Surface vs. Air Shipment of Humanitarian Goods under Demand Uncertainty

John H. Park, Burak Kazaz, Scott Webster

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The combination of insufficient funds and limited information regarding the demand in regions of desperate need presents a great challenge to many humanitarian organizations. This study examines how a humanitarian organization can minimize the expected shortage in delivering relief aid to regions of need, either though surface or air transportation, in the presence of demand uncertainty with a budget constraint. The study makes four contributions. First, we show that when there is reserved supply for air transportation, it is optimal to provide a higher service level through surface shipment to regions with greater demand uncertainty. Second, we show that the demand variation plays a significant role in the allocation of funds between surface and air shipments. The reaction of the humanitarian organization to higher degrees of demand uncertainty can be determined by the optimal level of inventory purchased for surface shipment. If the optimal inventory for surface shipment is less than the mean demand, then we show that increasing degrees of demand uncertainty leads to increasing reliance on the air shipment option with greater levels of inventory reserved for air transportation and decreasing levels of inventory reserved for surface shipment. Third, when there are opportunities to invest in better forecasting, we find that a humanitarian organization should focus its resources on improving the demand forecast in one region as opposed to evenly allocating resources to all regions. Fourth, we show that the expected amount of shortages reduces with a higher number of regions to serve due to a risk-pooling effect.

Original languageEnglish (US)
JournalProduction and Operations Management
DOIs
StateAccepted/In press - Jan 1 2018

Fingerprint

Air
Uncertainty
Demand uncertainty
Air transportation
Shortage
Resources

Keywords

  • Budget
  • Demand uncertainty
  • Humanitarian operations
  • RUTF
  • UNICEF

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

Cite this

Surface vs. Air Shipment of Humanitarian Goods under Demand Uncertainty. / Park, John H.; Kazaz, Burak; Webster, Scott.

In: Production and Operations Management, 01.01.2018.

Research output: Contribution to journalArticle

@article{abc0a7e6d3ce44c0b23155a9be4f950f,
title = "Surface vs. Air Shipment of Humanitarian Goods under Demand Uncertainty",
abstract = "The combination of insufficient funds and limited information regarding the demand in regions of desperate need presents a great challenge to many humanitarian organizations. This study examines how a humanitarian organization can minimize the expected shortage in delivering relief aid to regions of need, either though surface or air transportation, in the presence of demand uncertainty with a budget constraint. The study makes four contributions. First, we show that when there is reserved supply for air transportation, it is optimal to provide a higher service level through surface shipment to regions with greater demand uncertainty. Second, we show that the demand variation plays a significant role in the allocation of funds between surface and air shipments. The reaction of the humanitarian organization to higher degrees of demand uncertainty can be determined by the optimal level of inventory purchased for surface shipment. If the optimal inventory for surface shipment is less than the mean demand, then we show that increasing degrees of demand uncertainty leads to increasing reliance on the air shipment option with greater levels of inventory reserved for air transportation and decreasing levels of inventory reserved for surface shipment. Third, when there are opportunities to invest in better forecasting, we find that a humanitarian organization should focus its resources on improving the demand forecast in one region as opposed to evenly allocating resources to all regions. Fourth, we show that the expected amount of shortages reduces with a higher number of regions to serve due to a risk-pooling effect.",
keywords = "Budget, Demand uncertainty, Humanitarian operations, RUTF, UNICEF",
author = "Park, {John H.} and Burak Kazaz and Scott Webster",
year = "2018",
month = "1",
day = "1",
doi = "10.1111/poms.12849",
language = "English (US)",
journal = "Production and Operations Management",
issn = "1059-1478",
publisher = "Wiley-Blackwell",

}

TY - JOUR

T1 - Surface vs. Air Shipment of Humanitarian Goods under Demand Uncertainty

AU - Park, John H.

AU - Kazaz, Burak

AU - Webster, Scott

PY - 2018/1/1

Y1 - 2018/1/1

N2 - The combination of insufficient funds and limited information regarding the demand in regions of desperate need presents a great challenge to many humanitarian organizations. This study examines how a humanitarian organization can minimize the expected shortage in delivering relief aid to regions of need, either though surface or air transportation, in the presence of demand uncertainty with a budget constraint. The study makes four contributions. First, we show that when there is reserved supply for air transportation, it is optimal to provide a higher service level through surface shipment to regions with greater demand uncertainty. Second, we show that the demand variation plays a significant role in the allocation of funds between surface and air shipments. The reaction of the humanitarian organization to higher degrees of demand uncertainty can be determined by the optimal level of inventory purchased for surface shipment. If the optimal inventory for surface shipment is less than the mean demand, then we show that increasing degrees of demand uncertainty leads to increasing reliance on the air shipment option with greater levels of inventory reserved for air transportation and decreasing levels of inventory reserved for surface shipment. Third, when there are opportunities to invest in better forecasting, we find that a humanitarian organization should focus its resources on improving the demand forecast in one region as opposed to evenly allocating resources to all regions. Fourth, we show that the expected amount of shortages reduces with a higher number of regions to serve due to a risk-pooling effect.

AB - The combination of insufficient funds and limited information regarding the demand in regions of desperate need presents a great challenge to many humanitarian organizations. This study examines how a humanitarian organization can minimize the expected shortage in delivering relief aid to regions of need, either though surface or air transportation, in the presence of demand uncertainty with a budget constraint. The study makes four contributions. First, we show that when there is reserved supply for air transportation, it is optimal to provide a higher service level through surface shipment to regions with greater demand uncertainty. Second, we show that the demand variation plays a significant role in the allocation of funds between surface and air shipments. The reaction of the humanitarian organization to higher degrees of demand uncertainty can be determined by the optimal level of inventory purchased for surface shipment. If the optimal inventory for surface shipment is less than the mean demand, then we show that increasing degrees of demand uncertainty leads to increasing reliance on the air shipment option with greater levels of inventory reserved for air transportation and decreasing levels of inventory reserved for surface shipment. Third, when there are opportunities to invest in better forecasting, we find that a humanitarian organization should focus its resources on improving the demand forecast in one region as opposed to evenly allocating resources to all regions. Fourth, we show that the expected amount of shortages reduces with a higher number of regions to serve due to a risk-pooling effect.

KW - Budget

KW - Demand uncertainty

KW - Humanitarian operations

KW - RUTF

KW - UNICEF

UR - http://www.scopus.com/inward/record.url?scp=85042616311&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85042616311&partnerID=8YFLogxK

U2 - 10.1111/poms.12849

DO - 10.1111/poms.12849

M3 - Article

JO - Production and Operations Management

JF - Production and Operations Management

SN - 1059-1478

ER -