Monday, January 23, 2012

BESIOU Maria, PEDRAZA-MARTINEZ Alfonso J., VAN WASSENHOVE Luk
The Effect of Earmarked Funding on Fleet Management for Relief and Development
INSEAD Working Paper 2012/10/TOM/ISIC

International Humanitarian Organizations (IHO) often implement relief and development programs simul- taneously. With headquarters in Europe or USA and programs (operations) in developing countries, IHO are frequently decentralized. Moreover, IHO program delivery is funded by donors and funding is typically earmarked for specific programs increasing even more the decentralization levels. Using system dynamics methodology we study the IHO dual mission of relief and development in stochastic operations with different levels of earmarked funding. Focusing on metrics of equity and efficiency we find that earmarked funding and relief programs affect operations in counter-intuitive ways. First, our analysis focuses only on development programs. Second, we add relief operations to better understand the impact of the dual mission. Finally, we study the impact of earmarking. Due to the interaction of dual mission and earmarked funding, a system with local procurement and a short lead time may consistently take longer to supply transportation for disaster response (relief) than a system with global procurement and high lead time. Our results have important implications for humanitarian fleet management practice. Specifically, what organizational structure to adopt in different organizational environments.