1. CASE 29 CLARINDA COMMUNITY HOSPITAL (Inventory Management)
Introduction
3 Key Learning Points (KLPs)

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Introduction
This case focuses on inventory management.
The primary goal of the case is to introduce you to the economic ordering quantity (EOQ) model, but it also contains issues related to:
Inventory classification
Inventory control
Inventory management systems
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Spreadsheet Model
The spreadsheet model for this case is relatively simple and focuses on the EOQ model.
It calculates the following data for two different suppliers:
EOQ
Average daily usage
Ordering, carrying, and total inventory costs
Reorder points
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KLP 1: Inventory management
is important
Although this case focuses on low-cost items (forms used by the SICU), it illustrates that savings of hundreds of dollars, when applied to thousands of inventory items, can result in significant cost reduction.
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KLP 2: The EOQ is relatively
insensitive to its input parameters
Total inventory costs are relatively flat when plotted against EOQ, so the EOQ can be thought of more as a range than as a point value.
Total inventory costs are most sensitive to ordering and carrying costs. Still, small errors in these estimates do not result in significant changes to the EOQ.
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KLP 3: The EOQ model can be
applied when usage is seasonal
One way would be to develop seasonally adjusted annual rates and use them to calculate seasonally adjusted EOQs.
For example, if usage is different during the summer and winter periods, the EOQ model could be applied separately to each period and actual inventories would be run up or down during the transitional fall and spring seasons.
The result would be relatively large inventories during times of heavy usage and relatively small holdings in seasons when usage is light.
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