Exploratory Research on the System of China Relief ... - Science Direct

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Systems Engineering Procedia 5 (2012) 99 – 106

International Symposium on Emergency Management 2011

Exploratory research on the system of China relief reserve Tao Chen a, * , Jun Huangb

a

College of Mathematica Science, Graduate University of Chinese Academy of Sciences, Beijing 100049ˈChina b College of Engineering Graduate University of Chinese Academy of Sciences, Beijing 100049ˈChina

Abstract

To meet the relief demands caused by frequent natural disasters and unusual emergencies, the government should utilize the power of society fully and establish a complete system of emergency relief reserves. Thus, this is a complicated task of system engineering. In this paper, we build the system of China relief reserve at first. On this basis, the application of various methods of emergency relief reserve is analyzed through bargaining model in game theory. We conclude that the emergency supplies reserve strategy in the form of ex-ante government and enterprise co-reserve is superior to the strategy in the form of ex-post emergency procurement and emergency production with fund limitation and high social cost. The comparison embodies in three aspects including quantity requirements, quality requirements and structural requirements. © 2011 Elsevier Ltd.Ltd. Selection and peer-review under responsibility of Desheng Wu Dash Wu. © 2012Published Publishedbyby Elsevier Selection and peer-review under responsibility of Dash Desheng

Open access under CC BY-NC-ND license. Key words: game theory; physical reserves; production capacity reserve; emergency procurement; system engineering

1. Introduction China is one of the disasters-ridden countries affected by natural disasters in the world; the disasters consist of multiple characteristics, including various types, high frequency, wide geographic distribution, large losses, etc. In China, more than 70% of the city and more than 50% of the population is distributed in the region of meteorology disasters, geology disasters, marine disasters and other serious natural disasters. In the past 15 years, various natural disasters resulted in about 300 million people (times) affected, 3 million houses collapsed, 8 million emergency relocated population, and direct economic loss of nearly 200 billion RMB annually. Since 2008, disasters had brought serious social and economic influence to the country, such as Wenchuan earthquake, the South freezing rain, Yushu earthquake and Zhouqu landslides. With the unpredictability, rarity and destructiveness of unconventional emergencies, the anti-emergency resources have bared characteristics of unexpected, diversity, phased, timeliness, uncertainty, weak economy etc. In unconventional emergency response, the quantity and species of emergency resources, effectiveness of the corresponding configuration layout, distribution and scheduling influence a lot in the the efficiency and result of unconventional emergency disposal. Therefore, emergency resources are very important in restrictting the effectiveness of unconventional emergency response. *

Tao Chen .Tel:010-88256561 E-mail address: [email protected].

2211-3819 © 2012 Published by Elsevier Ltd. Selection and peer-review under responsibility of Desheng Dash Wu. Open access under CC BY-NC-ND license. doi:10.1016/j.sepro.2012.04.016

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Tao Chen and Jun Huang / Systems Engineering Procedia 5 (2012) 99 – 106

In order to respond to emergencies more affectively, China needs to establish and improve the relief reserve system. While related research of the relief reserve system is an important aspect of system engineering in emergency management. This paper applies system engineering approach, and tries to combine previous research results, and presents a system of emergency relief resources reserve in a more broad sense. The second part of the paper enumerates current situations of the emergency reserve system in China in terms of related researches and relevant laws and regulations. In the third part, a relative complete system of emergency relief resources reserve is given out on the basis of the previous discussion. In the forth part, based on the emergency response methods in respect of common procurement application currently and the theoretical system of bargaining philosophy in Game Theory, it is concluded that the form of government and business cooperation reserve (physical reserves and production capacity reserve) is better than the emergency supplies reserves in the form of emergency procurement and emergency organizing production. In the last part of the paper, we highlight the contents and prospects of the anti-emergencies strategies. 2. Literature review Since Zhangbei earthquake in 1998, China has gradually established an emergency supplies relief reserve system. Currently, we have set up l0 central emergency supplies reserve warehouses in Tianjin, Shenyang, Harbin, Hefei, Wuhan, Changsha, Zhengzhou, Nanning, Chengdu, Xi'an, several provincial emergency supplies reserve warehouses in 31 provinces, autonomous regions, municipalities, Xinjiang Production and Construction Crops; prefecture-level reserve warehouses in 251 cities; county-level reserve warehouses in 1079 counties[1]. Eventually, China has formed a central-provincial-municipal-county four-level emergency supplies relief reserve system, so as to ensure the first delivery relief supplies to the affected areas within 24 hours after disasters [2]. Nevertheless, in face of unconventional emergencies such as Wenchuan earthquake, our existing relief reserve system remains inadequate, such as incomplete varieties, insufficient number of materials storage, less and uneven geographic distribution emergency supplies reserve warehouses. To solve these problems, Lu Shaoping [2] proposed that China must break the pattern of national reserves, take advantage of corporate and social forces, reserves to the people, and take the reserves road with national and socialization combination. And he further pointed out that: the social reserve of emergency supplies is a useful complement for the reserve system currently, and makes up fundamental shortcomings in the existed reserves system, so that enterprises play a better role in the disaster relief. Zheng Hongkai [3] also believed that on China's comprehensive national power, the reserve of national level alone is far from meeting our response to frequent natural disasters and serious emergencies. So we must be fully mobilize social forces, and establish the national emergency reserve supplies system combined of national reserves and private reserves. In recent years, state and local government has begun to promote the socialization process of emergency reserve supplies through laws and other means. China's "Emergency Response Act" declares: "Local governments above the county level shall sign contracts with the companies, in order to guarantee production and supply of emergency relief supplies, daily necessities and emergency equipment, according to the actual situation in the region."[4] “Shanghai implementation Rules” makes the form of emergency supplies reserves clear: "Except that the emergency supplies must be kind of physical reserve, other emergency supplies should imply technical solutions and production capacity reserves, at the same time guarantee a minimum amount of reserves. For emergency supplies in the form of technical solutions and production capacity reserves, the relevant manufacturer should be quick enough into production based on government departments’ instructions after public health emergencies occur [5] ". After regionalization merged in Beijing, the new West has 14 emergency shelters, and there are 4 supplies reserves place in the Southern District, the region's 255 communities will be built civil defence point, in order to meet demands of people prevention for emergency and disaster. In supplies reserve, we will cooperate with large supermarkets. All these facts indicate that China has gradually established the whole society emergency supplies reserve system. Zhang Hong [6] indicated that our emergency supplies reserve management problems from the laws, regulations and management, and proposed two methods to government and business joint reserves --physical reserves and production capacity reserves. Pu Songlin [7] implied that we should sign emergency procurement contracts with related companies to facilitate products and transportation supplies after emergency occurs, for the emergency supplies with difficulty to store a long time or probably large demand. At the same time, we will make use of market


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power and social resources. And effective methods should be applied combining social reserves and corporate reserves, distributed reserves and centralized reserves, contract reserves and physical reserve, to achieve the purpose of reducing the actual inventory, obtain good ability to emergency supplies, and improve the management level. Gao Jianguo et al [8] proposed “price reserve" as a co-reserve mode of basic government and business, and improved the national reserve system with relevant measures. They also proposed that many of the required basic supplies (food, drinking water, instant noodles, etc.) can not be large reserves, but consult with the supermarkets, shopping malls and food warehouses to do "reserve price" work, avoiding that these supplies appear price hikes leading to the shortage in the disaster in disaster relief. Liu Limin [1] implied that we should achieve an open reserve network, and build social mobilization mechanism. Perishable living supplies could take with manufacturers (including largescale logistics supermarket) agreement. In addition to the government establishing reserves, in order to promote and encourage enterprises reserving, some varieties should be taken mandatory or discount, low-interest loans with businesses to reserve. Qiao Hongbo [9] integrated the government reserves, corporate in-kind agreement physical reserves, and corporate in-kind agreement production capacity reserves, constituted five emergency supplies reserve mode: the government reserves, corporate in-kind agreement physical reserves, government and corporate in-kind agreement physical reserves, government and corporate in-kind agreement physical reserves and production capacity reserves, as well as corporate in-kind agreement physical reserves and production capacity reserves, on the basis of scientific, complementary, the emergency needs protection and save the reserve cost. Li Jimei et al [10] pointed out that the guarantee of emergency supplies is the key to emergencies response, a lot of emergency supplies continue to consume along with emergency disposal, timely and effective remedial compensation is particularly critical. They analyzed the type and content of emergency supplies compensation, studied different supplies compensation standards. Such as time-demanding supplies are utilize procurement agreements approach to compensate, and less time-sensitive supplies can be used the way of bidding to compensate. Wang Jianguang et al [11] proposed different types of reserve strategies of emergency supplies, according to the timeliness, supply capacity, supply sources, and occupation funds of emergency supplies etc. i.e. physical reserves, emergency procurement, emergency acquisition, emergency production. Specifically, for the emergency supplies which are provided with time-demanding, production of time constraints, high demand, less to maintain market and lack of market supply capacity, physical reserve can be used. For the emergency supplies which are provided with less time-sensitive and shorter supply cycle in timeliness requirements; maintain a large market, abundant market supply, shorter production and supply cycle in supply capacity; shorter reserves period, higher costs in reserves in emergency supplies management, emergency procurement methods can be used. For the emergency supplies which are provided with higher cost, lower frequently used, not suitable for purchase and reserve, such as large-scale rescue equipment, compulsory acquisition approach should be utilized. Furthermore, EJ Lodree Jr and S Taskin[14] introduced newsvendor variants, compared to the classic newsvendor solution and concluded the different was interpreted as the insurance premium associated with proactive disaster-relief planning, thus they built an insurance risk management system for disaster relief and supply chain disruption inventory planning. Amiya K.Chakravarty [15] implied that the relief providers need to work in collaboration with retailers, and infrastructure service providers for improving responsiveness, and they studies a hybrid of reactive and proactive approaches, where the reactive response is contingent upon the disaster intensity exceeding a certain threshold. In summary, many scholars study the issue of emergency supplies reserves so as to respond to emergencies effectively. some scholars implied simply that the government should be co-reserves with enterprise to cope with possible risks; part of scholars clearly stated that the government should cooperate with relevant companies on basis of national reserves, and the corresponding emergency supplies should implement agreement physical reserve and production agreement capacity reserve; others suggested that physical reserves, emergency purchases and compulsory acquisition are regarded as forms of emergency supplies reserves. However, few scholars analyze comprehensively the emergency supplies reserves strategy of physical reserves in emergency supplies reserve warehouses and government and enterprise co-reserves with physical reserves and production capacity reserve, compared with the emergency supplies reserves strategy of emergency purchase, compulsory acquisition and emergency production. The article integrates these reserves response methods, which has a broad sense for the system of emergency supplies relief reserves response to emergencies. 3. Establishing the system of emergency supplies relief reserves

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The emergency events with burstiness and uncertainties lead to emergency supplies with uncertainty. There may be a massive amount of demand for emergency supplies, such as demand of tents in Wenchuan earthquake. Although the ex-ante mode of the government and enterprise co-reserves is better than the ex-post mode of emergency procurement and emergency production in the emergency demand: quantity demand, quality demand and structure demand intuitively (Note: The fourth section of the article gives a detailed discussion) , in order to respond to emergencies better, especially unconventional emergencies, we will integrate our emergency supplies reserve into a main body, an important complement and an organic component, which includes three parts: the system of national emergency supplies reserve as the main body; the emergency procurement, the compulsory acquisition and the emergency organization production as the important complement (short for "Emergency Complement Section"); and community donate as the organic component. The system of national emergency supplies reserve consists of two parts: the national reserves and corporate inkind agreement reserves. The national reserve is divided into the central emergency supplies physical reserve warehouses and prefecture-level physical reserve warehouses; the corporate in-kind agreement reserves are divided into production-oriented enterprises reserve (combined of production capacity reserves and physical reserve) and sales-oriented enterprise reserves (mainly physical reserves) such as large supermarkets. Emergency Complement Section: emergency procurement, compulsory acquisition and emergency organization production.

The System of Emergency Supplies Relief Reserves The System of National Emergency Supplies Reserves Corporate Reserves

Production -oriented

National Reserves

Production

Emergency Procurement

Sales -oriented Enterprises

Central Reserve Warehouses

Prefecture -level Reserve Warehouses

Physical Reserves

Physical Reserves

Physical Reserves

Enterprises

Capacity

Emergency Complement Section

Compulsory Acquisition

Community Donate

Emergency Production

Reserves, Physical Reserves

Comprehensive analysis of the above, we can get the following conclusions: x For the emergency supplies which are provided with time-demanding, production of time constraints, high demand, less to maintain market and lack of market supply capacity, physical reserve can be used. We should utilize the way of combination of government physical reserves and enterprises physical reserves to respond. x For the emergency supplies which are provided with less time-sensitive and shorter supply cycle in timeliness requirements; maintain a large market, abundant market supply, shorter production and supply cycle in supply capacity; shorter reserves period, higher costs in reserves in emergency supplies management, We should utilize the way which based on production-oriented enterprises agreement physical reserve and sales-oriented enterprise reserve agreement physical reserve, complement with emergency procurement and emergency organization production. x For the emergency supplies which are provided with higher price, lower frequently used, not suitable for


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purchase and reserve, such as large-scale rescue equipment, We should utilize the way of pre-registration, which provides the emergency supplies occupant with a certain storage costs. When emergency occurs, we will use the way of acquisition reserve according to registering. Thus, to a certain extent, this way could not only reflect more fairness and justice than the temporary compulsory acquisition, but also avoid the potential disputes from postcompensation, in order to protect the enthusiasm of the whole society relief. In a certain sense, this form of emergency supplies reserves can be viewed as a generalized enterprises agreement physical reserve. 4. Introduction and analysis of game model This section tries to analyze and shows that the former emergency supplies reserve strategy is superior to the latter strategy under the system of bargaining model in Game Theory. In particular, emergency procurement and emergency production are substituted by government and enterprise co-reserves with physical reserves and production capacity reserve. 4.1. Game model Players: A and B Game Order: There is $1 benefit. First, player A proposes that occupy s , give the remainder 1 s to player B; then player B decided whether or not to agree with A. Payoff: If player B agrees with A, then the payoff of player A is s , the payoff of player B is 1 s ; If player B doesn’t agree with A, then the payoff of player A is 0, the payoff of player B is 0. Analysis: As players assumed to be rational in game theory, we use Backward Induction method to obtain: for H ! 0 , the strategy of player A is s 1 H , then Nash Equilibrium is 1 H , H or (1,0) (weak Nash Equilibrium ). If we subjoin a stage of bargaining, turning into a two-stage bargaining model. Thus, the rules of the game become: The first stage: player A proposes that occupy s , give the remainder 1 s to player B; then player B decided whether or not to agree with A. If player B agrees with A, then game is over and their payoffs are ( s, 1 s ) ; If player B doesn’t agree with A, the game enters the second stage. The second stage: player B re-proposes a new distribution plan ( sc, 1 sc) , if player A agrees with B, then their payoffs are ( sc, 1 sc) ; otherwise, their payoffs are (0,0). Note: During the analysis, we consider a discount G (0 G 1) , i.e. in the first stage, the total benefit of two players is $ 1; if the game does not end in the first stage, then the total benefit becomes 1 u G , and so on. In addition, in order to facilitate model analysis, we assume that two players have same discount, i. e. G 1 G 2 G . Analysis: According to Backward Induction, in the second stage, player B has a certain advantage, i.e. player B could occupy most of total benefit G , while player A obtains nearly nothing. Their payoffs of Nash Equilibrium are (G , G H ), where H ! 0 . Due to the arbitrariness of H , the payoff of player B is 1 s c | G , thus, there is a weak Nash Equilibrium (0, G ) . On this basis, we analyze the strategy of player A in the first stage. Standing on A’s position, if the game carried out to the second stage, the result would be (0, G ) . In order to maximize his payoff, the Best Response strategy of player A is that player A give B $ G ˈand player A obtains $ 1 G . Then we conclude the Nash Equilibrium of two-stage game, i. e. (1 G , G ) . Their payoffs are (1 G , G ) . Similarly, the game rules of three-stage bargaining model are: The first stage: player A proposes that occupy s , give the remainder 1 s to player B; then player B decided whether or not to agree with A. If player B agrees with A, then game is over and their payoffs are ( s, 1 s ) ; if player B doesn’t agree with A, the game enters the second stage. The second stage: player B re-proposes a new distribution plan ( sc, 1 sc) , if player A agrees with B, then their payoffs are ( sc, 1 sc) .The actual payoffs need to take into multiplied by the discount G ; if player A doesn’t agree with B the game enters the third stage.

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The third stage: player A proposes a new distribution plan ( scc, 1 scc) again, if player B agrees with A, then their payoffs are ( scc, 1 scc) . The actual payoffs need to take into multiplied by the discount G u G , i.e. G ; otherwise, their payoffs are (0,0). We expand the above model to a limited-stage bargaining model for analysis. For the convenience, we use chart form for intuitive analyzing, and assume that the stage number of the game is n . 2

Offerer of allocation scheme

Receiver of allocation scheme

1

0

1G

G

1 G (1 G )

G (1 G )

ĂĂĂĂĂĂĂĂĂĂ

ĂĂĂĂĂĂĂĂĂĂ

1 G G 2 G 3 G 4 G 8 G 9

G G 2 G 3 G 4 G 8 G 9

ĂĂ

ĂĂ

The strategies or payoffs of one-stage The strategies or payoffs of two-stage The strategies or payoffs of three-stage ĂĂĂĂĂĂĂĂ The strategies or payoffs of ten-stage

From above table, we could clearly obtain strategies and payoffs of two players considering the discount. Such as n 3 , the bargaining game is set three stages. In the first stage, if player B doesn’t agree with A, the game enters the second stage. At this moment, we could regard this model as a two-stage bargaining model. While the total benefit becomes $ G as the discount effect. Meanwhile, compared with two-stage bargaining modelˈput the positions of offerer and receiver of allocation scheme reversed (using arrow in the table), which results in above table. We could get the recursive formulas of two players when stage number of the game equals n . i. e. The recursive formulas of Nash Equilibrium strategy or payoff of player A is: 2

3

1 G G G ( G )

uA

=

1 ( G )

n 1

n

1 G

The recursive formulas of Nash Equilibrium strategy or payoff of player B is: If n

1 , then u B

2

0 ; if n t 2 , u B

i.e. When n t 2 , u B When n o f , u A o

1 uA 1 1 G

3

n

G G G ( 1) G

G ( G )

n 1

.

n

1 G

˗ uB o

G 1 G

.

4.2. Model Analysis x From the above game, we could see that stage number of the game will become less when the game's players become “impatient”ˈ and the last offerer is always counterpart, which is very unfavorable to the player with "impatient”. Combined with emergency supplies reserves, when unexpected events occur, due to emergencies with urgency and unexpected, from literature [11] emergency supplies strategy reserves in the form of emergency procurement and production emergency is obviously more “impatient” than strategy reserves in the form of ex-

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ante enterprises agreement physical reserves and enterprises agreement production capacity reserve. x Generally, the enterprise stands on "the first bidder" status, which is player A in above game; and the government stands on "bargainer or receiver" status, which is player B in above game. In the bargaining process, we could assume that the final stage-number of bargaining is "random", i.e. two players in the game don’t know how many stage-numbers to this game can last, which approximately equivalent to be stage-number of game is infinite. i.e. 1 G ; uB o . As the weak-economic of emergency supplies demand, the discount G in When n o f , u A o 1 G 1 G emergency circumstances is much smaller than the case under normal circumstances with government and enterprise co-reserve, so the government's payoff will be significantly less than the forms of co-reserve. x For convenience, we assume the discounts G 1 and G 2 are the same in above model, i.e. G 1 G 2 G . While if G 1 z G 2 , we could obtain the payoffs of two players are u A

1 G2

, uB

G 2 G 1G 2

G 2 (1 G 1 )

in the case of 1 G 1G 2 1 G 1G 2 1 G 1G 2 infinite stage-number of game. (The detailed proof can be derived by literature [12]) So we conclude the payoff function u A (or u B ) for his own discount G 1 (or G 2 ) is an increasing function, respectively. As the weak-economic of emergency supplies demand, the discount G in emergency circumstances is much smaller than the case under normal circumstances with government and enterprise co-reserve, so the government's payoff will be significantly less than the forms of co-reserve. The emergency supplies demand consists of three aspects: quantity requirements, quality requirements, and structural requirements. Quality requirements of emergency supplies are the requirements timeliness, accuracy number, safety and cost of supplies; quantity requirements are the number of emergency supplies under premise of quality requirements; structural requirements mainly refer to the proportional relationship between various supplies. Based on the system of emergency supplies relief reserves, we compare and analyze relationship of “the system of national emergency supplies reserve" and” Emergency Complement Section” using bargaining model in game theory. In condition of certain emergency funds and social impact "loss" of emergency greater than generally inventory cost, the conclusions are as follow: x After emergency occurs, emergency supplies quantity in the form of ex-ante government and enterprise coreserve is much larger than the form of ex-post emergency procurement; x Emergency supplies provided by the form of ex-ante government and enterprise co-reserve have higher timeliness, and we could also do ahead some structural requirements work. So, emergency supplies reserve strategy in the form of ex-ante government and enterprise co-reserve is superior to the latter strategy in the form of ex-post emergency procurement and emergency production, in aspects of emergency demand including quantity requirements, quality requirements, and structural requirements. 5. Conclusion We build the system of China relief reserve in the first part of the paper. And then, the problems of applications of emergency relief reserve based on the previous research are analyzed, using the Bargaining model in game theory. In condition of certain emergency funds and social impact "loss" of emergency greater than generally inventory cost, we conclude that the emergency supplies reserve strategy in the form of ex-ante government and enterprise coreserve is superior to the strategy in the form of ex-post emergency procurement and emergency production, in aspects of emergency demand including quantity requirements, quality requirements, and structural requirements. However, the research of system of China relief reserve is a complicated task of system engineering, there are many problems still need to further study.

Acknowledgements This work was supported in part by the National Natural Science Foundation of China under Grant No. 71001099, 90924008, 91024031, and the President Fund of Graduate University of Chinese Academy of Sciences.

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