Point-of-use hospital inventory management with inaccurate usage capture

Many hospital supply chains in the US follow a “stockless” structure, often implemented with the acquisition of new systems promising improved efficiencies and responsiveness. Despite vendor promises, supply chain gains from new technology are often unfulfilled or result in a reduction of performance. A critical component of achieving promised gains is the hospital’s ability to accurately and consistently capture hospital inventory use. In practice, recording demand with perfect, 100% accuracy is infeasible, so our models condition on the level of accuracy in a particular hospital department, or point-of-use (POU) inventory location. Similar to previous literature, we consider actual net inventory and recorded net inventory in developing the system performance measures. We develop two models, optimizing either cost or service level, and we assume a periodic-review, base-stock (or par-level) inventory policy with full backordering. In addition to choosing the optimal order-up-to level, we seek the optimal frequency of inventory counts to reconcile inaccurate records. Results from both models provide insights for supply chain managers in the hospital setting, as well as hospital administrators considering the adoption of similar technologies or systems.