Efficient stockpiling and shipping policies for humanitarian relief: UNHCR's inventory challenge

The United Nations High Commissioner for Refugees (UNHCR) establishes and maintains refugee camps to meet the needs of 34.5 million people affected by disaster or war worldwide. Like other international humanitarian organizations, UNHCR maintains central stockpiles which supply these refugee operations. Management at UNHCR seeks to improve the timeliness and quality of its disaster response subject to its budget constraints. We develop an inventory model to analyze the interaction between a stockpile and a downstream refugee camp or relief operation. We consider two inventory decisions: first, how to partition a fixed budget between stockpiling and shipping costs in order to best meet the needs of beneficiaries; and second, given the shipping budget determined by the budget partition, how to ship relief items from the stockpile to a downstream relief operation in an efficient manner. We solve for the shipment policy using dynamic programming, then determine the optimal stockpile size given knowledge of the optimal shipment policy. The optimization balances a key tradeoff: a larger stockpile is costly to procure and maintain, but enhances a humanitarian organization's ability to respond to relief operation demands. We provide insights into shipment strategies and stockpile size. We also develop a spreadsheet model to help humanitarian organizations in their operational decision-making, leading to improved response to beneficiaries. Humanitarian organizations must use their financial resources wisely to carry out their mandates, and models of this type can help them make the best use of their limited response resources.