A Methodology to Evaluate Obsolete Inventory in Healthcare

Authored by: Erick C. Jones , Rama K. Thummalapalli

Supply Chain Engineering and Logistics Handbook

Print publication date:  December  2019
Online publication date:  November  2019

Print ISBN: 9781138066519
eBook ISBN: 9781315159096
Adobe ISBN:


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Many organizations are currently facing inventory management problems such as distributing inventory on time and maintaining the correct inventory levels to satisfy the customer or end users. Organizations understand the need for maintaining the accurate inventory levels but sometimes fall short leading to a wide performance gap in maintaining inventory accurately. The inventory inaccuracy can consume much of the investment on purchasing inventory and many times leads to excessive inventory. The research objective of this thesis is to provide decision-making criteria to the management for closing or maintaining the warehouse based on basic purchasing and holding cost information. The specific objectives provide information regarding the impact of inventory carrying cost, obsolete inventory, and inventory turns. Section 15.4[Sundar4] explains about the carrying cost ratio that would help inventory managers to adopt best practices to avoid obsolete inventory and also reduce excessive inventory levels. The research model was helpful in providing decision-making criteria based on the performance metric developed. This research model and performance metric had been validated by analysis of warehouse data, and results indicated a shift from two-echelon inventory supply chain (SC) to a one-echelon or Just In Time (JIT)-based inventory SC. The recommendations from the case study were used by a healthcare organization to reorganize the SC resulting in the reduction of excessive inventory.

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