Optimal inventory policy in hospitals: a supply chain model

The paper deals with a health care system consisting of multiple hospitals, a distribution center and one regular and one outsourcing suppliers of medicine for the distribution center. Demand of medicine at hospitals is assumed stochastic in practice. The expected cost function of entire supply chain is formulated considering holding cost, shortage cost, outsourcing cost and preservation cost. In this cost function, order quantities from each hospital and rate of deterioration of medicine at distribution center are decision variables. The above expected cost function of supply chain is analyzed by calculus method in light of both continuous and discrete distribution function. Model is also particularly demonstrated for normal and Poisson distribution of the random variables. We use a distribution-free approach to address the situation where information about the random variables is limited to the mean and the variance, and distribution function is unknown. In this case we minimize upper bounds of the expected cost function of the supply chain for all the possible distribution of the random variable. Numerical example is illustrated to justify our proposed models.