A new Kind of Operations Inventory: the Pre-assembled Kit

Abstract

This paper studies the effect of a kit system on the supplier inventory. Kits have been popular fordecades in many segments, especially in the health care sector. Pre-assembled kits create new kinds of inventory:a circulating inventory and its safety stock. The classic replenishment formula of the periodic review system is affectedby the use of kits. The paper establishes simple formulas to determine the size of the circulating inventoryand of its safety stock. The theme was inspired by the activities of an importer-distributor of orthopedic surgicalgoods, based in São Paulo, Brazil, who imports these items from an American manufacturer and loans the kits tohospitals for a few days to perform surgeries. Working with pre-assembled kits offers many advantages: less errors,less losses, more speed, which offset the moderate inventory increase they cause.