Designing Efficient Infrastructural Investment and Asset Transfer Mechanisms in Humanitarian Supply Chains

29 Pages Posted: 11 Jan 2012 Last revised: 26 Sep 2012

See all articles by Shantanu Bhattacharya

Shantanu Bhattacharya

Independent

Sameer Hasija

INSEAD - Technology and Operations Management

Luk N. Van Wassenhove

INSEAD

Date Written: September 26, 2012

Abstract

We analyze the efficacy of different asset transfer mechanisms and provide policy recommendations for the design of humanitarian supply chains. As a part of their preparedness effort, humanitarian organizations often make decisions on resource investments ex-ante because doing so allows for rapid response if an adverse event occurs. However, programs typically operate under funding constraints and donor earmarks with autonomous decision-making authority resting with the local entities, which makes the design of efficient humanitarian supply chains a challenging problem. We formulate this problem in an agency setting with two independent aid programs, where different asset transfer mechanisms are considered and where investments in resources are of two types: a primary resource that is needed for providing the aid, and infrastructural investments that improve the operation of the aid program in using the primary resource. The primary resource is modeled as either a divisible or indivisible good, and is acquired from earmarked donations. We show that allowing aid programs the exibility of transferring primary resources improves the efficiency of the system by yielding greater social welfare than when this exibility does not exist. More importantly, we show that a central entity that can acquire primary resources from one program and sell them to the other program can further improve system efficiency by providing a mechanism that facilitates the transfer of primary resources and eliminates losses from gaming. This outcome is achieved without depriving the individual aid programs of their decision-making autonomy while maintaining the constraints under which they operate. We find that outcomes with centralized resource transfer but decentralized infrastructural investments by the aid programs are the same as with a completely centralized system (where both resource transfer and infrastructural investments are centralized).

Keywords: Asset Transfer, Humanitarian Logistics, Supply Chain Design

Suggested Citation

Bhattacharya, Shantanu and Hasija, Sameer and Van Wassenhove, Luk N., Designing Efficient Infrastructural Investment and Asset Transfer Mechanisms in Humanitarian Supply Chains (September 26, 2012). INSEAD Working Paper No. 2012/86/TOM/INSEAD Social Innovation Centre. Available at SSRN: https://ssrn.com/abstract=1982566 or http://dx.doi.org/10.2139/ssrn.1982566

Shantanu Bhattacharya

Independent

No Address Available

Sameer Hasija (Contact Author)

INSEAD - Technology and Operations Management ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France

Luk N. Van Wassenhove

INSEAD ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France
(33) (0)1 60 72 42 66 (Phone)
(33) (0)1 60 72 40 49 (Fax)

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