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Inventory Management with Advance Booking Information: The Case of Surgical Supplies and Elective Surgeries

Author

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  • Jacky Chan

    (Department of Mechanical and Industrial Engineering, University of Toronto, Toronto, Ontario M5S 3G8, Canada)

  • Berk Görgülü

    (DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4L8, Canada)

  • Vahid Sarhangian

    (Department of Mechanical and Industrial Engineering, University of Toronto, Toronto, Ontario M5S 3G8, Canada)

Abstract

Problem definition : Medical operations require a large volume and variety of consumable supplies that are kept in hospital inventory and replenished on a regular basis. Stringent requirements on the availability of these supplies, together with high variability in their daily usage, contribute to the high inventory costs of the surgical departments in hospitals. We investigate the value of utilizing Advance Booking Information (ABI) on elective surgeries—which are often booked up to months in advance—in reducing inventory costs. Methodology/results : We study a single-item, periodic-review, stochastic inventory control problem, where the item demand in each period is driven by the number and type of surgeries requiring the item, and with the available information on elective surgeries integrated into the ordering decisions. Given that item usage from each case is uncertain and only realized after the surgery, ABI provides imperfect information on future demand. Through exact analysis of a simplified version of the problem, as well as extensive numerical experiments using synthetic and real data, enabled using a state aggregation technique, we provide insights on and quantify the value of using ABI as a function of the number of periods of ABI integrated into the ordering decisions. We identify a relevant parameter regime—namely, high backlog (relative to holding) costs and when surgeries are booked sufficiently in advance—where the value of using ABI could be significant and the majority of the benefits can be gained through incorporating only one period of ABI beyond the order lead time. In a case study conducted using real data, we observe up to 26% reduction in average inventory levels, without violating the service levels. Managerial implications : By incorporating readily available elective surgery schedules into replenishment decisions of surgical supplies, hospitals could significantly reduce inventory costs without compromising the availability of the supplies.

Suggested Citation

  • Jacky Chan & Berk Görgülü & Vahid Sarhangian, 2024. "Inventory Management with Advance Booking Information: The Case of Surgical Supplies and Elective Surgeries," Manufacturing & Service Operations Management, INFORMS, vol. 26(3), pages 931-951, May.
    • Handle: RePEc:inm:ormsom:v:26:y:2024:i:3:p:931-951
    DOI: 10.1287/msom.2021.0063
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    References listed on IDEAS

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    1. Yong Ma & Tao Tao & Xuying Ma & Haoxin Li & Zhitao Cheng & Maoji Kang & Yan Zhuang & Linru Zhou & Fan Li & Song Su & Jiali Wu & Yong Tang, 2026. "An integrated deep learning framework for effective management of surgical instruments tables based on videos," Health Care Management Science, Springer, vol. 29(2), pages 1-17, June.

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