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

Title:

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

Weraikat, Dua, Kazemi Zanjanib, Masoumeh and Lehouxc, Nadia (2019) Improving sustainability in a two-level pharmaceutical supply chain through Vendor-Managed Inventory system. Operations Research for Health Care . (In Press)

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Abstract

Hospitals, as the main customers of medications, typically adopt conservative inventory control policies by keeping large quantities of drugs in stock. Given the perishable nature of medications, such strategies lead to the expiration of excess inventory in the absence of patients' demand. Consequently, producers are faced with governmental penalties and environmental reputation forfeit due to the negative impact that disposing expired medications pose to the environment. 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 ef�ciency 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.

Divisions:Concordia University > Gina Cody School of Engineering and Computer Science > Mechanical, Industrial and Aerospace Engineering
Item Type:Article
Refereed:Yes
Authors:Weraikat, Dua and Kazemi Zanjanib, Masoumeh and Lehouxc, Nadia
Journal or Publication:Operations Research for Health Care
Date:24 April 2019
Funders:
  • Fonds de recherche du Québec – Nature et technologies (FRQNT)
Digital Object Identifier (DOI):10.1016/j.orhc.2019.04.004
Keywords:Supply Chain; Vendor-Managed Inventory; Pharmaceutical Industry; Mixed-Integer Nonlinear Programming
ID Code:985391
Deposited By: MICHAEL BIRON
Deposited On:17 May 2019 18:46
Last Modified:17 May 2019 18:46

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