The inventory centralization impacts on sustainability of the blood supply chain.

This paper studies the significance of inventory centralization at the second echelon of a two-echelon supply chain with perishable items when the agents of the second echelon use an (S−1,S) inventory policy. The replenishment at the first echelon is considered to be stochastic. The context in which the studied problem exists is in the blood supply network where the first echelon includes a single blood bank that receives stochastic supply from donors. The second echelon contains hospitals receiving external demands (transfusions). In our proposed structure, some of the hospitals in close proximity of each other maintain centralized inventories to serve their demands in addition to the demands by other neighbour hospitals. The results demonstrate that centralization of hospitals’ inventory is a key factor in the blood supply chain and can increase the sustainability and resilient of the blood supply chain. Using numerical study, it was observed that reducing the number of hospitals that hold inventory from 7 to 3 decreases outdate and shortage in the supply chain by 21% and 40% respectively.