Understanding Humanitarian Supply Chain Logistics with Systems Dynamics Modeling

Purpose – We explore the short-term humanitarian response to a natural disaster that prompts a rapid influx of relief supplies to the area affected by the disaster, aiming to understand the dynamics of systemic processes that apply to humanitarian supply chain logistics. Design/methodology/approach – We use system dynamics to simulate the disaster relief supply chain elements of humanitarian response. System dynamics is a well-established simulation method for analyzing complex social systems that include feedback. We used it because the timing and coordination of, and feedback loops among, events in humanitarian response incorporate a delay structure that can be modeled effectively using system dynamics. Findings – Of all the stocks in our model of the Humanitarian Stock Management System, the most important was the Cumulative Food distributed to disaster victims. In all of our simulation runs, victims eventually got all the food they needed, but at varying speeds (fast in the base run, slow in runs where repair of infrastructure was slow). However, the most problematic stock was the amount of Food in the Central Warehouse. In almost all the runs, that stock contained an excess of food (which is very common in such situations), resulting in waste and inefficiency. This problem was worst when the agency panicked at the outset and doubled its estimate of needed food, and when, as is often true, the agency received too many in-kind donations of food. The most interesting finding was that “managing” donations led to the best overall performance--low waste, good relief for victims. Practical implications – We offer a number of policy recommendations, including the need to avoid early bias, to repair infrastructure as quickly as possible, to develop better methods for keeping track of inventories and supplies on the way, and striking a balance between encouraging and dampening donations. Originality/value – This study focuses on understanding the short-term dynamics of the logistics of a humanitarian response, using a system dynamics approach. There have been only two other studies applying system dynamics to humanitarian assistance. One was operational and focused on long-term dynamics (often called “development,” as opposed to “response”) and the other was abstract and focused on those same longer-term dynamics. While these studies have produced meaningful insight, our study is unique in that we have applied an operational approach to a short, or “crisis response,” time horizon

The Spirit of Capitalism Across Income Levels

This paper tests the consumption‐based capital asset model within the context of the spirit of capitalism. The spirit of capitalism asserts that consumers gain utility not just from consumption of goods and services, but also from the social status obtained from wealth. We examine two asset pricing models developed by Bakshi and Chen (1996) that employ wealth in the utility function, for households sorted by income quintiles. In the first model, households obtain utility from both consumption and the social status that comes from their own wealth. In the second model, households gain utility from both consumption and the social status obtained from their own wealth relative to the wealth of other peer households. Our results indicate that both models are inconsistent with the data regardless of income. However, using cointegration methods as a diagnostic tool, we find that the data are “loosely” consistent with the spirit of capitalism, at least for the upper income quintiles

A Methodology for Analyzing the Effects of Geographic Diversification for Financial Institutions

This paper develops a methodology to examine and measure the potential benefits of risk reduction for financial institutions wishing to grow primarily through a strategy of geographic expansion. This paper focuses on measuring the benefits obtained from a broader expansion strategy that considers the eight regions of the US, as classified by the Bureau of Economic Analysis (BEA). The effect of regional diversification is measured using the annual return on equity (ROE) of federally insured commercial banks from 1969 to 1999. This paper provides a blueprint for a financial institution wishing to implement a strategic plan for geographic expansion. It takes the approach that a financial institution is seeking to grow by expanding into new regions and wants to build a company that minimizes risk while maintaining or increasing its ROE. Using portfolio theory, the optimal percentage of capital that the financial institution should invest in each new region is determined

The Effects of Cultural Rigidity on Bank Geographic Diversification

The cognitive map of a bank showed that its culture constrained its geographic diversification strategy. Tests using a system dynamics model revealed better strategies

Hospital Evacuation in Disasters: Uncovering the Systemic Leverage Using System Dynamics

Our aim is to understand systemic processes that apply to hospital evacuation and patient relocation during and after a disaster. We use system dynamics to simulate hospital evacuation in such an event. System dynamics is a well-established simulation method for analysing complex social systems that include feedback. We found that the key to efficient hospital evacuation lies less in management of patient transportation and more in the ability of the receiving hospital to manage the influx of patients. The decision makers at the hospital receiving patients are most subject to feedback effects and therefore hold the most leverage in determining the rate of the evacuation. On the basis of simulation results, we develop recommendations for hospital evacuation and patient relocation. Planners, policy makers and practitioners can use the recommendations to facilitate efficient hospital evacuations