Sequential Resource Allocation for Nonprofit Operations

This paper studies a sequential resource allocation problem motivated by distribution operations of a nonprofit organization. The alternate objectives that arise in nonprofit, as opposed to commercial, operations lead to new variations on traditional problems in operations research and inventory management. Specifically, we consider the problem of distributing a scarce resource to meet sequentially observed customer demand. In a commercial setting, the amount distributed to each customer is determined to maximize profit; however, this objective may lead to inequitable distributions among customers. Our work in a nonprofit setting solves the sequential resource allocation problem with an objective function aimed at equitable and sustainable service. We define service in terms of fill rate (the ratio of the allocated amount to observed demand) and develop an objective function to maximize the expected minimum fill rate among customers. Through a dynamic programming framework, we characterize the structure of the optimal allocation policy for a given sequence of customers. In addition, we address customer visitation sequencing by identifying properties to consider in sequencing decisions to optimize the objective. For both inventory allocation and customer sequencing decisions, we develop heuristic methods which yield near-optimal solutions. Subject classifications: Inventory/production: sequential resource allocation. Transportation. Area of review: Manufacturing, Service and Supply Chain Operations