Inventory Management for Mobile Money Agents in the Developing World

32 Pages Posted: 16 Jun 2017 Last revised: 7 Dec 2018

See all articles by Karthik Balasubramanian

Karthik Balasubramanian

Howard University School of Business

David Drake

University of Colorado at Boulder - Leeds School of Business

Douglas Fearing

Los Angeles Dodgers

Date Written: October 12, 2018

Abstract

Mobile money systems, platforms built and managed by mobile network operators to allow money to be stored as digital currency, have burgeoned in the developing world as a mechanism to transfer money electronically. Mobile money agents exchange cash for electronic value and vice versa, forming the backbone of an emerging electronic currency ecosystem that has potential to connect millions of poor and “unbanked” people to the formal financial system. Unfortunately, low service levels due to agent inventory management are a major impediment to the further development of these ecosystems. This paper describes models for the agent’s inventory problem, unique in that sales of electronic value (cash) correspond to an equivalent increase in inventory of cash (electronic value). This paper presents a base inventory model and an analytical heuristic that are used to determine optimal stocking levels for cash and electronic value given an agent’s historical demand. When tested with a large sample of transaction-level data provided by an East African mobile operator, both the base model and the heuristic improved agent profitability by reducing inventory costs (defined here as the sum of stockout losses and cost of capital associated with holding inventory). The heuristic increased estimated agent profits by 15% relative to profits realized through agents actual decisions, while also offering substantial computational advantages relative to the base model.

Keywords: Mobile money, inventory management, base of the pyramid, developing world, poverty alleviation, operations management

Suggested Citation

Balasubramanian, Karthik and Drake, David and Fearing, Douglas, Inventory Management for Mobile Money Agents in the Developing World (October 12, 2018). Available at SSRN: https://ssrn.com/abstract=2987591 or http://dx.doi.org/10.2139/ssrn.2987591

Karthik Balasubramanian

Howard University School of Business ( email )

2600 6th St NW
Washington, DC DC 20024
United States

David Drake (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Douglas Fearing

Los Angeles Dodgers

Los Angeles, CA
United States

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