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2923. Manufacturing and Procurement Strategies of Relief Supplies Considering Disruption Risk in Response to COVID-19

Invited abstract in session WB-21: Infectious diseases and pandemics, stream OR in Humanitarian Operations (HOpe).

Wednesday, 10:30-12:00
Room: 49 (building: 116)

Authors (first author is the speaker)

1. Yanfang Ai
School of Management, Xi'an Jiaotong University
2. Afshin Mansouri
Brunel Business School, Brunel University London
3. Jun Tian
School of Management, Xi'an Jiaotong University

Abstract

Confronted with the urgent demand for medical supplies in COVID-19, governments encouraged manufacturers to invest efforts in expanding and transitioning their production to bolster the supply capacity of relief supplies. However, the limited supply capacity and the risk of interruption in the upstream supply chain of critical raw materials hinder the expansion of manufacturers' capacity. We address this challenge within a relief supply chain consisting of a supplier and two competing manufacturers under various government subsidy strategies. In this study, we develop a game-theoretic model where an incumbent and an entrant manufacturer engage in two-dimensional competition involving production investment efforts and sales volume. We examine three scenarios: (1) no subsidy, (2) per-unit sales subsidy, and (3) per-unit price subsidy to understand the effectiveness of subsidy strategies in different contexts. Furthermore, we evaluate the stability performance of the subsidies from an evolutionary game theoretical perspective. We find that when the entrant manufacturer has a high level of investment efficiency, they prefer the per-unit sales subsidy over the price subsidy strategy. Additionally, government subsidies can promote production quantities, investment efforts, and social benefits for all stakeholders. To demonstrate the practicality of our results, we apply them to the case of China's response to COVID-19 and compare it with strategies adopted by the UK government.

Keywords

Status: accepted

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