Inventory management in humanitarian operations: Impact of amount, schedule, and uncertainty in funding

Funding for humanitarian operations in the global health sector is highly variable and unpredictable. We study the problem of managing inventory in the presence of funding constraints over a finite planning period. Our goal is to determine the optimal procurement policy given the complexities associated with funding and also to analyze the impact of funding amount, funding schedule, and uncertainty around the funding timing on operations. We use a multiperiod stochastic inventory model with financial constraints and demonstrate that despite the funding complexities, the optimal replenishment policy is a state-independent policy that can be easily implemented. We also provide analytical results and several insights based on our computational study regarding the effect of funding timing uncertainty and variability on the operating costs and fill rates. Among other results, we find that receiving funding early is beneficial in underfinanced systems while avoiding funding delays is critical in fully financed systems. Our analysis also indicates that receiving less overall funding in a timely manner might actually be better than delayed full funding.