The Use of Information for Inventory Decision in the Healthcare Industry
In this study, we explore the use of information for inventory decision in the healthcare organization (HO). We consider the scenario when the HO can make use of the information collected from some correlated products to enhance its inventory planning. Motivated by our real world observations that HOs adopt RFID and bar-coding system for information collection purpose, we examine the effectiveness of these systems for inventory planning with Bayesian information updating. We derive the optimal ordering decision and study the issue of Pareto improvement in the supply chain. Our analysis demonstrates that RFID system will outperform the bar-coding system when the RFID system installation cost and the tag cost reduce to a level that is comparable with that of the barcoding system. We also show how an appropriately set wholesale pricing contract can achieve Pareto improvement in the HO supply chain.
[1] J. H. Hammond, "Quick response in the apparel industries," Harvard
Business School, N9-690-038, Cambridge, Mass, 1990.
[2] M. J. Drake and K. A. Marley, "The evolution of quick response
progams" in Handbook on Innovative Quick Response Programme, T.C.
E. Cheng and T. M. Choi, Eds. New York: Springer, pp. 3-22, 2010.
[3] A.V. Iyer, and M. E. Bergen, "Quick response in manufacturer-retailer
channels," Management Science, vol. 43, pp.559-570, 1997.
[4] L. Pfahl and C. Moxham, "Achieving sustained competitive advantage
by integrating ECR, RFID and visibility in retail supply chains: a
conceptual framework," Production Planning and Control: The
Management of Operations, DOI:10.1080/09537287.2012.729100,
published online, 2012.
[5] T. M. Choi, D. Li, H. Yan, "Quick response policy with Bayesian
information updates," European Journal of Operational Research, vol.
170, pp.788-808, 2006.
[6] T. M. Choi, and P. S. Chow, "Mean-variance analysis of quick response
program," International Journal of Production Economics, vol. 114, no.
2, pp. 456-475, 2008.
[7] H. Gurnani, and C. S. Tang, "Note: Optimal ordering decisions with
uncertain cost and demand forecast updating", Management Science,
vol. 45, pp. 1456-1462, 1999.
[8] D. Tiwari, R. Patil and J. Shan, "Unreliable newsboy problem with a
forecast update", Operations Research Letters, vol. 39, pp. 278-282,
2011.
[9] D. Yang, T. M. Choi, T. Xiao and T. C. E. Cheng, "Coordinating a twosupplier
and one-retailer supply chain with forecast updating",
Automatica, vol. 47, pp. 1317-1329, 2011.
[10] D. A. Serel, "Optimal ordering and pricing in a quick response system,"
International Journal of Production Economics, vol. 121, no. 2, pp.700-
714, 2009.
[11] P.S. Chow, T.M. Choi and T.C.E. Cheng, "Impacts of minimum order
quantity on quick response supply chains," IEEE Transactions on
Systems, Man, and Cybernetics, Part A, vol. 42, no. 4, pp.868-879,
2012.
[12] T. M. Choi, D. Li, H. Yan, "Optimal two-stage ordering policy with
Bayesian information updating," Journal of the Operational Research
Society, vol. 54, no. 8, pp.846-859, 2003.
[13] Z. K. Weng, "Coordinating order quantities between the manufacturer
and the buyer: A generalized newsvendor model, European Journal of
Operational Research, vol. 156, pp. 148-161, 2004.
[14] L. Ma, Y. Zhao, W. Xue, T.C.E. Cheng, H. Yan, "Loss-averse
newsvendor model with two ordering opportunities and market
information updating," International Journal of Production Economics,
vol. 140, no. 2, pp. 912-921, 2012.
[15] Y. W. Zhou and S. D. Wang, "Supply chain coordination for
newsvendor-type products with two ordering opportunities and demand
information update", Journal of the Operational Research Society, vol.
63, no. 12, pp. 1655-1678, 2012.
[16] M. C. O- Connor, "RFID tidies up distribution of hospital scrubs,--
RFID Journal, 2007. Available at:
http://www.rfidjournal.com/article/view/3022. Accessed on 21/07/2011.
[17] A. M. Vilamovska, E. Hatziandreu, H. R. Schindler, C. Van Oranje-
Nassau, H. de Vries, and J. Krapels, "Study on the requirements and
options for RFID application in healthcare," RAND Corporation, 2009.
Available at:
http://www.rand.org/pubs/technical_reports/2009/RAND_TR608.sum.p
df. Accessed on 23/07/2011.
[18] R. Wessel, "German hospital expands bed - tagging project," RFID
Journal, 2007. Available at:
http://www.rfidjournal.com/article/view/3719/1. Accessed on
23/07/2011.
[19] Ö. E. Çakıcı, H. Groenevelt and A. Seidmann, "Using RFID for the
management of pharmaceutical inventory-system optimization and
shrinkage control," Decision Support Systems, vol. 51, pp. 842-852,
2011.
[20] H.L. Chan, T.M. Choi and C.L. Hui, "RFID versus bar-coding systems:
transactions errors in health care apparel inventory control," Decision
Support Systems, vol. 54, pp. 803-811, 2012.
[21] H. L. Chan, T. M. Choi, C. L. Hui, S. F. Ng, "Managing health care
perishable apparel products using quick response program," in
Proceedings of the IEEE International Conference on Industrial
Engineering and Engineering Management (IEEM) - Hong Kong, pp.
230-240, 2012.
[22] J. W. Pratt, H. Raiffa and R. Schlaifer, "Introduction to statistical
decision theory", MIT Press, 1995.
[1] J. H. Hammond, "Quick response in the apparel industries," Harvard
Business School, N9-690-038, Cambridge, Mass, 1990.
[2] M. J. Drake and K. A. Marley, "The evolution of quick response
progams" in Handbook on Innovative Quick Response Programme, T.C.
E. Cheng and T. M. Choi, Eds. New York: Springer, pp. 3-22, 2010.
[3] A.V. Iyer, and M. E. Bergen, "Quick response in manufacturer-retailer
channels," Management Science, vol. 43, pp.559-570, 1997.
[4] L. Pfahl and C. Moxham, "Achieving sustained competitive advantage
by integrating ECR, RFID and visibility in retail supply chains: a
conceptual framework," Production Planning and Control: The
Management of Operations, DOI:10.1080/09537287.2012.729100,
published online, 2012.
[5] T. M. Choi, D. Li, H. Yan, "Quick response policy with Bayesian
information updates," European Journal of Operational Research, vol.
170, pp.788-808, 2006.
[6] T. M. Choi, and P. S. Chow, "Mean-variance analysis of quick response
program," International Journal of Production Economics, vol. 114, no.
2, pp. 456-475, 2008.
[7] H. Gurnani, and C. S. Tang, "Note: Optimal ordering decisions with
uncertain cost and demand forecast updating", Management Science,
vol. 45, pp. 1456-1462, 1999.
[8] D. Tiwari, R. Patil and J. Shan, "Unreliable newsboy problem with a
forecast update", Operations Research Letters, vol. 39, pp. 278-282,
2011.
[9] D. Yang, T. M. Choi, T. Xiao and T. C. E. Cheng, "Coordinating a twosupplier
and one-retailer supply chain with forecast updating",
Automatica, vol. 47, pp. 1317-1329, 2011.
[10] D. A. Serel, "Optimal ordering and pricing in a quick response system,"
International Journal of Production Economics, vol. 121, no. 2, pp.700-
714, 2009.
[11] P.S. Chow, T.M. Choi and T.C.E. Cheng, "Impacts of minimum order
quantity on quick response supply chains," IEEE Transactions on
Systems, Man, and Cybernetics, Part A, vol. 42, no. 4, pp.868-879,
2012.
[12] T. M. Choi, D. Li, H. Yan, "Optimal two-stage ordering policy with
Bayesian information updating," Journal of the Operational Research
Society, vol. 54, no. 8, pp.846-859, 2003.
[13] Z. K. Weng, "Coordinating order quantities between the manufacturer
and the buyer: A generalized newsvendor model, European Journal of
Operational Research, vol. 156, pp. 148-161, 2004.
[14] L. Ma, Y. Zhao, W. Xue, T.C.E. Cheng, H. Yan, "Loss-averse
newsvendor model with two ordering opportunities and market
information updating," International Journal of Production Economics,
vol. 140, no. 2, pp. 912-921, 2012.
[15] Y. W. Zhou and S. D. Wang, "Supply chain coordination for
newsvendor-type products with two ordering opportunities and demand
information update", Journal of the Operational Research Society, vol.
63, no. 12, pp. 1655-1678, 2012.
[16] M. C. O- Connor, "RFID tidies up distribution of hospital scrubs,--
RFID Journal, 2007. Available at:
http://www.rfidjournal.com/article/view/3022. Accessed on 21/07/2011.
[17] A. M. Vilamovska, E. Hatziandreu, H. R. Schindler, C. Van Oranje-
Nassau, H. de Vries, and J. Krapels, "Study on the requirements and
options for RFID application in healthcare," RAND Corporation, 2009.
Available at:
http://www.rand.org/pubs/technical_reports/2009/RAND_TR608.sum.p
df. Accessed on 23/07/2011.
[18] R. Wessel, "German hospital expands bed - tagging project," RFID
Journal, 2007. Available at:
http://www.rfidjournal.com/article/view/3719/1. Accessed on
23/07/2011.
[19] Ö. E. Çakıcı, H. Groenevelt and A. Seidmann, "Using RFID for the
management of pharmaceutical inventory-system optimization and
shrinkage control," Decision Support Systems, vol. 51, pp. 842-852,
2011.
[20] H.L. Chan, T.M. Choi and C.L. Hui, "RFID versus bar-coding systems:
transactions errors in health care apparel inventory control," Decision
Support Systems, vol. 54, pp. 803-811, 2012.
[21] H. L. Chan, T. M. Choi, C. L. Hui, S. F. Ng, "Managing health care
perishable apparel products using quick response program," in
Proceedings of the IEEE International Conference on Industrial
Engineering and Engineering Management (IEEM) - Hong Kong, pp.
230-240, 2012.
[22] J. W. Pratt, H. Raiffa and R. Schlaifer, "Introduction to statistical
decision theory", MIT Press, 1995.
@article{"International Journal of Medical, Medicine and Health Sciences:49397", author = "H. L. Chan and T. M. Choi and C. L. Hui and S. F. Ng", title = "The Use of Information for Inventory Decision in the Healthcare Industry", abstract = "In this study, we explore the use of information for inventory decision in the healthcare organization (HO). We consider the scenario when the HO can make use of the information collected from some correlated products to enhance its inventory planning. Motivated by our real world observations that HOs adopt RFID and bar-coding system for information collection purpose, we examine the effectiveness of these systems for inventory planning with Bayesian information updating. We derive the optimal ordering decision and study the issue of Pareto improvement in the supply chain. Our analysis demonstrates that RFID system will outperform the bar-coding system when the RFID system installation cost and the tag cost reduce to a level that is comparable with that of the barcoding system. We also show how an appropriately set wholesale pricing contract can achieve Pareto improvement in the HO supply chain.
", keywords = "Efficient consumer response program, healthcare,
inventory management, RFID system, bar-coding system.", volume = "7", number = "3", pages = "133-6", }
