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

Abstract

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.

The human side of humanitarian supply chains: a research agenda and systematization framework

“…Humanitarian supply chain workers, such as volunteers, managers and employees, operate in a complex environment which requires effective management practices (Pateman et al 2013). Several different actors and stakeholders are involved in humanitarian operations, making policies and practices essential in order to guide and coordinate their actions (John et al 2020). Mowafi et al (2007), for instance, highlight the fact that humanitarian health workers are taking part in a multi-disciplinary endeavor and thus require proper training in broader humanitarian action to make them more effective in the field.…”

An optimal put option contract for a reverse supply chain: case of remanufacturing capacity uncertainty

“…In this section, we examine previous studies concerned with the application of option contracts in the context of supply chain management. This predominantly incorporates using option contracts to address inventory management (Biswas & Avittathur, 2019 ; Eriksson, 2019 ; John et al, 2020 ; Liang et al, 2012 ; Ritchken & Tapiero, 1986 ) and tackling disruptions in either demand (Anderson et al, 2017 ; Chen et al, 2014 , 2017 ; Erkoc & Wu, 2005 ; Fu et al, 2017 ; Hua et al, 2019b ; Nosoohi & Nookabadi, 2016 ; Wang & Chen, 2017 ; Wang & Tsao, 2006 ; Zhao et al, 2013 ) or production yield rate (Li et al, 2017b ; Luo & Chen, 2017 ; Xu, 2010 ). Recently, Hu et al ( 2019 ) examined a put option contract and a buyback contract in a relief supply chain.…”

Under “my way or the highway”! The weaker partner's synergy on collaborative performance in humanitarian relief when experiencing power tactics

“…Such agreements clarify what each party is expected to contribute in terms of activities (cf. John et al. , 2022).…”

“…, 1999). More specifically, power tactics are either coercive or non-coercive, and their implications on collaboration in the highly volatile and uncertain environment of humanitarian relief need a dedicated investigation (John et al. , 2022; Siawsh et al.…”