Fuzzy Logic in Health Services: Integrated Fuzzy Method for Multi-Criteria Inventory Classification

Fuzzy Logic in Health Services: Integrated Fuzzy Method for Multi-Criteria Inventory Classification

Nihan Kabadayi (Istanbul University, Turkey) and Sündüs Dağ (Istanbul University, Turkey)
DOI: 10.4018/978-1-7998-2581-4.ch007

Abstract

Healthcare inventory management is a complex task which contains critical decision phases. One of the efficient ways of healthcare inventory management is to classify inventory items into predefined categories in terms of their significant features. This chapter proposes a guideline to healthcare decision makers to implement appropriate inventory control methods. The proposed method combines Fuzzy AHP (Analytical Hierarchy Process), TOPSIS (Technique for Order of Preference by Similarity to Ideal Solution) and ABC (Always Better Control) analysis methods to determine the priority of inventory items. The corresponding method, which takes into account multiple criteria in the classification of inventory items, cope with the limits of the classical ABC method. It also helps to reduce the uncertainty in the inventory classification problem as the proposed method is based on the fuzzy logic approach. A real-life case study is conducted in a hospital laboratory to test the proposed method.
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Introduction

Nowadays, firms need to focus on their supply chain success in order to gain competitive advantage. Supply chain management is the organization of activities between independent companies; from raw material suppliers to the end customers. The main objective of supply chain management is to decrease total supply chain costs while increasing the customer service level. Both inventory and distribution costs are the major costs in the supply chain. It is important to have a well-managed inventory and distribution system to minimize the total costs of supply chain.

Hospitals are one of the most crucial institutions offering health services to the public. The primary purpose of hospitals is to provide the highest-quality healthcare services using their resources effectively and efficiently. Healthcare supply chain management is an important tool to control healthcare costs and improve the service quality in healthcare. According to the results of Kwon et al. (2016), the logistics costs in healthcare accounted for 38% of total costs, while it is 5% in the retail industry and 2% in the electronics industry. One of the reasons for the high logistics costs in healthcare is the lack of successful healthcare supply chain management applications.

The purpose of hospital inventory management is to minimize the cost of inventory while ensuring that necessary medicines and health supplies are available when needed. The inventory management department is responsible for efficient use of drugs and medical supplies, which are important resources of hospitals. However, hospital inventory management is a complex task due to the wide variety of inventory items and the availability of inventory items with different levels of importance. For this reason, it needs to be considered systematically.

Inventory classification is one of the effective ways to manage hospital inventory. Traditional ABC analysis is a well-known and useful method for inventory classification. However, this method classifies inventory items only in terms of one criterion: mostly annual usage values of inventory items. This is not enough for obtaining accurate classification of inventory items in practice. The ABC classification method is significantly affected by other criteria such as inventory holding unit cost, criticality, lead time, substitutability, scarcity, and durability. Therefore, traditional classification cannot give reliable results (Guvenir & Erel, 1998, p. 30). Based on the type and attribute of the company, the number of criteria, which are needed in order to manage inventory items, can vary. In the food industry, for example, expiry date may be the most important criterion in deciding importance of inventory items. On the other hand, in the health sector, lead time may be the most critical criterion due to the human life. For this reason, more than one evaluating criterion should be considered to classify or rank inventory items. Analyzing the criteria in multi-criteria context may improve inventory management and contribute toward the productivity of the company.

This chapter is organized as follows: Firstly, a brief overview on the literature dealing with the main approaches to the multi-criteria inventory classification problem is presented. Secondly, under the main topic of the chapter, importance of the healthcare supply chain management and inventory management are emphasized. Thirdly, the solution methodology, which contains both the Fuzzy AHP and TOPSIS methods, is described. Finally, future research directions and conclusions were discussed.

Key Terms in this Chapter

Healthcare: It is a health improvement effort via diagnosis, prevention and treatment of illnesses.

Supply Chain: It is the collection of steps that a company takes to transform raw components into final products and deliver them to customers.

Classification: It is an ordered set of related categories used to group data according to its similarities.

Fuzzy Logic: It is a form of multi-valued logic obtained from fuzzy set theory to deal with reasoning that is approximate rather than precise.

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