Healthcare inventory management in the presence of supply disruptions and a reliable secondary supplier

Hamed Shourabizadeh, O. Erhun Kundakcioglu (), Cem Deniz Caglar Bozkir, Mihriban Busra Tufekci and Andrea C. Henry
Additional contact information
Hamed Shourabizadeh: University of Toronto
O. Erhun Kundakcioglu: Ozyegin University
Cem Deniz Caglar Bozkir: Ozyegin University
Mihriban Busra Tufekci: Ozyegin University
Andrea C. Henry: RX Management, Magellan Health

Annals of Operations Research, 2023, vol. 331, issue 2, No 21, 1149-1206

Abstract: Abstract We study the inventory review policy for a healthcare facility to minimize the impact of inevitable drug shortages. Usually, healthcare facilities do not rely on a single source of supply, and alternative mechanisms are present. When the primary supplier is not available, items are produced in-house or supplied through another supplier, albeit with additional cost. Our aim in this study is to determine how optimal inventory parameters are adjusted depending on the availability of the primary supplier. We show that an approximation provides trivial results, yet fails to capture the nuances therein. Our proposed Markov chain model overcomes these issues, and numerical results illustrate the significant economic impact of inventory parameter optimization. Furthermore, we simulate uncertainty scenarios and provide sensitivity analyses concerning fixed ordering cost for the secondary supplier, shortage frequency, shortage duration, and demand rates.

Keywords: Healthcare supply chain; Inventory management; Supply disruption; Markov chain (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10479-023-05620-y

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