Managing blood inventory with multiple independent sources of supply

Abstract

This paper focuses on the management of red blood cells (RBCs) by a large medical center within a regional blood exchange network. We provide both a theoretical and managerial contribution to the periodic-review fixed lifetime perishable inventory literature by considering multiple independent sources of supply. One source supplies blood via a typical standing order process. The other sources are smaller lower usage hospitals that randomly transfer blood to the medical center. Transferred blood is characterized by a much shorter average lifetime than blood supplied via standing order and introduces additional uncertainty into the inventory management process. We propose a solution approach that can be readily applied in practice and solve the multi-period cost minimization problem using a dynamic program. We provide numerical examples and demonstrate that our solution approach outperforms a corresponding base stock policy as well as the ordering policy that was actually used by the medical center.