ZLC Seminar Series - Public Multi-Product Health Procurement: The Dynamic Inventory Budget Allocation Problem

By Iva Rashkova, PhD candidate in Management Science and Operations at the London Business School
 
Abstract
We provide a new framework to study the periodic inventory procurement of multiple health products subject to an exogenous fund disbursement schedule. The objective is to minimize expected discounted health costs in the presence of random demand and procurement lead times. Inventory dynamics are affected by two types of product-specific characteristics: patients in critical condition and availability of alternative distribution channels. We derive a heuristic for the dynamic allocation of funds based on index functions that evaluate the attractiveness of each additional unit of each product in the current period and for the future system state. The index functions quantify the trade-off between the cost of patients in critical conditions in the current period (myopic) and their benefit for future periods (look-ahead). The proposed fund allocation algorithm is: optimal and asymptotically optimal under certain conditions; intuitive, easy to implement, and generalizable; incorporates all available problem information. We present numerical results that suggest the algorithm also yields near-optimal fund allocations and outperforms policies such as fixed base-stock, constant order quantity and myopic.

Bio
Iva Rashkova is a PhD candidate in Management Science and Operations at the London Business School. Her research is motivated by the Global Fund (to Fight AIDS, Tuberculosis and Malaria) and focuses on improving health product availability in financially-constrained settings. It has been partially funded by the Deloitte Institute of Innovation and Entrepreneurship and the Economics and Social Research Council. Iva also holds a Master’s degree in Economics from Yale University and a Bachelor’s degree with Honours in Mathematics and Economics from the California Institute of Technology.

Date: 26 February 2015, 08:30h to 10:00h