Supply Chain Risk Management and Hospital Inventory: Effects of System Affiliation

In this study we propose a supply chain risk management (SCRM) approach in health care supply chains by empirically examining the relationship between supply chain risk and risk buffering approaches on hospital inventory cost. Results demonstrate that hospitals manage inventory in terms of supply and demand uncertainty as predicted by supply chain management theory. Our results suggest that, after controlling for health care service performance, weaker supply chain infrastructure and greater service mix uncertainty are associated with greater inventory accumulation. As a risk buffering approach, results suggest that hospitals mitigate supply chain risk by risk pooling through small hospital system affiliation. Results also suggest that hospitals do not appear to gain risk buffering operational benefits through large hospital system affiliation.