Distributionally robust optimization of a Canadian healthcare supply chain to enhance resilience during the COVID-19 pandemic

This paper presents a multi-period multi-objective distributionally robust optimization framework for enhancing the resilience of personal protective equipment (PPE) supply chains against disruptions caused by pandemics. The research is motivated by and addresses the supply chain challenges encountered by a Canadian provincial healthcare provider during the COVID-19 pandemic. Supply, price, and demand of PPE are the uncertain parameters. The [Formula: see text]-constraint method is implemented to generate efficient solutions along the trade-off between cost minimization and service level maximization. Decision makers can easily adjust model conservatism through the ambiguity set size parameter. Experiments investigate the effects of model conservatism on optimal procurement decisions such as the portion of the supply base dedicated to long-term fixed contracts. Other types of PPE sources considered by the model are one-time open-market purchases and federal emergency PPE stockpiles. The study recommends that during pandemics health care providers use distributionally robust optimization with the ambiguity set size falling in one of three intervals based on decision makers’ relative preferences for average cost performance, worst-case cost performance, or cost variance. The study also highlights the importance of surveillance and early warning systems to allow supply chain decision makers to trigger contingency plans such as locking contracts, reinforcing logistical capacities and drawing from emergency stockpiles. These emergency stockpiles are shown to play efficient hedging functions in allowing healthcare supply chain decision makers to compensate variations in deliveries from contract and open-market suppliers.