Relief supply prepositioning strategies via option contract reserve fleet vehicles

Abstract

In preparing for disasters, relief supplies can be prepositioned as tangible forms in warehouses or as intangible forms, such as production capacity. However, the prepositioning of relief supplies in the absence of a sufficient number of vehicles may delay the delivery time and reduce relief operation performance. Budget pressure may prevent local disaster relief authorities from maintaining a large fleet; thus, they may opt for fleet vehicle reserves through an option contract as an alternative. We propose a model for coordinating prepositioned tangible and intangible relief supplies, considering fleet vehicle reserves through an option contract. The objective function includes the reduction of deprivation cost, which considers the suffering of beneficiaries. We obtain the optimal quantity of the prepositioned tangible and intangible supplies and the fleet vehicles. Furthermore, we propose benchmark relief supply prepositioning models without fleet vehicle reserves and compare the performance of the three models. We prove that reserving fleet vehicles can reduce social costs, alleviate the suffering of beneficiaries and increase the profit of the supplier. We examine the applicability of the proposed model through numerical examples.