Efficiency of Inventory in Thai Hospitals: Comparing Traditional and Vendor-Managed Inventory Systems

Sarunya Adirektawon, Anuchai Theeraroungchaisri and Rungpetch C. Sakulbumrungsil ()
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Sarunya Adirektawon: Faculty of Pharmaceutical Sciences, Chulalongkorn University, 254 Phayathai Road, Pathumwan, Bangkok 10330, Thailand
Anuchai Theeraroungchaisri: Faculty of Pharmaceutical Sciences, Chulalongkorn University, 254 Phayathai Road, Pathumwan, Bangkok 10330, Thailand
Rungpetch C. Sakulbumrungsil: Faculty of Pharmaceutical Sciences, Chulalongkorn University, 254 Phayathai Road, Pathumwan, Bangkok 10330, Thailand

Logistics, 2024, vol. 8, issue 3, 1-11

Abstract: Background : Traditional procurement and price negotiation methods in public hospitals in Thailand involve group purchasing agreements and bulk orders, posing challenges to improving inventory management efficiency. The vendor-managed inventory (VMI) model is a promising alternative for enhancing hospital performance, especially during crises. This study aimed to assess the potential cost savings in implementing VMI in a large general hospital in Thailand. Methods : A simulation modeling approach was used to compare the current inventory system with three VMI models: VMI1, focused on improving inventory turnover rate (ITR); VMI2, emphasized frequent replenishment with a 1-month supply; and VMI3, eliminated safety stock. Results : The results demonstrated significant cost savings, with potential reductions in total inventory management expenses. Specifically, VMI1 improved ITR from 6.31 to 7.76, reducing average inventory by 36% and cutting management costs by 40%. VMI2, with an ITR of 12.80, reduced inventory by 44% and saved 47% in management costs, while VMI3 achieved a 70% reduction in inventory and a 69% saving in management costs. Conclusions : This study highlights the VMI’s transformative potential in hospital inventory management, demonstrating significant cost savings. However, in the public sector, the feasibility of procurement regulations requires further exploration.

Keywords: vendor-managed inventory (VMI); hospital inventory management; third party-managed inventory services (3MIS); inventory turnover rate (ITR) (search for similar items in EconPapers)
JEL-codes: L8 L80 L81 L86 L87 L9 L90 L91 L92 L93 L98 L99 M1 M10 M11 M16 M19 R4 R40 R41 R49 (search for similar items in EconPapers)
Date: 2024
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