Inventory management and cost-benefit analysis: A case study

This paper treats the problem of comparing various stocking and issuing policies for two radioactive isotopes, I-123 and I-131, which are used in nuclear medicine departments for the diagnosis of thyroid disease. The approach is based on using a combination of a cost-benefit analysis to compare the increased operating costs of stocking I-123 versus the increased disease risk of using I-131, and simulation to recreate the operation of a radio-pharmacy which stocks these drugs. The required inputs to the model include: (1) estimates of the disease risks associated with radiation absorbed doses from I-131; (2) estimates of the probability distributions of the appropriate latent periods; (3) empirical distributions of daily patient demand; (4) census data for estimating longevity and individual expected earnings and (5) cost data the stocking costs of the isotopes. The cost benefit results give issuing rules based on the age and sex of the patient, while the simulation is used to compare the effectiveness of the various ordering policies considered (the choice of a particular ordering policy may influence the risk of disease development).