Lateral Transshipment in Two-Echelon Inventory Control for Sustainable Pharmaceutical Supply Chain

Efficient inventory management (IM) presents an important key driver for supply chain (SC) sustainability. This latter becomes a crucial concern for decision-makers and managers in all domains, particularly in the matter of sensitive areas that affect human well-being, namely the pharmaceutical industry. Medicines IM for a sustainable Pharmaceutical Supply Chain (PSC) brought further particularities compared to the traditional SCs. Besides the economic preoccupation, social and environmental issues might be considered. In this work, we assess the impact of the Lateral Transshipment (LT) strategy on the sustainability of the IM process. We compare the total costs of two cases, IM with and without LT strategy. We propose an IM model that seeks the optimal replenishment order quantity of multiple types of products and the shipment time in a two-echelon PSC under a centralized setting. The considered PSC consists of a pharmaceutical company (PC), a Pharma-distributor (PD), and multiple hospitals. The mathematical model takes into account the transportation costs including LT costs -in the case when LT is included- as well as shortage, and products with high deterioration rate costs. We attempt to minimize unused medicines leftover by minimizing the deterioration rate of products at both distributor and hospital sites.