An optimisation model of drug order quantity and distribution using continuous review approach by considering secondary suppliers

Benedicta Amadea Karina Dewi, Cucuk Nur Rosyidi and Azizah Aisyati

International Journal of Mathematics in Operational Research, 2023, vol. 24, issue 2, 210-252

Abstract: Drug shortages and inefficiencies in drug supply delivery are caused by poor drug purchase and distribution management in the hospital supply chain. A shortage occurs when a product is not available in sufficient numbers to satisfy demand. This research presents a mixed-integer linear programming model with the objective function to minimise the total costs comprising purchase costs, storage costs, distribution costs, and penalty costs due to shortages. The existence of secondary suppliers is considered in this research to overcome drug shortages. Purchases through a secondary supplier will occur if the primary supplier is unable to meet the hospital's demand. The model focuses on the decision-making of determining the number and drugs in each purchase and their distribution to each care unit. The hospital uses a continuous review inventory policy. Moreover, a numerical example is provided to show the applicability of the model using a real case study in a teaching hospital. The optimal solution was found using Lingo 18.0 software. Finally, sensitivity analysis is conducted by changing several parameters' values to determine their effects on the objective function and the decision variables.

Keywords: optimisation model; MILP; ordering and distribution models; continuous review; primary suppliers; secondary suppliers. (search for similar items in EconPapers)
Date: 2023
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