Improving bid pricing for humanitarian logistics

Abstract

PurposeHumanitarian logistics plays a critical role in the aid response to hunger and disasters worldwide. The US Department of Agriculture (USDA) uses a competitive bidding process to procure P.L. 480 Title II food aid, a $2 billion business annually. This paper describes a mixed‐integer program (MIP) decision tool that mimics the USDA bid approach in order to improve ocean carrier and food supplier bid pricing strategy.Design/methodology/approachFirst, the USDA bid process is detailed and the MIP decision tool is described. Then how the tool is run against historical data to approximate future USDA bid awards is explained, allowing the authors to subsequently advise food supplier and ocean carrier clients of expected price competition and pricing flexibility before they submit bids.FindingsThe MIP decision tool has demonstrated its effectiveness in supporting $8 million in food aid bids. Bidding implications for food aid carriers and suppliers are provided as well as suggestions for additional opportunities for humanitarian logistics research are offered.Originality/valueExtant literature in procurement offers little practical support for bidder pricing preparation. Additionally, humanitarian logistics is an emerging, under‐researched field, and this paper is the first to address sourcing and distribution of Title II food aid.