Dual Sourcing and Joint Replenishment of Hospital Supplies

In response to increasing supply chain costs, hospitals are investing in new technology to improve inventory visibility and control at the point of use. This poses new inventory optimization opportunities and challenges for hospital management. The technology-enabled increased inventory visibility allows hospitals to implement more sophisticated inventory policies to reduce costs and improve availability. One such policy, implemented at a large Midwest hospital, is a dual-source hybrid inventory system that combines periodic and continuous order-placement epochs under a single-item setting, in which different items are treated independently. In this paper, we extend the dual-source hybrid policy to a two-item setting. We propose different joint replenishment policies that take advantage of increased inventory visibility to coordinate periodic and continuous replenishments across items. We develop a simulation-based search engine and test the benefits of these different policies under different parameter settings. We find that more benefits can be obtained using simple joint replenishment policies than are obtained using just the hybrid policy without coordinated replenishments.