Improving the coordination in the humanitarian supply chain: exploring the role of options contract

The uncertainty associated with the location, severity and timing of disaster makes it difficult for the humanitarian organization (HO) to predict demand for the aid material and thereby making the relief material procurement even more challenging. This research explores whether options contract can be used as a mechanism to aid the HO in making procurement of relief material less challenging by addressing two main issues: inventory risk for buyers and over-production risk for suppliers. Furthermore, a contracting mechanism is designed to achieve coordination between the HO and aid material suppliers in the humanitarian supply chain through optimal pricing. The options contract is modelled as a stylized version of the newsvendor problem that allows the HO to adjust their order quantity after placing the initial order at the beginning of the planning horizon. This flexibility helps to mitigate the risk of both overstocking and understocking for the HO as well as the risk of overproduction for the supplier. Our results indicate that the optimal values for decision parameters are not “point estimates” but a range of prices, which can facilitate negotiation between the two parties for appropriate selection of contract parameters under an options contract. The results imply that options contract can aid in the decentralized approach of fixing the prices between the HO and the supplier, which in turn would help in achieving systemic coordination

Risk Analysis of Emergency Supply Chains

Unknowns and uncertainties are integral to any disaster relief operation. Activities of the emergency supply chain are usually performed in highly volatile environments and are prone to risks. Due to the complexity of the operating relief environment, relief organizations can only anticipate some supply chain disruptions. As such, they must take a comprehensive and proactive approach to uncertainties to manage multiple unexpected events. Therefore, this research aims to develop a comprehensive framework for risk management in emergency supply chains. This study adopts a comprehensive and rigorous procedure to explore the risk factors and mitigation strategies for emergency supply chains. The research design is divided into three phases; first, the risk factors and mitigation strategies are collected through an extensive literature review; next, the risk factors and risk mitigation strategies are verified with experts through high-level surveys and semi-structured interviews. Finally, based on the weight of risk factors estimated using the fuzzy analytic hierarchy process, risk factors mitigation strategies to overcome the risk factors are prioritized using the fuzzy technique for order performance by similarity to ideal solution that considers uncertainty and impreciseness rather than a crisp value. This study found and verified 28 emergency supply chain risk factors, which are categorised into two main categories: internal and external risks; four sub-categories: demand, supply, infrastructural, and environmental risks; and 11 risk types: forecast, inventory, procurement, supplier, quality, transportation, warehousing, systems, disruption, social, and political risks. War and terrorism, the impact of follow-up disasters, poor relief supplies, and sanctions and constraints that hinder stakeholder cooperation and coordination are the most significant risks. Finally, eight risk factor mitigation strategies; strategic stock, prepositioning of resources, collaboration and coordination, flexible transportation, flexible supply bases, logistics outsourcing, flexible supply contracts, and risk awareness/knowledge management were proposed and prioritised to overcome the risk factors so decision-makers can focus on these mitigation strategies. This study provides a more efficient, effective, robust, and systematic way to overcome risk factors and improve the effectiveness of emergency supply chains in disaster relief operations. This study is the first to objectively identify, categorise, and analyse emergency supply chains’ risk nature and frequency. Practitioners and policymakers can use the research findings to spot significant risk factors and appropriate mitigation strategies to reduce their effects. The risk profile will be a new database of risk factors affecting the emergency supply chain and allow stakeholders to immediately identify the disrupted emergency supply chain component