A Bilevel Optimization Model Based on Agency Theory in Relief Supply Chain Considering Authorization

As a proactive response, reserving a certain amount of relief materials in advance is crucial for responding to potential disasters. Different from public tendering and bidding, this study proposes the purchasing mode of authorization, under which a nonprofit organization (NPO), as a buyer, wholly authorizes the procurement of relief materials to a professional agent. The relief material procurement system under the purchasing mode of authorization is regarded as a bilevel relief supply chain consisting of one buyer, one agent, and two suppliers with private information about the quality levels of relief materials. For the disclosure of private information, the quality-related procurement strategy is designed in the form of a menu based on the suppliers’ private information. A bilevel optimization model is developed based on agency theory to derive the optimal strategic decisions, and the impacts of the main influencing factors on the optimal procurement strategy and the buyer’s minimum expected cost are discussed via numerical analysis. Then, the study is extended by exploring supplier’s alternative cost functions and supply availability, as well as proposing future research directions. This paper presents an optimal quality-related procurement strategy, which provides rules for quickly responding to the changes in influencing factors during the material procurement process, as well as the minimum expected cost for the buyer to purchase relief materials, which serves as a threshold for screening a reliable retail enterprise as the agent. Finally, three managerial implications with practical significance, drawn from our findings, are presented to facilitate cooperation between NPO and large retail enterprises in order to achieve effective procurement of relief materials at the pre-disaster preparation stage.