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Answer question No.4 only (750 words) and Introduction (250 words) with references.
1- Based on the information given in the case, identify the challenges in managing an inventory of blood products. 
2- Using the data provided in the exhibits, compute the current level of shortage and wastage of platelets and type O positive (O+) blood at the MBB.
3. What will you recommend to Joshi to improve the shortage and wastage performance at the MBB?
4. What are the key leanings from this case?

W16617

MODEL BLOOD BANK, INDORE: SUPPLY CHAIN MANAGEMENT

Harshal Lowalekar, T. S. Raghu, and Ajay Vinze wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.

Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-09-29

It was May 1, 2015, and Dr. Anil Joshi, the in-charge and associate transfusion officer at the Model Blood
Bank (MBB), the largest blood bank in Indore, was reviewing the monthly numbers. Although the report
on collected and issued blood units (see Exhibit 1) seemed to indicate no crisis in demand and supply, Dr.
Joshi knew that the situation was worse than what the report indicated. Due to complicated requirements
on blood products, demand for specific products was frequently not met and shortages in specific blood
products persisted despite improvements in number of blood units collected.. What worried him was that
the problem of blood shortage would likely only worsen in the months of May, June, and July, when the
majority of educational institutions in India, which constituted a significant source of blood donation for
the MBB, would be closed due to vacations. The implications of a shortage of blood products were very
serious. A shortage would mean some surgeries would need to be postponed; in situations such as accidents
or a pandemic, the unavailability of blood could even result in the loss of lives.

Joshi needed to decide on the optimal frequency and quantity of blood collection over the next few months
to minimize the shortage and wastage of blood products at the MBB. He was considering two options: (1)
increase the collection quantity at the blood donation camps,1 or (2) increase the frequency of blood
collection camps. The business objective was to minimize the total shortage and wastage costs at the bank.

THE BLOOD BANKING SCENARIO IN LOW-INCOME COUNTRIES

According to the World Health Organization (WHO), blood donation by approximately 1 per cent of a
country’s total population was sufficient to meet the nation’s annual demand.2 But approximately 40 per
cent of the world’s nations were unable to meet this requirement.3 The average blood collection in low-
income nations (0.4 per cent) was less than in medium- (1.17 per cent) and high-income nations (3.7 per
cent).4 This meant that low-income countries struggled with a blood shortage rate of 60 per cent.

The problem of blood shortage was further amplified in low-income countries because only a low
percentage of whole blood (45 per cent) was fractionated into components.5 Many blood banks in low-
income countries were not equipped to prepare and store components such as red blood cells, platelets, and
plasma. Such blood banks stored all collected units as whole blood (i.e., blood that was not separated into

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Page 2 9B16D018

components) and issued the whole blood in place of the desired components. This approach affected the
overall blood supply since transfusing one unit of whole blood when a patient required just one component
wasted the other two components present in the blood. The transfusion of whole blood, instead of only the
desired component, also led to some side effects in the recipient’s body. Therefore, componentization was
a beneficial process that both reduced the overall risks associated with transfusing whole blood and
increased the overall blood supply by making one unit of whole blood available to three potential recipients.

To increase the overall safety in blood transfusion, the WHO recommended blood collection only from
non-remunerated voluntary donors.6 Blood-borne diseases and infections were found to be less prevalent
among voluntary donors than paid and replacement donors,7 who often donated blood not willingly, but out
of necessity.8 Although the percentage of voluntary donations had increased around the world, nearly half
of all nations (mostly the low- and medium-income countries) still depended on replacement and paid
donations for more than 50 per cent of their blood supply.9 The prevalence of transfusion-related infections
was significantly higher in low- and medium-income countries than in high-income countries. The
combined rate of prevalence of the human immunodeficiency virus (HIV), the hepatitis B virus (HBV), and
the hepatitis C virus (HCV) observed in low-income countries was 5.51 per cent, as opposed to 1.13 per
cent in middle-income countries and 0.04 per cent in high-income countries.10

THE BLOOD BANKING SCENARIO IN INDIA

India, like several other low-income countries, faced a huge shortage of blood products. The total blood
supply in India in the fiscal year 2009/10 was less than 70 per cent of the annual demand (see Exhibit 2).
Most of the states in India experienced an extreme shortage; some states such as Bihar faced a shortage as
great as 90 per cent of the demand. Only a few states—such as Gujarat, Maharashtra, Mizoram, Punjab,
and Kerala—collected enough units of blood to meet the demand in their states. Voluntary, non-
remunerated donations constituted nearly half of the blood supply in India; the remaining supply came from
replacement and paid donations.11

The problem of blood shortage in India could be mainly attributed to a poor overall organization of blood
services. Most of the collection and transfusion services in India were performed by various licensed,12
central, and state government-owned blood banks; voluntary blood banks; and privately owned hospital
and commercial blood banks. Railways, municipalities, defence forces, and independent trusts were also
involved in the blood collection process.13

There was minimal coordination among the activities of this fragmented mix of agencies; as a result, the
agencies often competed among themselves for blood collection.14 Since there was no coordination of blood
services, most of the Indian blood banks managed their operations in a decentralized mode. Many medium to
large blood banks organized their own blood collection camps. Some small, hospital-associated blood banks
that could not collect blood themselves met their requirements by ordering blood from large blood banks at
regular intervals. The inventory of blood products was managed at the level of the individual blood banks;
collecting blood in large quantities was considered a measure of success. Since the number of voluntary donors
was limited, there was intense competition among blood banks for donations. Because they were unable to
collect sufficient units in blood collection camps, Indian blood banks often faced a shortage of blood products.
The fear of facing a shortage often led blood banks to set up huge blood donation camps where blood was
collected in large quantities. Compounding the problem, blood component therapies were not popular in the
general population, and those opposed to the therapies weren’t willing to contribute.15

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Page 3 9B16D018

HISTORY AND ORGANIZATION OF THE MODEL BLOOD BANK, INDORE

The Model Blood Bank (MBB) was the largest blood bank operating in the city of Indore,16 the industrial
capital of the state of Madhya Pradesh. The MBB was set up in 1955 as a non-profit blood bank within the
government-owned Maharaja Yeshwant Rao Hospital (commonly known as “MY Hospital”). The blood
bank was run jointly by the hospital and the Mahatma Gandhi Memorial Medical College, Indore. Funding
for the blood bank’s operations was provided by the state government of Madhya Pradesh and the National
AIDS Control Organization. The team at the MBB consisted of 35 people with Joshi in charge (see Exhibit
3). The blood bank operated 24 hours a day, seven days a week, supplying quality blood products to various
hospitals in the city.

Since its inception, the MBB had worked with both voluntary and replacement donors. The percentage of
replacement donations had gradually decreased; almost 91 per cent of collections came from voluntary
sources.17 Blood collection camps were organized in different parts of Indore, and the collected blood units
were tested for infectious diseases to ensure patient safety. The MBB had successfully conducted 842 blood
donation camps from 2005 to 2014.

The MBB was one of the few blood banks in Indore equipped to separate blood components. With its state-
of-the-art equipment and component separation facility, the MBB was able to manufacture, store, and
supply major blood components such as red blood cells, platelets, and plasma. It was not permitted to
manufacture advanced products (predominantly drugs) using the collected blood units.

Approximately 70 to 80 per cent of the whole blood collected at the MBB was broken into components.
Being a charitable organization, the blood bank charged a very nominal rate of ₹7018 (approximately US$1)
for one unit of whole blood or a component. Approximately 70 per cent of the blood was given away free
of charge to prenatal, neonatal, and postnatal patients; patients who had cancer, HIV, thalassemia, or
aplastic anemia; and patients living below the poverty line. The blood bank was regulated by the Madhya
Pradesh’s Food and Drugs Administration; under its regulations, the blood bank could prepare only packed
cells, platelets, plasma, and cryoprecipitate.

THE BLOOD SUPPLY CHAIN AT THE MODEL BLOOD BANK

The blood supply chain at the MBB included five major steps: collection, separation into components,
testing and determination of blood type, storage, and issuing.

Collection

The major supply (approximately 90 per cent) of the total blood collection at the MBB came through
voluntary non-remunerated donations collected at blood donation camps. Replacement donations
constituted approximately 10 per cent of the total blood supply. The remaining supply was from those
donors who came to the MBB to donate blood. The annual average blood collection at the MBB was
approximately 24,000 units. The frequency of organized blood donation camps differed according to the
month of the year (see Exhibit 1). The MBB had organized a total of 165 blood donation camps in 2014.

Blood was collected in specially designed plastic bags that had an anticoagulant solution (see Exhibit 4).
The type of bag used for blood collection depended on the number of components to be produced from the
collected unit. Single bags were used to store whole blood, while triple bags were used to store components
such as red blood cells, platelets, and plasma. As a standard practice, blood from donors who were in

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Page 4 9B16D018

excellent physical health was collected in 450-millilitre (ml) triple bags, while blood from other donors was
collected in 350-ml single bags with a closed system.

It typically took 7–10 minutes to collect blood from a donor at the blood donation camp. Donors received
refreshments and a donation certificate after the donation process was completed. No incentives in the form
of cash or gifts were given to donors for donating blood.

The MBB, like other blood banks in India, followed a policy of collecting blood from all medically fit
donors who arrived at the blood donation camp. This policy was due to the perennial shortage of blood
products in India. Also, since the blood demand was highly variable, it was difficult for blood banks such
as the MBB to predict future demand with reasonable accuracy. Moreover, turning away donors could make
them less motivated to donate blood in the future.

It was usually very difficult to predict the number of donors who would arrive at a given blood donation
camp (see Exhibit 5). This unpredictability posed significant challenges for planning blood collection.
When the blood bank did not receive the number of units it needed by the end of a blood donation camp,
the blood bank faced a potential shortage. On the other hand, if the number of donors was larger than
expected, the blood bank collected more than it needed; because blood products were perishable, over-
collection increased the level of wastage. The disposal of medical waste from blood banks (such as
discarded blood bags, needles, and chemicals) posed significant environmental challenges. Nonetheless, in
the world of blood banking, wastage, even though a serious problem, was preferred over shortage.

Separation into Components

When the blood donation camp was complete, collected blood units were brought to the blood bank
laboratory. Triple bags were centrifuged at high speed. Due to the difference in their densities, the three
components separated out in the triple-bag system: plasma in the top layer, platelets in the middle, and red
blood cells in the bottom (see Exhibit 6).19 The components were then drained out into three bags, sealed,
and sent for storage in appropriate conditions. Approximately 70 to 80 per cent of the total blood collected
at the MBB was separated into components.
 

Testing and Determination of Blood Type

All units collected from donors at the blood donation camps were tested in the laboratory to determine
whether they were safe for transfusion. Blood samples were tested for diseases such as HIV, HCV, HBV,
malaria, and syphilis, which could be transmitted from the donor blood to the recipient through transfusion.
The units that failed the screening tests were discarded; the failed units accounted for approximately 2 per
cent of the total blood collection. The blood type of collected units was also determined (see Exhibit 7).20

Storage

Blood units deemed safe for transfusion were stored in appropriate conditions at the blood bank. Whole blood
and red blood cells were stored at 2–6 degrees Celsius (ºC) in blood bank refrigerators for a maximum duration
of 35 days.21 Platelets were stored at room temperature (21–22ºC) in special storage units for a maximum
duration of five days. Plasma was stored in a frozen state at −25ºC for up to one year, and at −18ºC for up to
one and a half years. As recommended by the WHO, the process of testing, componentization, typing, and

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Page 5 9B16D018

storage was completed within six hours of collection to ensure the viability of the blood components
(especially the platelets).22

Issuing

The MBB supplied blood and its components to several hospital blood banks in the city as well as directly
to patients who were in need of blood. Units were issued for patients against a signed requisition from their
doctors that specified the type and quantity of the blood component required.23 Red blood cells were given
to patients who had anemia (i.e., insufficient red blood cells), which was often the result of internal bleeding
or kidney failure.24 Platelets were commonly given to patients who had bleeding disorders and those
undergoing open-heart surgery and cancer therapy.25 Patients who had clotting disorders, those who had
experienced burns, and trauma victims required plasma transfusions.26 In the absence of the required blood
component, one unit of whole blood of the patient’s blood type was given to the patient.

Whole blood and red blood cells that were the same blood type as the recipient were usually considered to
be perfectly substitutable. For example, in the absence of a demanded product (e.g., whole blood or red
blood cells), a recipient would be given the other product in the same blood type. Except in extraordinary
circumstances, it was common practice to transfuse the recipient with whole blood or red blood cells that
matched the recipient’s blood type. Platelets, however, were not specific to blood type so could be given to
recipients of any blood type (see Exhibit 8).27

Plasma was the least required component for transfusions because plasma transfusions could cause many
adverse transfusion-related reactions and circulatory overload in a recipient’s body.28 Excess plasma at the
blood bank was discarded; the state laws did not permit banks to sell blood units for commercial reasons.
Blood banks in other states were able to sell their excess plasma at a good price to pharmaceutical
companies that used the plasma to prepare globulins and albumin.29

THE BLOOD SHORTAGE PROBLEM

Despite its continuous efforts to increase blood collection, the MBB struggled with the increasing rate of
shortage of various blood products. The shortage figures from April 2015 increased Joshi’s worry. In that
month, the MBB was short an average of more than 10 per cent of various blood products in April. The
MBB also experienced wastage of precious negative blood types due to lack of demand during the month
(see Exhibit 8). Also, at the prevailing rate of componentizing, almost all of the plasma needed to be
discarded due to a very low demand for plasma.

April 2015 was also notable for a major earthquake that occurred in Nepal. Even though the MBB did not
experience any noticeable increase in demand due to the Nepal calamity, such incidents posed a major
challenge to blood banks. It was impossible for any blood bank to predict the occurrence of calamities,
outbreaks, and major accidents, and the resulting demand they created. The MBB ensured a minimum stock
of approximately 200 blood units at any time to meet urgent requirements arising from such events, but
keeping a very large stock of blood was not a viable solution since it resulted in the wastage of precious
blood units. The MBB had attempted to mitigate the risk of potential shortages by maintaining a
comprehensive list of contacts at the agencies and institutions that hosted blood donation camps, and of all
donors from previous blood donation camps.

Joshi expected that the overall blood supply would drop by approximately 10 per cent during the months of
May, June, and July 2015. He was also well aware that during blood supply shortages, hospital blood banks

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Page 6 9B16D018

tended to inflate their order sizes in an attempt to compensate for the effects of rationing. Often in the months
of lean supply, the hospital blood banks ordered two to five times the desired number of units. Moreover, since
the demand forecasts at the hospital blood banks were either not available or extremely erratic, inflations in
order sizes resulted in simultaneous shortage and wastage at different hospital blood banks.

Joshi needed to find a way to ensure that hospital blood banks did not over-inflate their orders. He also
needed to ensure that the overall supply of blood at the MBB increased in order to compensate for the ever-
mounting blood shortage problem. He was considering two main options: increase the collection quantity
at the blood donation camps or increase the frequency of the blood donation camps.

Increase the Collection Quantity at the Blood Donation Camps

Increasing the quantity of blood collected would be achieved by organizing extra-large blood collection
camps at large private organizations such as information technology and manufacturing companies in and
around Indore. The MBB would need to advertise heavily in newspapers, magazines, and other media, and
organize donor motivation seminars to increase the donor turnout at the blood donation camps.

Increasing the collection quantity could alleviate the shortage problem to a large extent, but it could also
increase inventory costs at the blood bank. This increased cost was not necessarily a bad thing according to
Joshi, who believed that a larger inventory gave the MBB a better chance of dealing with a potential blood
shortage. However, a larger inventory would also increase the rate of wastage for blood products, but as
Joshi put it, “Wastage is preferred over shortage any day.”

Increase the Frequency of the Blood Donation Camps

The other, relatively less popular, option was to increase the number of times the MBB set up blood donation
camps. Increasing the blood collection frequency could alleviate the shortage problem but it could also increase
the collection costs associated with setting up the blood donation camps. The overall inventory of blood products
would be reduced under this option but Joshi was not sure whether wastage would reduce significantly. A major
benefit of this option was that the MBB could set up blood donation camps at even those sites where it normally
would not (e.g., housing societies, bus terminals, and railway stations). These sites had low potential for
collection without requiring additional advertising. The overall blood donation camp duration would be shorter,
and the MBB could manage collection with fewer personnel and less equipment.

Harshal Lowalekar is an Assistant Professor in the area of Operations Management and
Quantitative Techniques at the Indian Institute of Management Indore, India. T. S. Raghu is the
Department Chair of Information Systems at W. P. Carey School of Business, Arizona State
University, United States. Ajay Vinze is the Earl and Gladys Davis Distinguished Professor in
Information Systems at W. P. Carey School of Business, Arizona State University, United States.

For the exclusive use of P. Sivaganeshan, 2021.

This document is authorized for use only by Prashath Sivaganeshan in 620 winter 2021 (2) taught by Mahmood Kotb, University Canada West from Feb 2021 to Aug 2021.

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For the exclusive use of P. Sivaganeshan, 2021.

This document is authorized for use only by Prashath Sivaganeshan in 620 winter 2021 (2) taught by Mahmood Kotb, University Canada West from Feb 2021 to Aug 2021.

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