Penalty and reward contracts between a manufacturer and its logistics service provider

A Single Supplier Multi Buyer Supply Chain Coordination under Vendor- managed Inventory: Ensuring Buyers’ Interests in a Decentralized Setting

Our work delves into supply chain coordination involving a single supplier selling a single product to multiple downstream buyers. We consider the case when the supplier proposes implementing vendor-managed inventory (VMI) for each buyer. The VMI contract involves the buyers charging a penalty to the supplier on the excess inventory whenever the supplier exceeds some pre-decided inventory threshold. Unlike the works covered predominantly in the VMI literature involving penalty, where both the penalty and the threshold are exogenous, we develop a model to determine both endogenously. In our study, the supplier deciding on the penalty and the inventory threshold needs to ensure that each of the buyers’ interests is protected, that is, none of the buyers becomes worse off from the optimal position, thereby ensuring the willing participation of all the buyers. We further compared our model with the centralized Joint Economic Lot Size (JELS) model and other existing models. We show that our model has a cost equivalence with the JELS model with unequal order intervals. We also show the superiority of our proposed model over the existing VMI models in terms of the overall costs. Finally, we examine the impact of size and ordering cost on each buyers’ costs through numerical analysis.

Essential medicine shortages, procurement process and supplier response: A normative study across Indian states

Efficient public-procurement systems are critical for ensuring Access to Medicines (ATM) and enabling universal healthcare delivery. This is especially true of India where public healthcare caters to the underprivileged population who have limited access to medicines. However, essential medicine shortage in the Indian public-healthcare system is significant and is exacerbated by inefficiencies in the procurement system. Healthcare policy makers have to constantly contend with delays and non-fulfillment of medicine orders leading to shortages. Pharmaceutical companies supplying orders argue that the current system is not business-viable or fair. To explore these issues in-depth, we distill insights from structured interviews with a Policy Maker and interactions with the pharmaceutical industry to identify supply side issues which lead to medicine shortages. We build a normative model and utilize public medicine procurement data to study how pharmaceutical supplier response and order fulfillment is impacted by orders from multiple Indian states with different procurement conditions. We then employ standard supply chain theory to propose solutions to mitigate some of these issues. We find that the current system can be significantly improved by increased capacity allocation at suppliers for state orders, staggered ordering at the state level, stricter but gradual implementation of penalties and blacklisting and sourcing from suppliers located closer to the state.