Procurement modes for emergency supplies in the presence of disaster and commercial demands

Abstract

This paper studies alternative procurement modes for emergency supplies in the presence of a public sector and a private supplier. A key feature of such a supply chain is that the private supplier must consider commercial demand in addition to disaster demand. Three procurement modes are analysed: an option mode (OM), an order-before-disaster mode (OBDM) and a procurement-after-disaster mode (PADM). We provide the optimal decisions associated with these three modes. Theoretical results in the OM show that a large order is not always better for the private supplier. From theoretical and numerical comparative analyses, no mode is absolutely superior. For the public sector, there are two thresholds. When the disaster probability is less than the low threshold, the revenues of all procurement modes are the same; when the disaster probability is larger than the high threshold, the OBDM has the highest revenue; otherwise, the OM has the highest revenue. However, for the private supplier, the PADM always has the highest revenue.