Sustainable Pharmaceutical Distribution Network Design

Due to the aging society and the high-pressure environment, the number of general illnesses and chronic diseases has increased year by year. The demand for prescription drugs and chronic diseases treatment medicines has also risen. From a drug dealer’s point, community-based clinics and pharmacies are a weak buyer. Their procurement volume and inventory space are lower than those of hospitals. Therefore, how to reduce costs from procurement and distribution to achieve the economic optimality has become a subject to enhance their competitiveness. This is a 2-year research project. In the first year, we consider the decision between applying the third-party logistics (3PL) or organizing an alliance to provide logistics service from the demand side (clinics and pharmacies). The concerned factors include multiple products, procurement costs, inventory, transportation costs and multi-compartment vehicle routing with a minimum cost target to determine the required number of distribution centers and design the distribution network. We will firstly establish a drug delivery network model. At the same time, through industry interviews, we adjust the model to meet actual situations. Finally, we introduce a Particle Swarm Optimization (PSO) algorithm with mathematical programming to solve the problem. Furthermore, based on the changes in demand and bargaining price with suppliers (drug dealers), the model provides sensitivity analysis for the alliance of clinics and pharmacies and helps to build up an optimized distribution planning. In the second year, with the goal of sustainable development, environmental aspect will be taken into account. Pharmaceutical reverse logistics will be included in the discussion. A reverse logistics network will be set up based on the number and location of drug disposal stations. Similarly, the problem is solved to minimize the objective cost function and consider the economic advantage by setting up medical disposal stations to increase the price bargaining power with suppliers. The goal is for clinics and pharmacies to achieve a sustainable development balance among economic, environmental and social aspects.

Project ID:PB10708-1614
External Project ID:MOST107-2221-E182-056