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Operations Article | "Supply Chain Issues in Disaster Management"

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Supply Chain Issues in Disaster Management

- by Varun Gupta & Naresh Mahadevan *

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Page - 7

These contracts can be setup like the 'Options contracts' available in the financial market. The government will pay a fixed premium (in cash or in tax relief) to the producer for maintaining the inventory, and will use this inventory if and when the disaster relief demand occurs.

The value of this premium can be determined by the producer (and the government) based on whether the producer is writing a 'naked option' (the producer doesn't increase his safety stock levels and speculates that the disaster relief demand will not occur) or a 'covered option' (the producer increases his safety stock levels to account for the disaster relief demand). The key here is to have a widely spread network of producers, such that there are clusters of producers available within 200 miles radii of any given region.

  • Procuring DM warehouses as per DM backbone plan: The government needs to enter into a contract with the local warehouse owners and third party logistics companies (3PLs) at the locations identified for DM warehouses. These warehouses will host the disaster management inventory to be used by government during disaster relief, and the 3PLs will be responsible for taking the supplies to the field. These contracts can be short-term contracts or similar to the option contracts setup with the producers. Existing warehouses of the army can also be used for this purpose. These warehouses must be equipped to handle large quantities of different types of goods like perishable food items, warm clothing, light building materials, tent equipment, etc.

  • Setting up mobile satellite communication equipments: Self powered mobile satellite communication equipments, that can be quickly set-up and used, would enable continuity of communication and also flow of critical information from the disaster hit areas.
    Refer to Exhibit E for complete DM supply chain

    Next


    * Contributed by: -
    Varun Gupta & Naresh Mahadevan,
    Indian School of Business, Hyderabad.


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