The adoption of vendor managed inventory for hospital pharmaceutical supply

Abstract

The study investigates Vendor Managed Inventory (VMI) for the supply of medicines between distributors and hospitals to identify factors that may affect VMI adoption. Multiple case studies are conducted involving five organizations (three hospitals, one distributor, and one manufacturer/ supplier). Four dyadic relationships are identified. Triangulation techniques are used in data collection, including interviews, site visits and document analysis to enhance reliability and validity. Case studies have been analyzed individually and comparatively. Two types of VMI initiatives -public and private sector -are identified in the supplier/hospital context. The public sector supplier focuses on improving service level while the private sector supplier seeks to strengthen relationships with key customers. Hospital characteristics, including the type of hospital, top management perspectives, and the hospital's willingness to share information, are critical in decisions on VMI initiation or termination. Relatively stable demand products are preferred for a VMI approach. Hospitals may perceive risks in VMI adoption for medicines as it involves relinquishing control of critical supplies and may result in 'lock-in' with a particular supplier. The paper provides supply side and demand side perspectives on VMI adoption in an important sector. It highlights the need for greater understanding of the perceived and actual risks in VMI from the perspective of both the hospital and the supplier and for much clearer advice on which pharmaceutical products are appropriate for VMI control in a hospital context. VMI is advocated as being beneficial in many supply contexts. However, it may be challenging to implement. This study identifies a range of factors that affect the adoption of VMI in hospital pharmaceutical supply chains. The cases have been conducted in one country, which may affect the generalization of the findings. Wider empirical evidence from other countries in both developed and less developed regions will be beneficial.

Inventory Sharing Strategy for Disposable Medical Items between Two Hospitals

“…Our research has some limitations in its research model and methodology, which can be considered in future work. First, although our mathematical model describes hospitals' ordering process and inventory sharing process completely, it still neglects some complex characteristics in real healthcare operations, such as medical manager behaviors [28], the service level of patients [25], information asymmetry between the dealer and hospitals, and delivery reliability in transportation [26]. By considering these specific characteristics in the mathematical model, the research would provide more managerial insights for practice.…”

“…They also suggest considering the service level of patients in operational practice, such as the service quality, traceability, and information system. Kritchanchai and MacCarthy [26] investigate the application of vendor-managed inventory (VMI) in the pharmaceutical transportation for hospitals, while Kritchanchai et al [27] analyze the performance of healthcare logistics from the perspective of purchasing and supply policy, warehousing, inventory management, transportation and distribution, and information and technologies. Scholars also propose incorporating the behavior of healthcare personnel when optimizing the medical inventory transportation efficiency.…”

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

“…Moreover, there might be some barriers of VMI practices in healthcare sector such as lacking of knowledge and skills in supply chain management, i.e., technology involvement, standardize code, physician preference, information sharing limitation and poor supplier selection (Guimarães et al , 2013). Krichanchai and MacCarthy (2017) stressed that suppliers play an important role in achieving VMI project initiative. The supplier selection should be careful since it is one of the crucial organizational decisions for VMI implementation and greatly depend on suppliers (Classen et al , 2008).…”

Quantifying the benefits of continuous replenishment program for partner evaluation

“…Hence, CRP resembles a centralized inventory control system. CRP has been adopted by many organizations from different sectors, including the healthcare sector, and continues to be one of the best practices for improving supply chain performance (Waller et al 1999, Krichanchai & MacCarthy 2016. This research is motivated by a leading healthcare manufacturer who is interested in quantifying the benefits of CRP relationships with healthcare distributors in order to select the most profitable partners for their continuous replenishment programs and to set fair profit sharing contractual terms.…”

“…This study did not include the handling cost at the retailer side and is limited to a specific warehouse layout. stochastic process is very suitable for modeling the demand in CRP relationships because asKrichanchai & MacCarthy (2016),,and Niranjan et al (2012) suggest, the most suited items for CRP have stable and low variability demand. In the case of non-stationary demand, our model can be used as a piece-wise stationary function for approximation.…”