Improving sustainability in a two-level pharmaceutical supply chain through Vendor-Managed Inventory system

This article aims to improve the sustainability of a pharmaceutical supply chain using a real case study. An analytical model is proposed to explore the effect of implementing a Vendor-Managed Inventory (VMI) system in minimizing the quantity of the expired medications at hospitals. Further, a set of Monte-Carlo simulation tests are conducted to investigate the robustness of the VMI model under demand uncertainty. Experimental results on a real case study under deterministic demand show the efficiency of the VMI model in eliminating the amount of expired medications without compromising customer’s satisfaction. The results also demonstrate that the safety stock (SS) level and the capacity assigned to the customer are crucial factors in the overall cost of the pharmaceutical supply chain (PSC). The PSC cost could be reduced by 19% when reducing the SS level by 50%. Moreover, the producer is recommended to increase the capacity assigned to the customer by a factor of 1.5 so as to fully satisfy the customer’s demand. Finally, the simulation results confirm the efficiency and robustness of embracing a VMI system under random demand scenarios. More precisely, zero amount of expired medications is obtained in 93% of cases. Thus, adopting this strategy could minimize drug wastage and ultimately improve the reputation of the producer in the market in terms of implementing Lean and sustainable practices.
Source: Operations Research for Health Care - Category: Hospital Management Source Type: research