Pharmaceutical supply chain specifics and inventory solutions for a hospital case

Abstract

Pharmaceuticals represent a large portion of the costs in the healthcare industry due to the significant costs of these products and their storage and control requirements. In this work we discuss the pharmacy supply chain and current managerial practices in a case hospital, examine the often conflicting goals in decision making amongst the various stakeholders, and explore the managerial tradeoffs present at the operational, tactical, and strategic levels of decision making. We focus on the inventory management at a local storage unit within an individual Care Unit (CU). For the operational inventory decision we provide the reorder point and order up to level (calledmin and max par levels) that control the automated ordering system. These parameters are based on a near-optimal allocation policy of cycle stock and safety stock under storage space constraint. Tactical decision support focuses on the relevant tradeoffs amongst three key performance indicators: the expected number of daily refills, the service level, and the storage space utilization. We analyze the tradeoffs amongst the refill workload, the emergency workload, and the variety of drugs offered (called formulary). The resulting decision support tool facilitates improvements to the current management practices.