Computers & Operations Research 34 (2007) 624 – 641

www.elsevier.com/locate/cor

Scheduling logistic activities to improve hospital

supply systems夡
Sophie D. Lapierrea , Angel B. Ruizb,∗
a Centre for Research on Transportation (CRT) and Dept. Mathématiques et de génie industriel, École Polytechnique de
Montréal C.P. 6079, succ. Centre-ville, Montréal, Québec, Canada H3C 3A7
b Network Organisation Technology Research Center (CENTOR) Faculté des sciences de l’administration,
Université Laval Québec, Québec, Canada G1K 7P4
Available online 27 April 2005

Abstract
This paper presents an innovative approach for improving hospital logistics by coordinating the procurement
and distribution operations while respecting inventory capacities. Instead of focusing on multi-echelon inventory
decisions, our approach put the emphasis on the scheduling decisions: when to buy a product, when to deliver to
each care unit, when each employee should work and what task should he do, etc. This promising strategy requires
the elaboration of coordinated schedules that balance the activities through the purchasing cycle. We introduce two
modelling approaches that can account for the numerous scheduling decisions in such environment. We present a
tabu search metaheuristic that explores four different neighborhoods and which accommodates the two modelling
approaches. We tested our models and algorithms on a real case extracted from a hospital based in Montreal,
Canada. The supply schedules generated by our algorithm were considered by the hospital managers as efficient
and well balanced. The approach may help hospitals to improve their logistics by better coordinating purchasing
and procurement.
䉷 2005 Elsevier Ltd. All rights reserved.

Keywords: Supply chain; Logistic; Hospital; Workload balancing; Tabu search

夡
In memory of Sophie D. Lapierre, who left us on September 19, 2004. Merci Sophie. Your commitment and enthusiasm are
a great inspiration for us. We miss you.
∗ Corresponding author.
E-mail address: angel.ruiz@fsa.ulaval.ca (A.B. Ruiz).

0305-0548/$ - see front matter 䉷 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.cor.2005.03.017
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 625

1. Introduction

Managing a supply logistics department requires answers to a huge quantity of questions related to
the planning and control of activities and resources that cannot be provided by inventory control models
alone. Most hospitals organize their supply activities around a two- or three-echelon inventory system.
However, managing supply activities goes well beyond inventory control decisions. It is true that a big
part of the activities performed by the supply department consists in replenishment operations such as
replenish shelves at the care units (CU) and replenish shelves at the central store (CS) or the distribution
center (for a three-echelon system only). But supply managers also have to make scheduling decisions
related to inventory such as: When each employee should work? What should they do? How often and
when should we visit each CU? How often and when should we call each supplier? Which products
should we order from each supplier? Moreover, the supply managers decisions are so constrained by the
hospital budget and the facilities storage space that most supply inventories cannot be made according to
the pure inventory approach.
One may observe two main approaches to plan the activities of a health care supply system: inventory
oriented and scheduling oriented. The inventory approach has been the dominating one in the literature.
The scheduling approach, often referred as optimization of the supply chain, is more recent and, in
consequence, has been less covered in the literature. The purpose of this paper is to propose and test
models exploring the scheduling approach, i.e., attempting to better coordinate supply activities.
Basically, the inventory approach works as follows. Whenever the reorder point for a given product is
met at a CU, a replenishment signal is sent to the distribution center or the CS. The required replenishment
quantity is then sent to the CU. In the mean time, CS also takes care of its inventory and, when the reorder
point for a given product is met, purchasing orders are generated to buy this item from an external supplier.
The cycle is completed when the products ordered to the external sources are received at the CS.
But managing efficiently such inventory system requires another approach than the pure reorder point
model. There are at least three limitations for using the reorder point model into the context of health care
supply systems: (a) the model does not account for the limited human resources, (b) it does not account
for physical storage capacities, particularly the one at the CS level which is critical in most hospitals and
(c) the decisions are only based on costs, not accounting for inventory control activities. We elaborate on
each limitation.
First, the reorder point is not purely applicable in hospitals since visits to CUs take a lot of the employees’
time. To make it more efficient, tours are made such that several CUs are visited consecutively for rounds
of stock control or supply distribution. The periodic replenishment model seems more appropriate for
health care organizations as each CU is replenished according to a schedule instead of when reaching a
reorder point. However, with the inventory approach, the frequencies of the visits are determined based
on the reorder point and the economic order quantity (EOQ). In practice, health care organizations make
these decisions on other basis as we will explain in the next two paragraphs.
Storage capacities at CUs and the CS are important factors when deciding how frequent a CU should
be replenished and how frequent a supplier should be called. An undersized CS and open shelves able to
contain very limited quantities of the voluminous products is often the reality most hospitals have to face.
This situation calls for more frequent orders to suppliers and/or keeping more stocks at the CU than these
suggested by the EOQ model in order to satisfy requirements and respect capacities. In that context, CU’s
stocks are kept higher to compensate for a small CS. Another reason is that stock outs are time expensive
for the supply service that needs to make extra visits—internally referred as hot-picks—to CUs but also
626 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

Direct Delivery
Which Products?
Direct Delivery
Reception
Dock Central Store
External CU's
Transport Stock How much
Suppliers Reception
Handling Which Products? stocks?
Deliver
Handling How much stocks?
Manpower Stock picking Storage
Replenishment

Purchase Manpower
Storage
When?
Replenishment
Which Products?
Requirements When?
Who?
Which Products?
Purchase
Department

Manpower

Fig. 1. Key decisions for the hospital supply chain.

for the medical staff who waste their time making extra calls to the supply department or chasing the
products at other CU.
Finally, the third limitation of the reorder point model is that all replenishment questions are based on
cost and do not account for the beneficial aspects related to stock control. In the real context, where CU’s
stocks are on shelves where staff can freely take products, increasing the frequency of visits to CUs allow
the rapid identification of an unusual demand that leads to investigation for determining if this change
of consumption is temporary, due to new medical practice, or other reasons. If stock control is still a
problem despite frequent visits, then we need to reduce the stock levels kept at the CU and to increase
the visit frequency in order to guarantee a good service level. More frequent visits is then considered a
service given to the CU, the cost being not a concern in this case.

1.1. The supply chain approach

An alternative to the inventory model is the supply chain approach. This approach is the one described
by some Canadian health care supply managers in the benchmark exercise lead by Dacosta et al. [1]. It
consists in looking at the supply activities as a chain of operational decisions. Fig. 1 illustrates a two-
echelon supply system. In this figure, we can see that a key decision is the one making a product stock
or direct: stocking a product at the CS can reduce the frequency of purchasing orders to the suppliers
and reduce the CU’s stocks but increases CS’s stocks; bypassing the CS reduces the handling time
and the need for space at the CS but requires sophisticated coordination between receptions and deliveries
to the CUs.
As shown in Fig. 1, the supply system requires storage capacities at the CUs and the CS. It also requires
manpower resources to accomplish four main activities: (1) stock control and replenishment decisions
at CUs; (2) order picking and delivery of products to CUs; (3) purchasing activities with suppliers to
replenish the CS and the CUs (for direct products); (4) handling of supplies at the reception dock and
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 627

CS. A feasible schedule will therefore program the main operations—receptions, replenishments, stock
controls, and purchasing activities—such that resource availabilities are respected. However, in order
to maximize the CU’s satisfaction—i.e., visit them as often as possible—the supply cycle must be well
coordinated. Hence, a good schedule will make a wise classification of products between direct and stock,
will coordinate activities such as to schedule supplier deliveries with stock replenishments to CUs, and
will group the products ordered to each supplier as to minimize the number of purchasing orders.
In this paper, we present models and solution techniques to support the optimization of the supply
chain as shown in Fig. 1. The supply chain approach is not new as we have observed it in many hospitals.
However, our modelling effort to help health care managers to better organize their supply activities
is original according to our literature review. The paper is structured as follows. A literature review is
presented in Section 2. Section 3 presents several particularities derived from the context under study. It
also presents two mathematical models, a classical cost minimization model and a second one based on
the balancing of the supply activities. The tabu search metaheuristic is presented in Section 4. Section
5 focuses on numerical tests. Finally, some avenues of future research are discussed in Section 6 which
concludes the paper.

2. Literature review

As mentioned earlier in the paper, the related work to the problem under study concerns the multi-
echelon inventory problem and the supply chain management. Multi-echelon systems are difficult to
model and analyze because inventory decisions at the decentralized level—the local stores—are linked
to the decisions made at the central warehouse and vice versa. Coordination is then needed between
the different echelons in order to reduce the overall inventory and replenishment costs. Most of the
researchers in the field of inventory control focus their studies on particular strategies or policies that
restraint replenishment visits to specific intervals. The zero-inventory ordering policy, fixed partition
policies (Bramel and Simchi-Levi [2]), direct shipping policies (Gallego and Simchi-Levi [3]), the power
of two strategies (Federgruen et al. [4]), and the modified periodic policy (Qu et al. [5]) are some of the
most popular multi-echelon management strategies.
The limits of the multi-echelon approaches have led the researcher to create the new concept of supply
chain management (SCM) in the early 1990s. By looking at multi-echelon systems with a scheduling
perspective, SCM has allowed many companies to achieve important improvements in almost every kind
of logistic systems (Slats et al. [6] and Geoffrion and Powers [7]). In fact, SCM goes beyond multi-echelon
systems. It attempts to coordinate the logistic activities of different echelons, but it can also improve the
supply coordination between vertically related companies or even competing companies.
Different researchers have concentrated their studies in different aspects of SCM. Erenguc et al. [8]
distinguish two aspects of a supply chain: the supply network infrastructure and the relationships between
the different components of the network. The design of the supply infrastructure concerns the physical
location of the production, storage and distribution centers as well as the design of the transportation
network to move goods between these different facilities. The coordination of operations between the
different members of the chain has been less covered by the literature than the network design, according
to this author.
Concerning the general supply coordination problem, Thomas and Griffin [9] analyze the fundamen-
tals of SCM—procurement, production, distribution—and propose several models that focus on the
628 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

coordination of operational activities at each stage of the supply chain. Blumenfeld et al. [10] study more
specifically the synchronization of production and distribution schedules. They show that the synchronized
model leads to relevant cost savings. But most papers in SCM focus on the joint inventory/distribution
problem by adding transportation or routing constraints to multi-echelon inventory models (Chan [11] and
Anily and Federgruen [12]). To solve such problems, Viswanathan and Mathur [13] and Barnes-Schuster
and Bassok [14] propose heuristics derived from the zero inventory ordering, power of two, and modified
periodic policies. Although a routing problem is also a scheduling problem, we believe that modelling
this way would over-simplify our health care supply problem. There is a definitive need for more research
in the field of SCM with a larger scheduling vision instead of an extended inventory model vision.
More specifically in the health care area, most of the papers focus on practical issues rather than
developing innovative models or performing quantitative analyses. Dellaert and van de Poel [15] derive a
simple inventory rule—a (R,s,c,S) model—for helping buyers at a university hospital in the Netherlands.
Jayaraman et al. [16] present several tools and practical ideas to improve the flow of materials in a
small health care facility. Landry and Beaulieu [17] present a descriptive study of logistics systems at
hospitals from three countries—France, Netherlands and United States—to identify the best practices for
replenishment policies, equipments, and handling technologies. All these descriptive studies are important
to document the actual health care supply practices.
On the quantitative side, Michelon et al. [18] develop a tabu search algorithm for scheduling the
distribution operations in a hospital. In their application, the number of replenishment visits is given a
priori and the problem consists in finding the schedule that minimizes the number of carriers given several
time windows and practical constraints. Banerjea-Brodeur et al. [19] present an application of a routing
model to match the different CUs to be visited by a laundry department in a hospital such as to minimize
the number of routes while respecting the volume capacity constraint of a cart.
To the best of our knowledge, modelling the general supply problem within a health care organization
has not previously been done. This paper aims to fulfil this need with an innovative manner. First, we will
consider simultaneously the supplier/purchaser and the inventory/distribution stages. We will model this
large context not by using shared costs but, instead, by considering limited human resources (manpower)
and storage capacities. Finally, we will approach the problem such as to determine the right level of
manpower for the available physical storage capacity.

3. Modelling the problem

By using a supply chain approach instead of an inventory model strategy, our main decisions work
around a schedule. Most supply departments in hospital settings work on a Monday to Friday schedule.
On the other hand, CUs are open 7 days per week while clinics are operated only two or three days per
week. On the supplier side, a few suppliers may deliver several times per week, but most of them deliver
only once a week or even less frequently. Therefore, a weekly schedule is the shortest length schedule
that we may use, the demand for products on Saturday and Sunday being aggregated with the Friday if
the supply department is closed on weekends. However, the model should be able to accommodate a two
week or a one month schedule for more comprehensive logistic planning. The schedule will consist in
deciding when each CU will be visited and which products will be delivered at each visit; when each
supplier will deliver to the hospital and which products they will include at each delivery visit; and, finally,
which products are in the category of direct product, and what quantity is shipped directly to the CU on
the reception day.
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 629

The second important modelling issue concerns the design of an objective function considering the
number of visits to CUs, an objective reflecting well the manager goals that we observed on the field.
The traditional cost approach, minimizing both the total inventory and the human resources costs, clearly
does not maximize CUs visits. However, minimizing only the inventory costs under a human resource
constraint does maximize the number of visits to CUs. Moreover, using only costs can lead to bad decisions
for voluminous but cheap products—order not often enough—and highly variable demand products—not
visited enough for stock control. To eliminate this flaw, one may associate a utility function instead of
a cost function to each product, accounting for their price, volume, weight and demand variance. Also,
note that running the model minimizing both the cost of human resources and inventories would still
be interesting since it could identify the minimum human resources needed to service the hospital and
estimate the added service value to better control the CU’s local stocks.
Finally, models maximizing visits to CUs will not provide practical schedules. Balancing workload
through the workdays is what managers and employees require. We will see how we can accommodate
these aspects. In the next sections we present our two main models: the inventory cost oriented model
and the balanced schedule model.

3.1. Minimizing inventory costs (Model I)

Let us define the following notation and constants:

• Index

i: index for products, i = 1, . . . , I ;

j: index for CU, j = 1, . . . , J (0 = CS);
t: index for period number (t = 1, . . . , T and T = 5 for a weekly planning model, Monday =
1, . . . , Friday = 5);
s: index for supplier, s = 1, . . . , S;
• Products data

dij t : demand for product i at CU j during period t;

vi : volume of product i;
wi : weight of product i;
SS ij : safety stock of product i to be kept at CU j, function of the product daily variance;
• Storage capacity and initial inventories

Wj : storage capacity in weight of CU j (0 = CS);

Vj : storage capacity in volume of CU j (0 = CS);
Iij 0 : initial inventory quantity of product i at location j (0 = CS) at the beginning of the planning
period, t = 0;
• Manpower capacity and operation times

Lt : total available manpower time over all personal in period t;

Rs : fix purchasing, reception and handling time per purchasing order at supplier s;
ris : variable purchasing, reception and handling time for purchasing ordered product i at supplier s;
Pj : fix replenishment processing and delivery time per visit to CU j;
630 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

pij : variable processing time for delivering product i at CU j;

fij : reduced handling time if product i is delivered directly to CU j;
• Costs

hij : holding cost of a unit of product i during one period at location j or an inverse utility function
associated with visiting or replenishing product i at location j;

Let us also define the following sets of decision (binary) and continuous variables:

• Continuous and positive variables

xist : replenishment quantity ordered for product i from supplier s at period t;

yij t : replenishment quantity for product i at CU j at period t (does not include “direct” replenishments);
zij t : “direct” replenishment quantity for product i at CU j at period t;
Iij t : inventory quantity of product i at location j (0 = CS) at the end of period t = 1, . . . , T ;
• Binary decision variables

1 if supplier s delivers at period t;
Xst
0 otherwise;

1 if CU j is visited at period t;
Zj t
0 otherwise.

The inventory cost oriented model (Model I) can then be written as follows:

⎛ ⎞
 
Minimize ⎝hi0 Ii0t + hij Iij t ⎠ , (1)
t i j
 
  
s.t.: Rs Xst + ris xist − fij zij t
s i j i
 
 
+ Pj Zj t + pij (yij t + zij t )
Lt ∀t, (2)
j i
Iij (t−1) + SS ij + yij t + zij t − dij t = Iij t ∀i, j and t, (3)
 
Ii0(t−1) + SS i0 + xist − (yij t + zij t ) = Ii0t ∀i and t, (4)
s j

vi Iij t
Vj for j = 0, . . . , J and ∀t, (5)
i

wi Iij t
Wj for j = 0, . . . , J and ∀t, (6)
i
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 631

MXst  xist ∀s and t, (7)
i

MZ j t  (yij t + zij t ) ∀j and t, (8)
i
 
xist  zij t ∀i and t, (9)
s j

xist , yij t , zij t , Ii0t , Iij t  0 ∀i, s, j and t, (10)

Xst , Zj t ∈ {0, 1} ∀s, j and t. (11)

The objective function (1) minimizes the total inventory costs or an inverted utility function along
the planning period. By minimizing the stock value, the objective is to force as many visits as possible
to the CUs.
Constraints (2) put the restrictions on manpower time to accomplish the required supply activities.
Operation time includes: purchasing, reception and handling, replenishment preparation, distribution and
inventory control at CUs. Constraints (2) also partly decide if the product will be directly shipped to the
CU or put in the CS as the direct shipment requires less delivery time but could lead to more frequent
purchases, a time-consuming activity. Constraints (3) and (4), compute the inventory level at CUs and the
CS for each period, respectively. They also implicitly force the demand satisfaction since the inventory
level can have only positive value from constraints (10). The amount of safety stock SS ij to be kept at
each unit and at the warehouse is computed a priori from the daily variance of the demand for product
i at CU j and CS, and for the given level of service agreed with the CUs’ managers. Constraints (5) and
(6) request the respect of storage capacity in terms of weight and volume—only lower shells can accept
heavy products so we also need to account for weight in addition to volume. Notice that direct products
do not consume space at the CS if they are delivered to the CUs the same day. Constraints (7) say that no
product can be received if the supplier does not visit the hospital. Similarly, constraints (8) implicate that
products at CU can only be replenished if the unit is visited. M is an arbitrarily big constant. Constraints
(9) restrict direct deliveries to products received within the current period. Finally, Eqs. (10) and (11),
define the decision variables as positive and continuous or as binary.
Before discussing the use of this model, we introduce the supply chain approach model that includes
a second criterion—balancing the workload—into the objective function.

3.2. Balanced schedules model (Model II)

Managers are not only concerned by stock control or service maximization. They also look for practical
schedules, i.e., schedules that balance the workload over the weekdays. The workload equilibrium of a
schedule can be quantitatively compared by computing the summation of the square of the daily workloads
for each schedule. Using this metric, a lower score indicates a better balanced schedule to the one with
a higher score. Such quadratic measures have been successfully implemented by Lapierre et al. [20]
for balancing workload over stations in assembly lines. Therefore, one may introduce such balancing
objective into a service oriented model leading to a two criteria objective function.
632 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

Given a planning horizon of T days, the service oriented model with balanced workload can then be
stated as follows:
Minimize
⎛ ⎞
  
⎝hi0 Ii0t + hij Iij t ⎠ +
G2t , (12)
t i j t

where we have defined variables Gt as the total used manpower time over all personal at period t given
by the equations:
 
  
Rs Xst + ris xist − fij zij t
s i j i
 
 
+ Pj Zj t + pij (yij t + zij t ) = Gt ∀t, (13)
j i

Gt  0 ∀t (14)
and constraints (3)–(11) from Model I. Note that the manpower level Gt is now part of the minimization
objective (12) through Eq. (13). Constant
allows to adjust the importance we want to accord to the
balancing term in the objective function.
But solving Model II is much more difficult than Model I due to the quadratic terms in the objective
function. To our knowledge, we are the first authors to suggest some balancing workload criteria for
supply chain modelling. Our experience from the field tells us this is an important factor to account for
in a supply schedule. However, a secondary objective must not destroy the goal of the primary objective,
i.e., supplying the CUs in an effective manner. We address this issue in Section 5.2.

3.3. Using the models

Despite the operational orientation of models presented in the previous section, they can also be used
for strategic purposes since running the models with different amounts of resources can help managers
to support the addition/reduction of manpower services as well as addition/reduction of storage capacity
in the CS and CU. The “value added” service can also be estimated by running Model I with the addition
of the manpower cost to the objective function and by comparing the results with the original Model I.
On the practical side, solving the models does not directly produce a schedule for the employees but the
daily total amount of worktime required by each group of activities. In our models, detailed sequencing
has been neglected since it would have been computational impossible to solve a model including all
the schedule specifications. The model output gives critical information on employees’ schedules, i.e.,
the amount of manpower hours per day split between purchasing and reception activities, and delivery
and stock control activities. This information fixes the required number of employees and their skills for
each day but does not account for the practical details of a schedule. First, the deliveries to the CUs have
to be grouped in order to make the delivery routes. The way the routes are made can impact the total
delivery time. Second, the different tasks have to be assigned to the different employees for each day of
the week. Such assignment problem may be difficult to solve because of the practical constraints, i.e.,
precedence relationships between tasks, time window for task execution and employees break periods.
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 633

Again, the quality of the schedule can impact the total working time. Consequently, our model gives only
an approximation of the required number of employees.

4. Solving the models

Two directions are offered to us: exact solution techniques or metaheuristics. Although Model I is a
pure MIP, Model II incorpores a quadratic objective function that can barely be tackled by standard MIP
softwares. But the main limitation of such solvers is in the problem size capacity: with CPLEX, we were
not able to solve a problem bigger than ten products and five CUs over a five day period. On 10 products,
10 CUs, and 7 day period problem, CPLEX got at 10% from the lower bound after working 3 days. Since
our typical problem size is of 43 product families and 23 CUs, metaheuristics seem to be a worthwhile
option to explore.
We elected to develop a tabu search (TS) metaheuristic that explores several neighborhoods. We suppose
that the reader is familiar with the general TS [21,22], and variable neighborhood search [23] principles.
The idea of using several neighborhoods in order to enhance the efficiency of the TS was successfully
applied by Lapierre et al. [24] in the context of the design of transportation networks. We adopted here
the Lapierre’s approach but we developed more complicated neighborhoods and we elected a random
neighborhood selection rule. In the next paragraphs, we discuss around the most important parts of our
metaheuristic.

4.1. Neighborhoods definition, exchange rules and exploration

The algorithm includes four different neighborhoods. N1 and N2 work around the replenishment to
CUs, while N3 and N4 focus on the supplier’s schedules. N1 tries the smallest changes on the solution
structure: it picks a product, a CU, and a replenishment event of such a product to the selected CU,
and it reschedules the replenishment of this product. N2 is similar to N1, but instead of rescheduling
a single product, the whole replenishment visit is shifted. N3 picks a product and a reception day and
tries to reschedule the reception of that product. N3 may also transfer the reception of a product to a
day where the related supplier does not visit the hospital. In this case, the product must be ordered from
another supplier offering the selected product and visiting the hospital in that particular day. Finally, N4
reschedules the visit of a given supplier to another day. The moves performed by each of the described
neighborhoods are illustrated by Fig. 2.
All the four neighborhoods try to transfer operations—replenishment of CUs or receptions from external
suppliers—from their original scheduled day, backwards and forwards one day, two days or until the
previous or the next scheduled visit day, respectively. If the operation is transferred to a new day for
which a visit is already planned, the replenished/ordered quantities are simply added to the ones scheduled
for the new day. Also, note that the proposed neighborhoods may need the adding of new visits to the
schedule. Moreover, since a direct replenishment requires that the product is distributed to the CU within
its reception day, rescheduling suppliers’ visits—or the list of products to be received within a given
order—may require the transformation of a direct replenishment into a stock one.
A neighborhood also needs boundaries on infeasibility. Accepting infeasible solutions—solutions that
violate one or several constraints—may enhance the flexibility during the search, but infeasibility must
be kept as a temporary status. Therefore, although we do not accept rescheduling operations that lead to
634 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

Visits to CUs Visits to CUs Visits to CUs Visits to CUs

Visit to CU1 Visit to CU1 Visit to CU1 Visit to CU1
scheduled for scheduled for scheduled for scheduled for
on day t1 on day t2 on day t1 on day t2
day t1 day t2 day t1 day t2

P1 (Q1) P1 (Q2) P1 (Q1+Q2) CU1 CU4 CU1

P8 P5 P8 P5 CU3 CU5 CU3 CU4

. .
. . . . CU5
. P10 . P10 . CU9 .
P10 P10 CU7 CU7 CU9

Before After Before After

Neighborhood N1 Neighborhood N2

Visits of Visits of Visits of Visits of

Order to S1 Order to S2 Order to S1 Order to S2
Suppliers on Suppliers on Suppliers on Suppliers on
for day t1 for day t2 for day t1 for day t2*
day t1 day t2 day t1 day t2**

P1 (Q1) P1 (Q2) P1 (Q1+Q2) S1 S1

P8 P5 P8 S2 S2 S. 2 S2
P8
. . . . . . . .
. . . . . .
. P.10 . P10 . S. 3 S. 3
.
P10 P10 S5 S5

Before After Before After

Neighborhood N3 Neighborhood N4

* S2 may be also S1 or any other supplier visiting the hospital on day t2 ** If S1 already visits on day t2 then the quantities to deliver are aggregated

Fig. 2. Neighborhoods description.

stock-outs at CUs or the CS, we accept reschedules that will exceed the storage capacity at the CUs/CS
or the daily manpower constraints, if apply. Solutions violating these constraints can be easily handled
through the use of penalty terms which are added to the objective function value. Clearly, the penalty
terms should be proportional to the violation amplitude to prevent the search process from straying too
deep into infeasibility. We therefore elected penalties of the form Sj t ( i hij dij t ) to account for storage
overload at location j and period t. We compute Sj t , the maximum
violation of storage
capacity—volume
or weight—at location j and period t, as Sj t =max(0, 100( i vi Iij t −Vj )/Vj , 100( i wi Iij t −Wj )/Wj ).
When manpower is also constrained (Model I), overload is penalized by terms of the form t G2t for each
period t, where t is computed by t = max(0, 100(Gt − Lt )/Lt ).
The neighborhood selection is done randomly at the beginning of each iteration. The incumbent neigh-
borhood is entirely explored and the best solution found is implemented. Since the computing complexity
increases from N1 to N2 and from N3 to N4, one could prefer to favor searches with N1 before switching
to N2—this rational is also valid for N3 with respect to N4. Therefore, different probabilities—65%,
20%, 10% and 5%—are affected to each neighborhood in order to select less often neighborhood N2–N4.

4.2. Tabu and diversification mechanisms

Several memories are used to guide the search along the algorithm execution. We have first the tabu
lists. Tabu lists aim to avoid cycling by temporary forbidding the reverse of the recent moves. We have
implemented three tabu lists. The first list concerns receptions or replenishment days: whenever a reception
or a visit to a CU is rescheduled, the originally scheduled day is declared tabu for T /5 iterations. By the
time a day remains tabu, none of the operations scheduled for that day can be shifted. The second tabu
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 635

list concerns only CUs: whenever an operation related to a CU (replenishment of a product or several
products) is rescheduled, the CU is declared tabu for J /4 iterations. By the time a CU remains tabu,
none of the operations scheduled for that CU can be shifted. The two previous tabu lists work on every
neighborhood. However, the third list concerns exclusively N1. This third list, who stores replenishments
of individual products, is a dynamic list of length 25 ∗  ( is random in the interval [1, . . . , 2]). Whenever
the replenishment of a given product is transferred, rescheduling of such given product as per N1 is
forbidden until tabu expiration. Clearly, extend the third tabu list to the others neighborhoods would be
very restrictive.
The diversification phase works as follows. When the search is trapped around a local optima—i.e.,
when the search is not able to improve the best schedule for 100 iterations—we call a diversification
procedure to generate important changes in the structure of the schedule in order to move the search to
new promising regions. In our case, we diversify by: (1) forcing all the suppliers to visit the hospital every
day of the planning horizon and (2) selecting up to 15% of the total number of replenishment visits and
rescheduling them from the most loaded days backwards and forwards.

4.3. Algorithm execution

Our algorithm is executed three times—each starting from a different initial solution—and each ex-
ecution contains five runs, the stop criterion being the number of iterations. We generate these three
initial solutions using priority-based heuristics that we will call H1, H2 and H3 in the following. The
first solution is generated by H1 as follows: (a) starting from the first scheduling day, we compute the
aggregated net requirements (for all the products) at each CU and the CS and then we rank them in de-
creasing order; (b) we schedule sequentially replenishment visits and receptions according to the priority
list such as to satisfy the demand, even if doing so requires to overcome the available working time; (d)
once the first operating day has been completed, we recalculate net inventories and we proceed similarly
day by day until completing the schedule. When scheduling a replenishment visit, all the products in the
selected CU are replenished up to the CU’s storage capacity, satisfying the demand for 1 or more days.
Although solutions generated by H1 may violate the worktime constraint, the TS procedure should be
able to recover the feasibility of the schedule. The second initial solution is generated by H2 in almost the
same way, except that we replenish up to 1.5 times the unit storage capacity. This second solution clearly
violates the inventory capacity constraints but respect, in most of the cases, the available worktime. The
last initial solution—produced by H3—is obtained by scheduling a replenishment visit to each CU at
every day, the replenishment quantities being given by the daily demand. Also, we schedule the suppliers’
visits every day using the same zero stock policy to determine the shipment quantities.

5. Numerical tests

The double purpose of this section is to compare the solutions produced by the two proposed approaches
and then illustrate how supply models can be helpful to health care logistics managers. We present only
the results of the application of our metaheuristic since our branch and bound software was not able to
produce any integer solution on reduced size problems after several dozen hours of computing efforts.
Therefore, even if an evaluation of the efficiency of our heuristics is not possible, we can still fulfill our
main objective, comparing Model I versus Model II.
636 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

5.1. Data description

In order to perform our experiments, we use the supply data extracted from a hospital located in
Montreal, Canada. The hospital supply system is relatively efficient but it was felt that the strongly
congested CS needed to be enlarged in order to improve the supply flow. We elected to look at the
problem in a systemic approach.
The data set we were able to collect is quite extensive thanks to the computerized system. It concerns
three kinds of information: demand per CU, products, and operational costs. We first extracted several
months of internal purchase orders released by each CU. Since the orders are compiled per month, we
estimated the daily demand by simply assuming a constant demand over each day of the week and
using a planning horizon of one month (20 working days) for our application models. For the products,
we extracted from the supply software the products attributes (weight, volume and number of units
per package) as well as the family product—in order to reduce the problem size—and the name of
the principal suppliers. We kept only the latest purchased price, assuming that we could get the same
price from any suppliers thanks to the hospital skilled purchasers. Finally, we estimated the operational
time and costs with sampling techniques. We observed and computed the average time required by each
of the logistic operations—reception, handling, replenishment preparation and distribution, inventory
control—and measured the available storage capacity at the CS and at each CU.
From this large database, we extracted the key data set in order to strategically design a new supply
system for the hospital. We eliminated the special products only used by one or a few CUs, limiting our
study to general purpose products—i.e., products required by at least 13 of the CUs—since these products
are already not kept at the CS. Aggregating the products per family, this reduced the number to 43 different
products. Finally, for the purpose of this study, we kept only the three large suppliers that could visit the
hospital several times per week on the requested day. The full problem set has 43 products to deliver to
23 CUs by three suppliers. For special algorithm testing, we also extracted a 10 and 20 product data set
and reduced the storage capacity of the CS and the CUs to account for the elimination of certain products.
These three problem sets illustrate the supply reality of many hospitals. For confidentiality purposes, the
product prices and manpower time have been scaled to avoid any reference to the real supply budget and
required staff number.

5.2. Model I vs. model II

We coded two versions of our tabu search algorithm named TS1 and TS2 implementing models I and
II, respectively. All procedures were coded in C + + and the tests were carried out on a Sun workstation
UltraSparc 10 (100 MHz). After several calibration experiments, we retained the value 0, 25 for the

parameter in objective function (12). The stop criterion for each run was set to 20,000 iterations. Execution
times for each of these runs of 20,000 iterations ranged from 238 to 420 s, for a total computation time
(i.e., 15 runs of 20,000 iterations) of around 70 and 80 min for TS1 and TS2, respectively. The tests were
conducted as follows: we fixed the available resources (storage capacity and worktime) and we run both
TS1 and TS2. The results of these experiences are reported in Table 1.
Table 1 presents the results of the experiments in terms of logistic activities. The first two columns
identify the metaheuristic and the number of product families considered. The third column, Rec, shows
the number of receptions scheduled for the four week period. The 4 columns under header Replenishments
show the results related to the activities of replenishment. Column Total provides the total number of
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 637

Table 1
Performance tests
Tabu #Prod. Rec. Replenishments Worktime Inventory
Total Ave. Max Min Cost Diff. (%)
TS1 10 20 252 12.6 22 6 858 2439 0
20 20 227 11.35 23 2 1016 3468 0
43 20 261 13.05 23 3 1422 5282 0

TS2 10 14 211 10.55 13 9 773 3131 28

20 15 217 10.85 14 9 970 4442 28
43 15 225 11.25 14 8 1261 6949 32

replenishments planned within the 4 week horizon. The next three columns show the daily variation of
the number of replenishment activities by their average, maximum and minimum values—columns Ave,
Max and Min. The column Worktime presents the total number of working hours required during the
planning horizon. The last two columns (under header Inventories) give the total inventory carrying costs
(column Cost) and theirs gap (column Diff) with respect to the cheapest solution among TS1 and TS2.
In order to compare the quality of the solutions produced by TS1 and TS2, one should consider three
criteria: (a) the carrying costs, (b) the uniformness of the workload distribution along the planning horizon
and (c) the required working time. As expected by the nature of their objective functions, Table 1 shows
that the solution generated by TS1 incurs lower inventory carrying costs and the solution of TS2 is
better balanced in terms of workload. What is not expected, however, is that the TS2 solution requires
less working time that the one from TS1. This may be explained by the fact that TS1 schedules more
receptions and replenishments in order to reduce the average inventory level.
In order to assess the capability of TS2 generating balanced schedules, we performed an extra test.
Since we observed that TS2 uses higher storage capacity than TS1, we decided to arbitrarily constraint
the storage capacity at CUs by an additional 15% and check if TS2 was still able to produce feasible and
balanced schedules. Such a reduction in the storage capacity should clearly reduce the inventory costs
incurred by TS2, bringing them down to, approximatively, the same level as the solutions produced by
TS1. The new results, that we call TS2*, are compared to TS1 in Table 2.
It can be observed that TS2* generates better balanced schedules than TS1 for about the same inventory
level and same working time. Therefore, a well-balanced working schedule is no more expensive than
a bad one, and a bi-criteria optimization approach—such as TS2—leads to better supply schedule than
while using a single criteria—such as minimizing the inventory level. We only retain the metaheuristic
TS2 for the remaining tests and analyses since it gives superior schedules to TS1.

5.3. Analyzing a logistic system

We used the data collected in order to analyze the logistic activities of the hospital mentioned in Section
5.1. The manager’s two main concerns were a highly congested CS and several unhappy CUs having to
constantly call the supply department to get out-of-stock products—referred internally as “hot picks”.
One potential solution came out as increasing the capacity of the CS in order to relocate some human
638 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

Table 2
Reducing the inventory capacity

Tabu #Prod. Rec. Replenishments Worktime Inventory

Total Ave. Max Min Cost Diff. (%)
TS1 10 20 252 12.6 22 6 858 2439 0
23 20 227 11.35 23 2 1016 3468 0
43 20 261 13.05 23 3 1422 5282 0

TS2* 10 17 245 12.3 18 9 883 2652 9

23 18 230 11.5 17 9 1060 3705 7
43 18 258 13.1 19 10 1530 5461 3

resources to better control the CUs stock level. They asked us to see if there was any potential solution
to their complex system.
The saturation of the CS has a very negative impact on the system performance. The products trapped
in the reception docks are not registered into the inventory system, which cause some major misleading
search activities, and are at high risk for damage or loss. Also, a congested area increase the handling
time since a product can be manipulated several times before being stored in the CS. Since hiring extra
staff is not a possible solution for the budget-tightened hospital, it was felt that increasing the CS capacity
is the only option.
A high number of urgent deliveries is another important problem as it steals productive time from both
supply department and CU’s employees. A less obvious effect of the poor local stock management is that
it leads to “stock hiding” by the CU’s employees in order to reduce the number of stock outs. However,
this normal reactive behavior can worsen the situation by increasing the demand variance, which increases
the difficulty to well serve the CUs. Since CUs store spaces seem to be used at a very high rate (stocks
are fill up at each distribution visit), managers believe that additional storage space is required at CUs.
We applied our service approach to this context and solve it with the TS2 algorithm. There are two
main concerns for the model outcomes: can we find a suitable supply schedule respecting the storage
capacity constraints and human resources? If not, what are the limiting resources? If yes, what do we
need to do differently?
TS2 produces feasible solutions respecting the current resources constraints. Therefore, there exists
a supply schedule satisfying the actual storage (CS and CUs) and human resources constraints. Fig. 3
illustrates how the human resources are distributed among the supply activities—purchase and reception,
delivery and control, others (unproductive operations)—compared to the current situation.
As it can be seen, our model suggests spending more time in acquisition (purchase and receptions)
and inventory control operations than the current situation. In practice, it means that the hospital should
order more frequently from their suppliers to reduce the average storage stock level at the CS to fit its
capacity, and to dedicate a person making the replenishment decision at the CUs in order to better control
the stock level. This can be done by the time recuperated from the hot-picks operations and extra material
handling at the reception docks. However, since the proposed schedule is tight, the hospital would need
to hire temporary staff to help in reaching this new efficient schedule.
 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641 639

100%
90%
80%
70%
Others
60% Purchase +
50% Reception
Delivery
40% Control
30%
20%
10%
0%
Current TS2

Fig. 3. Worktime distribution by activity.

Table 3
What-if study

Tabu Prod. Scenario 0 Scenario 1 Scenario 2

Worktime Inv. cost Worktime Inv. cost Worktime Inv. cost
TS2 43 1261 6949 1210 7176 1103 7424

However, what would happen if we could expand the CS capacity? A model can easily answer that
question by performing a “what-if” analysis. We ran the model again with an increased CS capacity by
10% (Scenario 1) and 20% (Scenario 2), the other parameters being kept at their current values. The
results are reported in Table 3 in comparison with the original solutions from TS2 (Scenario 0).
We can observe that a larger CS allows keeping more stocks and slightly less manpower to give the
same service level to the CUs. This solution would be easier to implement since it would require less
drastic changes in the supply schedule. However, getting extra space for the CS might be extremely
difficult in a hospital with hard-to-find space for every service, including medical services.

6. Conclusion

In this paper, we introduced a new approach for managing supply operations in a health care institution.
This new approach, which focuses on service improvement by better coordinating the supply activities, is
closer to the managers’day-to-day reality than the classic inventory optimization. We present mathematical
models for both approaches and we modify them by adding a second workload balancing objective. The
numerical results shows that adding this second criterion to our supply model produces more regular
schedules for almost the same resulting inventory costs and human resources. Since balanced schedules
are better for practical purposes, the second criterion contributes improving the models. We also develop
a tabu search metaheuristic for solving such models. Using our algorithm, we analyze the practical case
640 S.D. Lapierre, A.B. Ruiz / Computers & Operations Research 34 (2007) 624 – 641

coming from the supply department of an hospital based in Montreal, Canada. With our best service
approach model, we have analyzed the logistics system of that hospital and performed a what-if study to
compare different strategies to improve the supply system. However, the lack of optimal solutions or tight
bounds remains an important drawback of our approach. More work is needed to develop exact solving
approaches or to rigourously evaluate the efficiency of our metaheuristic in order to test its practical value.

Acknowledgements

This work was supported by the Natural Sciences and Engineering Research Council of Canada
(NSERC) under Grant OGP0184219. This support is gratefully acknowledged. Thanks are also due
to two anonymous referees for their helpful remarks.

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