The Wayne Hills Hospital in tiny Wayne, Nebraska, faces a problem common to large, urban hospitals as well as small, remote ones like itself.  The problem is deciding how much of each type of whole blood to keep in stock. Because blood is expensive and has a limited shelf life (up to 5 weeks under 1-6 degrees Centigrade refrigeration), Wayne Hills naturally wants to keep its stock as low as possible.

Unfortunately, past disasters such as a major tornado and a train wreck demonstrated that lives would be lost when not enough blood was available to handle massive needs. The hospital administrator wants to set an 85% service level based on demand over the past decade.

This is a balancing act between legal and ethical responsibilities, plus inventory quantities, inventory costs, holding costs, and inventory obsolescence.

Questions:

1. Discuss the implications of this decision.

2. What is the hospital's responsibility with regard to stocking lifesaving medicines with short shelf lives?

3. How would you set the inventory level for a perishable commodity such as blood?