Dynamic Discrete Inventory Control Model with Deterministic and Stochastic Demand in Pharmaceutical Distribution

Slobodan Antic,Lena Djordjevic Milutinovic,Andrej Lisec

doi:10.3390/app12031536

Slobodan Antic, Lena Djordjevic Milutinovic + Show 1 more

Open Access

https://doi.org/10.3390/app12031536

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Journal: Applied sciences	Publication Date: Jan 31, 2022
Citations: 6	License type: CC BY 4.0

Affiliation: University of Belgrade, University of Maribor

Abstract

This paper presents an inventory control problem in a private pharmaceutical distribution company from the Republic of Serbia. The company realizes that distribution within nine neighbouring countries and inventory control in the pharmaceutical supply chain is centralized. In order to constitute a conceptual model of the problem, we propose the modern control theory concept. The conceptual model is based on the specific practical assumptions and constraints of the supply chain. Thereafter, a dynamic discrete mathematical model of inventory control is formulated to reflect elements of the system and their relations. The model considers multiple pharmaceutical products, variable lead time, realized stochastics and deterministic demand, and different ordering policies (Lot for Lot and Fixed Order Quantity). Deterministic demand is represented as a sales forecast for each product per month, while stochastic demand is generated as a random variation of sales forecast in a range of ±20%. Two objective functions are defined as the maximization of the difference between planned average inventory level and realized average inventory level, and the minimization of stock-out situations. We develop a procedure for the determination of reorder points and the number of deliveries to achieve proposed objective functions. The model overcomes shortages of theoretically-based distribution requirements planning models and offers solutions to the limitations in inventory control practice. Real-life data, collected over two years, are used for the validation of the proposed model and the solution procedure. Numerical examples illustrate the model application and behaviour.

Highlights

The importance of the pharmaceutical industry is directly associated with the fact that it deals with human life
Aimed at the recognition of relevant elements that constitute the structure of the pharmaceutical distribution system in the real-world company, the authors of this paper propose the modern control theory concept for a conceptual model defining
The study presented in this paper considers a real-life inventory control problem detected in a private pharmaceutical distribution company

Summary

Introduction

The importance of the pharmaceutical industry is directly associated with the fact that it deals with human life. Since the quality and security of pharmaceutical products must be constantly maintained, inventory management of the industry is quite a challenging job. Inventory management of pharmaceutical products has become challenging for companies from health care industries, given that they continuously attempt to reduce costs and improve their customer service levels in a progressively competitive business environment [2]. Distribution management should ensure the delivery of required pharmaceuticals and inventory maintenance for facilities where they are needed, while costs of distribution should be the lowest. The development of a model that enables effective control of storing and distribution of pharmaceuticals and medical supplies is important, but it is not a simple task. Pharmaceutical distribution effectiveness depends on the quality of control system design [3]

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