Inventory Ordering Policy of Delayed Deteriorating Pharmaceutical Items with Two-Phase Demand Rates Under Preservation Technology Investment in Healthcare Environment
Yahaya Ahmed and Abubakar Musa
Keywords: Delayed Deterioration, Healthcare Environment, Inventory Ordering Policy, Preservation Technology, Two-phase demand.
Abstract
This study proposes an inventory ordering policy for delayed deteriorating pharmaceutical products with two-phase demand rates in healthcare environment. In most cases, the market demand rate for newly introduced pharmaceutical products such as drugs and other healthcare consumables increases with time. The demand rate of such items remains constant for some period of time, and shortly after, when the products become popular in the pharmacy or market, on the identification of the quality of the product and through advertisement, the demand rises. The model assumes constant demand in the first phase of the inventory system and linear time-dependent demand in the second phase. The rate of deterioration (which affect the efficacy of the items) can be reduced by means of effective preservation technology investment. The objective of the model is to find the optimal replenishment policy that minimizes the retailer’s total cost at a reduced deteriorating rate due to investment in preservation technology. An iterative procedure is proposed to solve the model mathematical formulation and its application is validated with some numerical examples. A Sensitivity analysis is carried out to illustrate the effect of changes in the system parameters. The outcome of the sensitivity analysis reveals that investment in preservation technology has significant impact on the inventory policy. As more investment is made into the system, more items are purchased due to their freshness, as such, order quantity has to be increased to avoid shortages. Some other managerial decisions are also provided.