Point-of-Use Hybrid Inventory Policy for Hospitals

Point-of-Use Hybrid Inventory Policy for Hospitals

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Article ID: iaor201522052
Volume: 45
Issue: 5
Start Page Number: 913
End Page Number: 937
Publication Date: Oct 2014
Journal: Decision Sciences
Authors: , ,
Keywords: inventory, decision, demand
Abstract:

Modern point‐of‐use technology at hospitals has enabled new replenishment policies for medical supplies. One of these new policies, which we call the hybrid policy, is currently in use at a large U.S. Midwest hospital. The hybrid policy combines a low‐cost periodic replenishment epoch with a high‐cost continuous replenishment option to avoid costly stockouts. We study this new hybrid policy under deterministic and stochastic demand. We develop a parameter search engine using simulation to optimize the long‐run average cost per unit time and, via a computational study, we provide insights on the benefits (reduction in cost, inventory, and number of replenishments) that hospitals may obtain by using the hybrid policy instead of the commonly used periodic policies. We also use the optimal hybrid policy parameters from the deterministic analysis to propose approximate expressions for the stochastic hybrid policy parameters that can be easily used by hospital management.

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