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

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 efciency 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 conrm the efciency 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.

Information and digital technologies of Industry 4.0 and Lean supply chain management: a systematic literature review

“…Simulation has also been used in LSCM environments to achieve process efficiency(Mason-Jones and Towill 1997;Saygin and Sarangapani 2011;Chen et al 2013;Khanchanapong et al 2014;Li et al 2018;Baradaran and Akhavan 2019;Miclo et al 2019;Ruiz, Fontanini, and Corrêa 2019;Weraikat et al 2019). Simulation has been used to analyze the efficiency of processes in which EDI (Mason-Jones and Towill 1997), RFID(Saygin and Sarangapani 2011;Chen et al 2013) or ATM(Khanchanapong et al 2014) are used.…”

Metaheuristics for a bi-objective green vendor managed inventory problem in a two-echelon supply chain network

“…Recently in 2019, Weraikat et al, [11] developed a VMI system to minimize the quantity of the expired products. The application of the model was tested in a pharmaceutical supply chain using a real case study.…”

“…Nowadays, the actual implementation of sustainability practices within the physical objects to the supply chain network throughout the world is unsustainable economically and environmentally [6][7][8]. The sustainable development and sustainability issues are active research topics in today's economic activities [9], needing coordinated supply chain networks, enforces the decision-makers to focus on the environmental parameters based on the lines of sustainability [10][11][12]. Based on this challenge, this study focuses on a two-echelon supply chain network between a supplier (vendor) and some retailers as buyers by contributing the environmental pollution to the problem in addition to the total cost [10,[13][14].…”

Supplier selection for vendor-managed inventory in healthcare using fuzzy multi-criteria decision-making approach ,

“…The growth of healthcare industry has been accelerated in the past several years, resulting inventory management of hospitals to be become a crucial issue in healthcare service providers (Kwon et al, 2016). In fact, the healthcare organizations have to make a trade-off between stock outs and on-shelf availability against the pharmaceutical wastage due to an expiry for their medication products (Weraikat et al, 2019). Moreover, any shortage case in medication supplies can lead serious consequences on the illness or the fatality of patients.…”