An Operational Mechanism Design for Fleet Management Coordination in Humanitarian Operations

Abstract

We study incentive alignment to coordinate operations in humanitarian settings. Our research focuses on transportation, the second largest overhead cost to humanitarian organizations after personnel. Motivated by field research, we study the fleet size problem from a managerial perspective. In terms of transportation, the objective of humanitarian Programs is to have a vehicle available whenever it's needed; the bigger the fleet, the higher the availability (the lower the cost of delay). On the other hand, the bigger the fleet, the higher the fleet cost. Fleet cost is the responsibility of the National Logistics. The different focus of the Programs and the National Logistics creates misaligned incentives that may lead to sub-optimal performance of a decentralized system. At the top of the system, the Headquarter must design incentive mechanisms to balance the operating cost of the fleet with the equity cost represented by cost of delay. The incentive alignment issue is complex in a humanitarian setting as traditional instruments based on financial rewards and penalties are not considered as viable options. The problem is complicated further by information asymmetry in the system due to the disperse geographical location of Programs, National Logistics and Headquarter. We propose a novel mechanism design for the incentive alignment problem where the Programs have private information regarding their true transportation needs. This study contributes to the humanitarian logistics literature and to the incentives in operations management literature.