Assignment Option 1: Critical Thinking

Rachel Grunloh


Colorado State University-Global Campus

Irene Hufton

June 23, 2019

Flow Chart for the purchasing of vaccines:


A ScienceDirect article explains, “A network flow model for inventory management and distribution of influenza vaccines through a healthcare supply chain” is the best way to get the necessary vaccines to a healthcare organization. It discussed the distribution, and a managed inventory of the influenza vaccine as a must in healthcare. Influenza is a contagious viral infection that is a yearly occurrence. With so much money being spent each year on influenza vaccines, the main question is “how to minimize the program costs while maintaining a required standard of public benefits”? The World Healthcare Organization (WHO) is an international agency, part of the United Nations that are responsible for health around the world.

They determine the strain; the type of vaccine, and the supply needed each year for the influenza outbreak. This information is provided to the manufacturers. The manufacturers start the vaccine process to be ready for the flu season.

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The flu is most common in the fall and winter months but can continue until May. The vaccines are typically shipped in August to be prepared for the upcoming season. There are a flow process and supply chain involved in this process. The influenza vaccine supply chain involves many stakeholders: the manufacturer, distributor, shipper, the medical organizations and hospitals and the patients. Each of these stakeholders participates in a different part and can add cost in the chain.

The challenge is getting the right number of vaccines to meet the need of the community.

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The hospital needs to understand the severity of the strain for that season. It also needs to look at historical data so as to maintain the needed inventory of vaccines. It is estimated that 10% of healthcare costs annually are spent on pharmaceuticals. It is essential to get the order correct. Too, many and it will cost the hospital for vaccines purchased that are not used. Insufficient, and the community takes the chance of getting the flu due to not being vaccinated. This also equates to lost revenue for the hospital from not being able to provide a service to patients. An example of the best way to determine the correct number is illustrated CLAIT Health services are a top health care group that oversees a vaccination program in Israel. CLAIT only obtained 800,000 injections of the flu vaccination and used 730,000 of it on patients. A mathematical model determined this number by looking at the number of healthcare facilities in the organization, the number of patients treated, and the number of vaccines administered previously. By using this number, the purchase order is created, and the buyers contact the distributors. They negotiate for the best prices, and when agreed upon, a contract is made, and the order is shipped. The hospital receives the order, and it is then administered to the patients. This process is time-consuming and may need to be done each time an order is placed. However, another way to determine the need is to let the ordering process be handled by the vendor in a vendor management inventory (VMI) agreement.


Vendor management inventory (VMI) is a model that information of the product from the buyer is given to the vendor; the vendor oversees and is accountable for keeping inventory in stock for the buyer at their location. A specific type of VMI is a healthcare industrial vending system (IVS). An IVS links healthcare suppliers together to form a network. This makes for the availability of more items at a potentially lower cost. By using a VMI, the vaccines can be obtained through multiple manufacturers at the best price for the hospital. The VMI model provides a mutual partnership between the distributor and the hospital. Instead of the hospital continually reordering supplies, the VMI is responsible for managing inventory and the purchase decisions. They will reorder as needed based on the customer’s previous purchasing history and current inventory. They will keep track of costs and can make the hospital aware of potential increases to items and possible shortages.

A VMI will be successful based on three different things; understanding the company’s expectations, proper communication, and the sharing of data by the hospital with the VMI. By developing a partnership between the VMI and the hospital, the partnership can provide the hospital with a higher level of customer service to its patients by not running out of supplies and reducing the costs of inventory.


Falasca, M., & Kros, J. F. (2018). Success factors and performance outcomes of healthcare industrial vending systems: An empirical analysis. ScienceDirect,126, 41-52. Retrieved from

Hovav, S., & Tsadikovich, D. (2015). A network flow model for inventory management and distribution of influenza vaccines through a healthcare supply chain. ScienceDirect,5, 49-62. Retrieved from

Langabeer, J. R., & Helton, J. (2016). Healthcare operations management: A systems perspective (2nd). Burlington, MA: Jones and Bartlett Learning

Murray, M. (2018, December 05). Small Business Supply Chain: Vendor Managed Inventory (VMI). Retrieved from

Zimlich, R. (2018). Ten Ways to Manage Rising Drug Costs: Protect your hospital’s bottom line. Managed Healthcare Executive,23(3), 31. Retrieved from

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Assignment Option 1: Critical Thinking. (2019, Dec 05). Retrieved from

Assignment Option 1: Critical Thinking

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