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Chinese Journal of Management Science ›› 2020, Vol. 28 ›› Issue (8): 162-171.doi: 10.16381/j.cnki.issn1003-207x.2020.08.014

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The Model of Joint Relief Supplies Pre-positioning by the Governmentand Two Suppliers Based on Option Contractsand Suppliers' Profits Allocation Mechanism

LIU Yang, TIAN Jun, FENG Gong-zhong, HU Zhong-quan   

  1. School of Management, Xi'an JiaoTong University, Xi'an 710049, China
  • Received:2018-07-06 Revised:2019-01-23 Online:2020-08-20 Published:2020-08-25

Abstract: The recent emergencies or natural disasters occurred across all corners of the whole world, such earthquakes, hurricanes, tsunamis, etc. Sudden disasters not only increase the demand of relief supplies, but also pose a serious security threat to people's health and life as well as property. The demand of relief supplies after a sudden disaster occurs will be an explosive growth. In real situations, in order to effectively guarantee the timeliness and availability of relief supplies, the government may urgently purchase relief supplies from multiple suppliers. However, the overwhelming majority of the existing studies assume that there only exists a single supplier in the relief supply chain, and few studies have been conducted with respect to the relief supply chain that consists of a single government and multiple suppliers. The number of agreement enterprises cooperated with the government, of course, should not be too many. Otherwise, it will increase the government's management cost and add difficulties tocoordinate each supplier's profit allocation.
Therefore, the situation of joint relief supplies pre-positioning by the government and two suppliers is taken as an example, and the model of joint relief supplies pre-positioning is constructed. Considering relief supplies system as a relief supply chain, option contracts are introduced into the relief chain management. At the first stage, the government purchases a certain amount of real relief supplies and options from every supplier, which can be executed by the government at an execution price. At the second stage, the government decides how many relief supplies to purchase from suppliers 1 and 2 after the actual demand of relief supplies is realized. With some reasonable assumptions, the model of joint relief supplies pre-positioning by the government and two suppliers via option contracts is established.
Next, the following critical questions are intended to be addressed. First, should the government select the government single pre-positioning model or the model of joint relief supplies pre-positioningby the government and two suppliers? Second, it is more profitable for the government to adapt the model of joint relief supplies pre-positioning, what are optimal pre-positioning strategies of the government and suppliers? Third, under what conditions will the government and suppliers will be better off? Finally, under which suppliers' profits allocation mechanism will the government make each supplier willing to conduct contracts?
After derivation, there are several key findings associated with our study. First, it is found that the relief supply chain with the government and two suppliers can be coordinated via option contracts. Under cannel coordination, the model of joint relief supplies pre-positioning is superior to the government single pre-positioning model because it improves the total joint amount of relief supplies, as well as reduce the government's regular inventory level. Second, the conditions are presented which help the government and the suppliers achieve an all-win situation. Third, there exists a suppliers' profits allocation mechanism which makes each supplier willing to conduct contracts.
At last, all conclusions are validated by a numerical example. Our findings contribute to provide managerial insights for the government's decisions of relief supplies pre-positioning.

Key words: relief supplies pre-positioning, joint relief suppliespre-positioning model, relief supply chaincoordination, profits allocation, option contracts

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