Investigation of the influence of product variety on inventories in hospitals

Abstract

The literature on product variety provides great insights into various businesses. However, little research has been conducted on product variety in the healthcare industry. This study aims to explore the influence of product variety on inventory in hospitals. Since most hospitals are known to replenish products using a homegrown ad-hoc system, a model is developed for exploring all possible product combinations and substitutions. This article presents the behaviour of product substitution, which may be either one-to-one or many-to-one for both sterile and non-sterile products, in the hospital with cost factors. It discusses the product variety reduction and its corresponding cost impacts. The data on a hospital inventory over the course of six years has been procured from a hospital in Norway. Based on the results, the hospital could have a potential product variety reduction of approximately 11% and cost savings from the spending of approximately NOK 3.6 million. Reducing the variety of products in hospital inventories proves to be an approach to reducing costs. The model developed for the research is universal in nature and could be used in other fields, such as retail, marketing etc.

Keywords

• product variety
• inventory management
• substitution effect
• hospitals