ABSTRACT
This chapter considers a medical supplies and pharmaceutical inventory management problem faced by a city health and human services department and shows how inefŽcient warehousing can become if inventory is not periodically checked for obsolescence. The department purchases and distributes medical supplies used by service centers spread throughout the city. To support the service process, the department operates several warehouses in the city. Furthermore, the warehouses order large quantities of goods at a negotiated price and store the items until a service center places an order for a relatively smaller quantity. Then the warehouse Žlls the orders. If the order quantity is on hand, the items are picked by warehouse employees and delivered to the ofŽces. If the warehouses do not have an item in stock, the item is placed on backorder and is delivered when it becomes available. The department estimates that the out-of-stock inventory is very costly.
