Pre-positioning strategies for relief supplies in a relief supply chain

Abstract

It is vital to pre-position a certain amount of relief supplies at pre-disaster. But governments are often confronted with a dilemma of coordinating inventory cost and stock-out cost in pre-positioning relief supplies. Pre-positioning strategies for relief supplies depend on the natural characteristic of relief supplies and the most urgent needs at post-disaster. Therefore, we classify relief supplies by their natural characteristic and priority, and introduce an option contract into relief supplies pre-positioning system which consists of a single government and an agreement enterprise. Specially, a consumable and relatively urgent relief supplies pre-positioning (C-RUP) model and a non-consumable and urgent relief supplies pre-positioning (NC-UP) model are established. The optimal decisions of the government and the enterprise are derived, respectively. The relief supply chain coordination is achieved with the option contract. Under channel coordination, the two models can not only improve the government’s emergency ability and support capacity, but also reduce the government’s inventory risk when compared to the government single pre-positioning model. Moreover, we give out the conditions that the two sides can reach a win-win situation. Lastly, we propose important managerial insights for pre-positioning strategies related to different types of relief supplies.