Optimal design of inventory management systems for micro-warehousing in the healthcare industry

Abstract

Reverse logistics' research has focused on how to improve current operations to recover some value from supply chains that distribute and sell products that end up with a customer. For high-value, low-volume supply chains, particularly those operating on a contract-loan basis such as specialized medical goods, reverse logistics has a different value proposition. As with most unidirectional supply chains, these have developed over time out of necessity and without a plan or design to operate efficiently. As health care has become widespread and universal, they have grown organically into systems that are far from optimal. In contrast to traditional supply chains, chains working on loan contracts are inherently closed, as products must be returned for re-fitting and conditioning before the next loan, and thus any inefficiencies in reverse logistics will directly impact the business. Moreover, at the consumer end of the health care sector (that is, the hospitals), efficiency for the supplier is not necessarily seen as a priority. In this paper, we investigate two important logistic questions that distributors of goods for the health industry face today. First, what are the efficiency gains if the medical good distributor assumes the lead role in centralising some operations (e.g., in sterilisation policies) which are currently distributed and owned by health staff? Second, can new sensors and the Internet of Things (IoT) assist reverse logistics of medical material in improving services, lead times and bottom lines of hospitals and distributors, without impacting patient care? We introduce an optimisation model to calculate an optimal distribution schedule to address these questions.