How much do customer ordering practices drive medical supplies distribution (in)efficiency for primary care markets?

Jeff Shockley, Jason R. W. Merrick, Xiaojin Liu and Jeffery S. Smith

Production and Operations Management, 2023, vol. 32, issue 12, 3908-3930

Abstract: Companies across many industries seek to understand how customer ordering impacts supply chain distribution performance. In the US medical supplies industry, wholesalers are uniquely positioned to use information about downstream customers to study and potentially influence buyer policies and practices due to their industry scale and data visibility. In this study, wholesale medical supplies buyers are first examined based on their ordering practices over a 2‐year window using the theoretical lens of data clumpiness—patterns of data non‐conformity to equal spacing—to derive insights into how their ordering practices affect the distribution efficiency of the medical supplies wholesale distributor. The analysis also considers how different buyer and industry characteristics moderate these upstream ordering effects. The results reveal several significant findings for both theory and practice. First, buyers exhibiting less clumpiness in order sizing and greater clumpiness in order‐timing practices drive greater distribution efficiencies for the wholesale distributor. These effects are greater when buyers have more category experience and lower when ordering across multiple categories. Industry customers’ use of centralized purchasing also tends to lower wholesale distributor efficiency. Still, these negative effects can be mitigated when customer ordering practices favor replenishment based on customer needs and consistent order sizing. After discussing the implications of our analysis, we offer additional practical and theoretical extensions of our approach that can be applied to study other industry supply chains or that could affect related healthcare purchasing markets.

Date: 2023
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