Building viable stockpiles of personnel protective equipment

Moutaz Khouja and Ramzi Hammami
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Moutaz Khouja: UNC - University of North Carolina [Charlotte] - UNC - University of North Carolina System
Ramzi Hammami: ESC Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business

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Abstract: Many stockpiled personnel protective equipment (PPE) were of no use during COVID-19 because they have expired. The need for rethinking past approaches of building PPE stockpiles without planning for their timely rotation has become clear. We develop a game-theoretic pandemic preparedness model for single and multiple PPE products for a budget-constrained governmental organization (GO) supplied by a manufacturer. The GO maximizes preparedness, measured by the service rate of PPE, whereas the manufacturer maximizes profit. The manufacturer supplies the PPE stockpile in the first year. Thereafter, the manufacturer buys back a quantity of older PPE from the GO annually and sells the GO the same quantity of new PPE. The manufacturer sells older PPE in the market place. We find that this approach induces the manufacturer to rotate inventory in the stockpile. Joint determination of the stockpile size and its rotation results in no waste from expired PPE and is better than separately determining the stockpile size and then determining how to rotate it. Using insights from the single PPE model, we examine the optimal budget allocation among multiple PPE products. We also consider the effect of spot market prices of PPE during a pandemic on the optimal stockpile sizes. We find that spot market prices of PPE can have a significant effect on the optimal stockpile sizes. We examine the performance of the proposed approach in a manufacturers-distributor-GO supply chain and with an option for the GO to invest in the manufacturer's volume flexibility and show its effectiveness.

Date: 2023-06
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Citations: View citations in EconPapers (1)

Published in European Journal of Operational Research, 2023, 307 (3), pp.1206-1224. ⟨10.1016/j.ejor.2022.10.004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03992676

DOI: 10.1016/j.ejor.2022.10.004

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