Rana Shraddha "Dynamic Pricing for Uncertain Episodic Service Demand"

Following natural disasters and man-made disruptions, the uncertain, episodic, and time-sensitive demand for relief services makes it difficult for humanitarian actors to compete with private-sector customers in securing commercial service capacity, leading to high costs. We study a case of transportation service procurement using dynamic-priced contracts to improve service-level while reducing costs in order to satisfy emergency demand. We contribute to the disaster procurement, truckload procurement, and dynamic-pricing literature by: i) studying truckload transportation service procurement for FEMA, without capacity guarantee; ii) considering uncertain episodic demand in response to disasters; iii) modeling a dynamic-priced truckload contract; iv) examining the case where the buyer, i.e., FEMA offers the price as opposed to the seller, i.e., carriers and brokers. We find that on implementing the proposed dynamic-priced contract, i.e., paying 71% over market rates, the cost savings for FEMA would be $9.85 million compared to what was actually paid under the fixed-price contract.

Shraddha Rana is a postdoctoral researcher in the Humanitarian Research Group at INSEAD. Prior to that, she was a graduate research assistant at the MIT Center for Transportation and Logistics. Shraddha holds a MS and PhD in Transportation and Logistics from MIT and a B.Tech in Civil Engineering from IIT Bombay. Her research focuses on distribution and transportation capacity planning for humanitarian operations, working closely with various humanitarian organizations.