Stock-up vs Stock-out: The Inventory Management Dilemma at a Mobile Clinic

The case illustrates the inventory management dilemma at The Star Clinic, a mobile medical clinic. The resident doctor at the clinic prefers commonly prescribed medicines, in particular Panadol, a brand of paracetamol (a pain relief drug), to be well stocked whereas the procurement manager seeks to minimise the holding cost of medicines.

Wanting to set a very high patient service level, the doctor is demanding paracetamol to be readily available and dispensable at all times in the clinic. Patients should not need to wait three days before the next batch of stock arrives. On the contrary, the procurement manager adopts a financial perspective and focuses on the profit-and-loss reporting of the company.

How can the clinic resolve the dilemma and enhance its inventory allocation and service levels?

The case is suitable for undergraduate classes on supply chain management or a postgraduate foundation course on inventory management. Students will learn to evaluate two models—continuous review inventory system and periodic review inventory system—and choose one that best fits the business needs. Through calculations of the re-order point, re-order quantity and order-up-to-level, they will learn to resolve the trade-off between meeting service levels and minimising inventory holding cost.

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