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Augmenting Fixed Framework Agreements in Humanitarian Logistics with a Bonus Contract

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  • Xihui Wang
  • Yu Fan
  • Liang Liang
  • Harwin De Vries
  • Luk N. Van Wassenhove

Abstract

Framework agreements (FAs) are commonly used by relief organizations to cooperate with suppliers to pre‐position relief items. Many Chinese local authorities with disaster responding experience choose a specific type of FA, the fixed framework agreement (FFA), which contains fixed terms for item quality, quantity, price, and delivery lead time. These FFAs, however, do not fully motivate suppliers to further improve the effectiveness of a humanitarian logistics (HL) operation. We suggest using a bonus contract as a supplemental agreement to FFAs to incentivize suppliers to reduce delivery lead times. We develop a performance measurement model using deprivation level functions (DLFs) to measure effectiveness, efficiency and cost‐effectiveness of an HL operation. With this model, we quantify the performance of an FFA with and without bonus contract and study the feasibility and optimality of the bonus contract. A case study on an FFA observed in practice is used to illustrate our methodology. The results show that the bonus contract can be both practical and capable of improving the performance of an HL operation.

Suggested Citation

  • Xihui Wang & Yu Fan & Liang Liang & Harwin De Vries & Luk N. Van Wassenhove, 2019. "Augmenting Fixed Framework Agreements in Humanitarian Logistics with a Bonus Contract," Production and Operations Management, Production and Operations Management Society, vol. 28(8), pages 1921-1938, August.
    • Handle: RePEc:bla:popmgt:v:28:y:2019:i:8:p:1921-1938
    DOI: 10.1111/poms.13024
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    Cited by:

    1. Fabiana Santos Lima & Ricardo Villarroel Dávalos & Lucila M. S. Campos & Andréa Cristina Trierweiller, 2022. "Framework proposal to support the suppliers’ selection of Humanitarian assistance items: a Flood Case Study in Brazil," Annals of Operations Research, Springer, vol. 315(1), pages 317-340, August.
    2. Jiaxin Geng & Hanping Hou & Shaoqing Geng, 2021. "Optimization of Warehouse Location and Supplies Allocation for Emergency Rescue under Joint Government–Enterprise Cooperation Considering Disaster Victims’ Distress Perception," Sustainability, MDPI, vol. 13(19), pages 1-14, September.
    3. Anderson Nunes Silva & Marcele Elisa Fontana, 2024. "A New Model to Consolidate Long-Term Intersectoral Partnerships in Humanitarian and Social Crises Management," Public Organization Review, Springer, vol. 24(1), pages 27-51, March.
    4. Ghavamifar, Ali & Torabi, S. Ali & Moshtari, Mohammad, 2022. "A hybrid relief procurement contract for humanitarian logistics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    5. Shu, Jia & Lv, Wenya & Na, Qing, 2021. "Humanitarian relief supply network design: Expander graph based approach and a case study of 2013 Flood in Northeast China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 146(C).
    6. Shao, Jianfang & Fan, Yu & Wang, Xihui & Liang, Changyong & Liang, Liang, 2023. "Designing a new framework agreement in humanitarian logistics based on deprivation cost functions," International Journal of Production Economics, Elsevier, vol. 256(C).
    7. Hu, Shaolong & Dong, Zhijie Sasha & Lev, Benjamin, 2022. "Supplier selection in disaster operations management: Review and research gap identification," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    8. Wu, Xuanyu & Yang, Min & Liang, Liang, 2024. "Government should be merciful or strict: Penalizing defaulting suppliers in emergency supply chains," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    9. Moshtari, Mohammad & Altay, Nezih & Heikkilä, Jussi & Gonçalves, Paulo, 2021. "Procurement in humanitarian organizations: Body of knowledge and practitioner's challenges," International Journal of Production Economics, Elsevier, vol. 233(C).
    10. Meng, Qingchun & Kao, Zhiping & Guo, Ying & Bao, Chunbing, 2023. "An emergency supplies procurement strategy based on a bidirectional option contract," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    11. Zhang, Meng & Kong, Zhaojun, 2023. "A two-phase combinatorial double auction and negotiation mechanism for socialized joint reserve mode in emergency preparedness," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    12. Fan, Yu & Shao, Jianfang & Wang, Xihui & Liang, Liang, 2024. "Contract design between relief organisations and private-sector vendors: A humanitarian logistics framework," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 182(C).
    13. Fan, Yu & Shao, Jianfang & Wang, Xihui, 2023. "Relief items procurement and delivery through cooperation with suppliers and logistics companies considering budget constraints," International Journal of Production Economics, Elsevier, vol. 264(C).
    14. Yao, Chen & Fan, Bo & Zhao, Yupan & Cheng, Xinyue, 2023. "Evolutionary dynamics of supervision-compliance game on optimal pre-positioning strategies in relief supply chain management," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    15. Fan, Yu & Wang, Xihui & Zhu, Anqi & Shao, Jianfang & Liang, Liang, 2024. "Measuring the shortage cost through deprivation and envy in collaborating contract between the local authority and the enterprise," International Journal of Production Economics, Elsevier, vol. 271(C).
    16. Hu, Shaolong & Hu, Qingmi & Tao, Sha & Dong, Zhijie Sasha, 2023. "A multi-stage stochastic programming approach for pre-positioning of relief supplies considering returns," Socio-Economic Planning Sciences, Elsevier, vol. 88(C).
    17. Lijo John & Anand Gurumurthy & Arqum Mateen & Gopalakrishnan Narayanamurthy, 2022. "Improving the coordination in the humanitarian supply chain: exploring the role of options contract," Annals of Operations Research, Springer, vol. 319(1), pages 15-40, December.
    18. Oscar Rodríguez-Espíndola, 2023. "Two-stage stochastic formulation for relief operations with multiple agencies in simultaneous disasters," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(2), pages 477-523, June.
    19. Jianfang Shao & Changyong Liang & Xihui Wang & Xiang Wang & Liang Liang, 2020. "Relief Demand Calculation in Humanitarian Logistics Using Material Classification," IJERPH, MDPI, vol. 17(2), pages 1-25, January.
    20. Diehlmann, Florian & Hiemsch, Patrick S. & Wiens, Marcus & Lüttenberg, Markus & Schultmann, Frank, 2020. "A novel approach to include social costs in humanitarian objective functions," Working Paper Series in Production and Energy 52, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).

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