Designing a New Framework Agreement in Humanitarian Logistics Based on Deprivation Cost Functions

In preparation to a potential disaster, cooperation between relief organizations and enterprises is important. Through a suitable framework agreement (FA), relief organizations can reduce a large amount of inventory cost and decrease the social cost (i.e., the sum of deprivation cost and logistics cost) in humanitarian operations, while enterprises can make more profit. However, unfortunately, in China, such cooperation between local authorities and enterprises is still far from developed due to the lack of a high-quality FA contract. In this paper, we solve the problem through designing a new FA that has the incentive for both relief organizations and enterprises to establish the partnership and brings them into a win-win situation. Hence,we base on the situation in China, consider the uncertainty of disaster occurrence and the dynamic relationships between delivery lead time and logistics cost, through which we design a new FA and propose the decision-making process of relief organizations and enterprises to make a negotiation and sign the new FA. A case study based on real world data from field investigation is conducted to prove the feasibility and appropriateness of our new FA