Coordinating a socially responsible pharmaceutical supply chain under periodic review replenishment policies

• Published in: Journal of cleaner production 2018-01, Vol.172, p.2876-2891
• Main Authors: Nematollahi, Mohammadreza, Hosseini-Motlagh, Seyyed-Mahdi, Ignatius, Joshua, Goh, Mark, Saghafi Nia, Mojtaba
• Format: Article
• Language: English
• Subjects: Channel coordination; Multi-objective collaborative decision-making; Periodic review inventory; Pharmaceutical supply chain; Service level; Social responsibility
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2017.11.126

Drug shortage compromises patient safety and increases the vulnerability of the overall healthcare system. Improving patient service level in the pharmaceutical industry context is a major endeavor towards a socially responsible supply chain. However, service levels are difficult to achieve as the actors (i.e. distributors and retailers) within the pharmaceutical supply chain (PSC) tend to maximize their respective self-interests. This paper illustrates how one can coordinate the PSC with service level consideration through a multi-objective collaborative decision making model. A two-level PSC comprising one pharma-distributor and one pharma-retailer with stochastic demand sets the backdrop of the study. The pharma-distributor's visit interval determines the duration of the review period of the pharma-retailer's inventory policy. Specifically, this paper incorporates the visit interval and safety stock level into the trade-offs between the entire PSC profit and the service level under decentralized and centralized decision-making scenarios. The augmented ε-constraint method is applied to obtain the Pareto optimal solutions and the trade-offs between the objectives are examined. The results suggest that all the PSC actors are individually better off under a multi-objective collaborative model that also improves the service level and profitability for the entire PSC. •Multi-objective coordination for pharmaceutical supply chain is investigated.•Multi-objective collaborative model is presented for channel coordination.•Pharma-distributor's visit intervals and retailer's safety stock are coordinated.•Pareto optimal solutions of the collaborative model are acceptable to both members.•Collaborative model increases profitability and service levels.