Decreasing operational costs of non-profit community-based blood centres

Blood is a necessary resource for hospitals; however, acquiring blood poses several challenges for blood centres and hospital blood banks. First, blood is a perishable and natural resource that cannot be manufactured at the time of need. Second, supply and demand of blood are uncertain due to seasonality, natural disasters and availability of donors. Third, blood centres and hospitals are challenged in acquiring blood economically, as the price of one package of blood has reached the price of an iPad. Prior research shows the popular economic order quantity (EOQ) model is not applicable to blood orders due to the ample shortages that result from the model. In order to provide fresh inventory and to reduce operational costs, this study employs an econometric methodology known as ARMA-in-ARMA-out (AIAO, where ARMA stands for autoregressive integrated moving average) combined with lean managerial accounting practices to place orders. Results show that applying the above system of ordering could supply fresh blood inventory and decrease operational costs for blood centres.