Public–private collaborations in humanitarian relief supplies: Incentive reserve contracts

Abstract

Collaboration between nonprofit organizations (NPOs) and enterprises plays a crucial role in disaster preparedness. However, the pressures of high risk, high cost, and uncertainty can deter enterprises from maintaining strategic reserves before a disaster, potentially leading to inefficiencies in private enterprise participation in disaster relief. This study develops incentive reserve contracts enhance partnerships between NPOs and enterprise and secure humanitarian supplies. We evaluate two levers widely used by NPOs, physical procurement reserves and incentive coefficient, which jointly influence enterprises’ autonomous production capacity reserves. Importantly, simultaneous reserve and priority reserve are different. Furthermore, disasters often trigger price fluctuations in spot markets, complicating temporary procurement for unmet pre-disaster demands. We focus on the actual demand and market variations for different supplies to design differentiated reserves and incentives. Our findings indicate that incentive contracts are more flexible and cost-effective than advance payments for the same reserves, particularly when NPOs prioritize reserves. We further extend the model to consider corporate social responsibility, probability of emergencies, and different distribution functions of demand to examine the generality and applicability of the proposed approach, which is also verified by numerical experiments. In summary, this study provides better guidance for relief supply chain players dealing with various supplies and disaster environments, increases corporate engagement, and improves the overall efficiency of relief supply reservation.