Perishable Inventory Management in Healthcare

Abstract

This study addresses a problem encountered in a nation-wide, large-scale healthcare supply chain that comprises several hundred medical organizations (hospitals, clinics, pharmacies, etc.) and provides highly advanced medical care to several million people. The medical products in the system are perishable, meaning that they become unusable beyond a certain expiry date. It is necessary to track the ages of units in stock and to plan and control the inventory accordingly. The models developed herein represent a multi-echelon, multi-supplier inventory system and unite together aspects of perishability and outsourcing under deterministic demand for medical products, which include both perishable and deteriorating goods. The objective of the study is to determine the optimal number of products to be purchased from regular and outsource suppliers so as to meet the required demand at the minimum operating cost. The solution is a network-flow model that can be used to determine the trade-off between the quantities of items to be ordered from the two types of suppliers in each time period. In addition, the study analyzes different distribution policies to account for the perishable nature of the products. Further insights are obtained by applying the model to a case study of a real-life healthcare supply chain from which interesting results are drawn.