Wayne Hills Hospital in tiny Wayne, Nebraska faces a problem common to large, urban hospitals as well as to small, remote ones like itself. That problem is deciding how much of each type of whole blood to keep in stock. Because blood is expensive and has a limited shelf life (up to 5 weeks under 1-6 degrees Celsius refrigeration), Wayne Hills naturally wants to keep its stock as low as possible. Unfortunately, past disasters such as a major tornado and a train wreck demonstrated that lives would be lost when not enough blood was available to handle massive needs. The hospital administrator wants to set an 85% service level based on demand over the past decade.

Discuss the implications of this decision. What is the hospital's responsibility with regard to stocking lifesaving medicines with short shelf lives? How would you set the inventory level for a commodity such as blood?

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