Optimizing the inventory system of a pharmaceutical company to improve efficiency - A Case Study

Inventory is a major cost driver in the healthcare sector since inventory levels are often kept high to satisfy demand without any delay due to the criticality of pharmaceutical products for patients. The question “how to optimize the inventory system of a pharmaceutical company?” is answered in this study. A global pharmaceutical company’s inventory in Finland is used as a case study. After introducing different inventory management strategies and analyzing the challenges in the pharmaceutical supply chain, the two-criteria version of the ABC analysis (ABC-XYZ) was done on selected 321 stock-keeping units (SKUs). Nine different categories with different safety stock levels were created and the inventory level of the case company was decreased by 4,35% with the new ABC-XYZ-based inventory management strategy. Additionally, three SKUs were suggested for “discontinuation” after analyzing products in the obsolete stock. A key employee in the case company was interviewed to aid in understanding the real-life implications of the challenges identified in the theory part of the study. It is also recommended that the case company improve its communication channels between internal and external stakeholders to increase the visibility of the upcoming issues that can cause shortages or expiry