A Dissertation Submitted to Mzumbe University, Dar es Salaam Campus College in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Science in Procurement and Supply Chain Management (MScPSCM) of Mzumbe University 2013The Fundamental objective of this research work was to assess the effectiveness of inventory management in referral hospitals. The study was conducted at the Muhimbili Orthopaedic Institute (MOI). The purpose of a study of the assessment of effectiveness of inventory management in referral Hospitals was to explore the inventory performance at MOI and to know the strengths and weaknesses and to assess the profitability there from. The researcher used various data collection instruments including questionnaire, observation, unstructured interview and documentary sources. The methodologies used were both qualitative and quantitative approaches. Through this study, the researcher revealed that, MOI is getting late deliveries which caused them to make rush orders while waiting for the suppliers to deliver their requirements, by doing so, the goods are obtained at a higher price and at a quality which could not be questioned since it is treated as emergency procurement. The researcher recommended that MOI should carry out efficient and effective inventory management, monitoring and operate good inventory information management system in order to ensure realistic inventory forecasts and high turnover.