Applying Actual Usage Inventory Management Best Practice in a Health Care Supply Chain

Vijith Varghese#1, Manuel Rossetti#2, Edward Pohl#3, Server Apras*4, Douglas Marek#5

# Department of Industrial Engineering, University of Arkansas 4207 Bell Engineering Center, Fayetteville, AR 72701

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*SAP, Turkey

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IM17

Abstract

This paper lays a foundation for the better understanding of the application and acceptance of Actual Usage Inventory Management within the health care supply chain.

Actual Usage Inventory Management consist advanced inventory control practices driven by actual usage data.

To determine the possible savings from using Actual Usage Inventory Management, a case study was performed on pharmaceutical products in a large healthcare system in the mid-west.

The case study used the (r, Q) inventory policy to model the current inventory system and to propose a more cost-effective inventory control system at each echelon.

A multi-echelon inventory control system is also proposed and the cost benefits are measured. Demand forecasting algorithms were applied to forecast demand for inventory control procedures.

The results indicate that there is great potential for significant cost savings within the healthcare provider network. It is likely that if other providers adopt such practices that they will be able to better control material supply costs.

Keywords

Inventory control; forecasting; logistics modelling; healthcare supply chain; pharmaceutical supply chain