparable countries. Three variables have the best predictive accuracy:

the number of locations, small partners, and large partners working for UNHCR.

We validate our findings with different regression methods and by applying our

approach to another organization. Our model has provided UNHCR with valuable

indications on how to help determine the appropriate number of vehicles in many

countries. We develop three design propositions that show how our approach can

be generalized to other humanitarian operations. These propositions offer insights

on how to implement a fleet sizing decision process in highly decentralized human-

itarian operations with limited information on optimal fleet sizes.

KEYWORDS

design science, fleet management, fleet sizing, humanitarian operations

1|INTRODUCTION

Humanitarian relief and development activities mostly take

place in areas that are difficult to reach, because road infra-

structure is poorly developed or has been destroyed. Heavy

duty 4 × 4 vehicles are often the most convenient option to

reach beneficiaries. These vehicles are mission-critical assets,

but they also represent a significant share of an organization's

budget. It is estimated that humanitarian organizations operate

a fleet of about 70,000–80,000 vehicles worldwide, represent-

ing a yearly cost of more than $1 billion (Pedraza-Martinez,

Stapleton, & Van Wassenhove, 2011). Because of mission

criticality and high costs, humanitarian organizations need to

carefully manage their vehicle fleets. Determining the appro-

priate number of vehicles to support operations in a country

is one of the most prominent challenges for which no easy

solution exists.

Due to high levels of decentralization, country offices—

the entities managing development and emergency response

programs in a country—have great autonomy over the use of

their budgets, which frequently fluctuate over time. Country

offices are accountable to donors who fund their programs,

and they decide how many vehicles they need to support

their operations. However, they often lack the capabilities to

determine the appropriate fleet size. For the staff managing

the country office, fleet is frequently an afterthought. The

high level of decentralization gives the central Fleet Man-

agement Unit (FMU) poor visibility on the number of vehi-

cles and how they are managed at the country office level.

The FMU is an entity reporting to headquarters, with the

Received: 17 January 2017 Accepted: 25 January 2019

DOI: 10.1002/joom.1013

282 © 2019 Association for Supply Chain Management, Inc. wileyonlinelibrary.com/journal/joom J Oper Manag. 2019;65:282–307.

responsibility of procuring vehicles and overseeing fleet

management in the organization. Large humanitarian organi-

zations may operate in over 100 countries worldwide, and

run multiple programs in most remote locations. This broad

geographic scope and variety in activities makes it difficult

for the FMU to get an accurate idea of the utilization of vehi-

cles. In addition, several tasks may be outsourced to imple-

menting partners,

1

using vehicles provided by the organization.

This further increases uncertainty about the appropriate number

of vehicles required in a country.

Many country offices tend to overestimate the number of

vehicles required for their programs. First, they want enough

vehicles in the case of unexpected transportation needs, that

is, they like to have some safety stock, just in case. Second,

vehicles often face significant downtime due to repairs,

which decreases vehicle availability and may jeopardize or

delay planned operations. Third, budget cycles require coun-

try offices to take fleet sizing decisions on a yearly basis,

leaving little room for adjusting the fleet throughout the

year. As a result, some country offices buy more vehicles

than strictly needed. When funding is scarce, country offices

keep vehicles beyond their prescribed replacement time

(5 years or 150,000 km). This leads to older fleet with higher

operational costs and increased safety risks (Kunz, Van

Wassenhove, McConnell, & Hov, 2015).

Some country offices operate undersized fleets, mainly

for two reasons. First, they may struggle to secure funding

for vehicle procurement (as opposed to medicines, for

instance). Consequently, they may lack the necessary vehi-

cles to support their operations. In the end, this may turn out

to be more expensive, since country offices then rent vehi-

cles on expensive local markets if this option is available, or

they may have to fly-in additional vehicles in the case of an

emergency. Second, cash may be released long after donor

pledges and even after peak disaster response needs. Even if

cash is available, vehicle delivery lead times are sometimes

substantial. So, country offices may run undersized fleets at

times.

Our team conducted several research projects on fleet

management in different humanitarian organizations, which

increased our understanding about the specificities of

this unique sector. Members of our team, for example,

looked at the organizational structure of fleet management

(Pedraza-Martinez et al., 2011), vehicle supply chains

(Besiou, Pedraza-Martinez, & Van Wassenhove, 2014;

Stapleton, Pedraza-Martinez, & Van Wassenhove, 2009;

Stauffer, Pedraza-Martinez, & Van Wassenhove, 2016;

Stauffer, Pedraza-Martinez, Yan, & Van Wassenhove,

2018), vehicle replacement strategies (Eftekhar & Van

Wassenhove, 2016; Pedraza-Martinez & Van Wassenhove,

2013), and internal leasing programs (Kunz et al., 2015).

Although the challenge of fleet sizing has been identified

as an underlying issue in the research projects conducted by

our team, none of these studies has yet focused on this ques-

tion. Headquarters and the FMU generally understand the

importance for countries to have an appropriate fleet size.

They want country officesto have enough vehicles to conduct

their mission, because they realize a shortage of vehicles neg-

atively impacts program effectiveness and costs. However,

headquarters are also concerned with excess vehicles, which

they see as waste of scarce resources that could be invested

elsewhere. In addition, excess vehicles hide problems, like

high vehicle downtime due to a lack of preventive mainte-

nance, poor routing of vehicles to villages to be visited, or

inappropriate private use of service vehicles by drivers and

staff. For these reasons, headquarters are keen to reduce fleet

size, by limiting the number of new vehicles delivered to

country offices and proper disposal of old vehicles. This pres-

sure increased in recent years due to decreasing funding and

stronger donor scrutiny about the use of funds.

The organizations we worked with understand these

issues well and have taken action to improve fleet manage-

ment in the countries. They have implemented leasing

programs where vehicles are leased to country offices for

5 years, have standardized vehicles models, and imposed

timely disposals of old vehicles. These organizations have

achieved remarkable results through these actions. However,

during a project conducted with UN High Commissioner

for Refugees (UNHCR), staff mentioned an important

remaining challenge. In spite of having a professional FMU

running a vehicle leasing system, and having introduced

adequate fleet management practices, it still faced the prob-

lem of figuring out the appropriate number of vehicles for

a country to properly run its operations. While UNHCR

understands the importance of having the right number of

vehicles, there exists no theory or tools the FMU could use

to identify the appropriate fleet size in a country. As a result,

the important fleet size decisions are made using experience

and intuition, which sometimes result in suboptimal choices.

Our paper intends to address the fleet sizing problem at

UNHCR by answering the following research questions.

(a) How can the FMU determine how many vehicles are

needed in different country offices based on empirical data?

(b) How can the FMU use a fleet prediction model to nudge

country offices to reconsider/recalibrate their fleet if it devi-

ates too much from its prediction? (c) Which variables pre-

dict fleet size in a given country office? In addition to

solving the problem faced by UNHCR, the paper also gener-

alizes our findings to other humanitarian organizations by

developing three generic design propositions that will help

other organizations facing fleet sizing problems. Doing

so, our paper responds to a need expressed by fleet managers

of multiple humanitarian organizations during professional

conferences (Fleet Forum, 2015, 2017). Indeed, uncertainty

KUNZ AND VAN WASSENHOVE 283