Blake Smith

Date of Award

3-26-2015

Document Type

Thesis

Degree Name

Master of Science

Department

Department of Operational Sciences

First Advisor

William A. Cunningham, PhD.

Abstract

A significant challenge facing the Air Force Medical Service (AFMS) Military Treatment Facilities (MTFs) is the perishability costs associated with its pharmaceutical stock. During a two year time period, the AFMS returned expired or nearly expired pharmaceuticals valued at over $23,000,000. In response to the waste represented by pharmaceutical perishability cost, this thesis analyzes the historical inventory management decisions of 173 MTF/pharmaceutical combinations and proposes an alternative inventory control policy to reduce perishability costs. Based on the critical nature of pharmaceuticals and importance of generating high patient satisfaction, the proposed alternative inventory control system was required to be cognizant of the cost savings/service level trade-off. After applying a fundamental inventory management equation to historical patient demands, the calculated inventory control policy is evaluated against a recent nine month time period of patient demand in terms of potential cost savings and fill rates. At the conclusion of the study, it is determined that the use of the proposed inventory control policy would generate an effective perishability cost savings of approximately $250,000 annually, as well as a one-time inventory reduction cost savings that exceeds $1,700,000. In spite of this stock reduction, the studied MTF/pharmaceutical combinations would maintain a strong fill rate that exceeds 99.82%.

AFIT Designator

AFIT-ENS-MS-15-M-133

DTIC Accession Number

ADA615570

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