17. Managing Supply Critical to Patient Care: An Introduction to Hospital Inventory Management for Pharmaceuticals

Hospital operations and patient care are inextricably linked to the supply chain. Like buyers in other industries, pharmacy material managers are challenged to develop inventory policies in light of changing demand, limited suppliers, manufacturing issues, and regulatory rulings that affect drug supply. While these challenges are similar to those in many industries, the impact of drug shortages is quite different as they can have detrimental impacts to patient care and the cost of care. This chapter addresses the inventory management of supplies that directly impact patient care with a focus on pharmaceuticals. The chapter discusses the unique modeling challenges associated with inventory decisions for these products such as their multi-echelon nature, the potential for perishability and/or obsolescence, and internal production/preparation lead times. The chapter also explores the broader implications of the impact of demand uncertainty and inventory management strategies on hospital operations and cost with a particular focus on the comparison between stationary and nonstationary demand. Finally, future research opportunities are discussed.