Supplying networks in the healthcare sector: A new outsourcing model for materials management

Purpose - The purpose of this paper is to present a new outsourcing model for materials management related to the operating theatre of hospitals. Two distinguishing features characterize the model: the long-term collaborative network established among the supplying companies (the "Network factor"), and the implementation of the RFID technology along the supply chain (the "RFID factor"). The network factor allows sharing transportation costs, while the RFID factor allows implementing a continuous review policy, instead of the periodic review policy normally utilized in hospitals. In the paper the effect of these two factors on the minimization of total materials management costs is investigated. Design/methodology/approach - An analytical model, validated through a simulation study, is proposed to calculate total management costs of materials, depending on the presence of the network and the RFID factors. Throughout the model it is possible to perform a scenario analysis and individuate the inventory management policy that allows minimizing total costs. The procedure has been applied to a real case study of a long-term collaborative network of supplying companies in the healthcare sector that operates in Central Italy. Findings - The optimal inventory management policy strongly depends on the mutual distances of supplying companies and the hospital. Both of the two factors have an impact on the reduction of total annual costs. The analysis of the scenario shows that a positive interaction effect exists between the two factors, so that higher savings are obtained when both factors are present. Originality/value - The outsourcing model presented in the paper is new, and the managerial insights that can be drawn from the application of the model to the healthcare sector can be extended to many other industries.