Saturday, February 25, 2012

Fixing the Broken Humanitarian Healthcare Supply Chains

Despite significant advances in supply chain management in terms of both methodology and application, healthcare supply chains, and, in particular, humanitarian healthcare supply chains, have not received the needed attention.

Humanitarian healthcare supply chains have many unique characteristics. For example, as pointed out in the handbook, Humanitarian Supply Management and Logistics in the Health Sector, by the Pan American Health Organization and World Health Organization (2001), “The various stages in the flow of supplies from their point of origin to the moment they reach their recipients – whether they be the organizations managing the emergency or the actual beneficiaries of the assistance – are a chain made up of very close links. How any one of these links is managed invariably affects the others. Supply management must therefore be the focus of an integral approach that looks at all the links in the sequence and never loses sight of their interdependence ...”

Hence, an appropriate framework for humanitarian healthcare supply chains must capture the entire relevant network.

Moreover, Van Wassenhove and Pedraza Martinez, writing in an article in a special issue of International Transactions in Operational Research, that I have blogged about, have argued that “The key for logistics restructuring is better network design” and noted that logistics restructuring is a supply chain management best practice that could be used in humanitarian logistics restructuring, singling out the restructuring of the International Federation of Red Cross and Red Crescent Societies (IFRC).

The news as to how to optimally design and redesign multiproduct humanitarian healthcare supply chains needs to get out more widely since, in 2011, more than 251 drug shortages were reported, including 20 chemotherapy agents, according to the American Society of Health-System Pharmacists. The drug shortage crisis has not only forced patients to switch to more expensive alternatives, but also posed potential hazards of medical errors. Although the causes of drug shortages are complicated, it has been noted that production disruption at one manufacturing facility can lead to widespread drug shortages.

In the paper, "Multiproduct Humanitarian Healthcare Supply Chains: A Network Modeling and Computational Framework," that I co-authored with my doctoral student, Min Yu of the Isenberg School of Management, and with Professor Patrick Qiang of Penn State Malvern, we developed a multiproduct supply chain network design and redesign model with applications to humanitarian healthcare applications. The variables in the model are supply chain network link capacities as well as the healthcare product flows associated with the supply chain activities of production, transportation/shipment, and storage/distribution.

When the capacities are sufficient to meet the demands and no enhancement of capacity is needed, the model collapses to a humanitarian healthcare operations optimization model.

The solution of the model yields the optimal investment capacities and product flows on the links at minimal total cost, with the demand for the various products being satisfied at the various demand points. With this information, a firm or organization involved in the production and distribution of healthcare products can identify the total cost associated with the provision of its products. The framework can handle both the design and the redesign problem with the latter being especially relevant for healthcare, since, for example, vaccine manufacturers may have to regear from year to year depending on the forecasted flu viruses; the same holds for the manufacture of associated medicines.

Given the paucity of multiproduct supply chain network mathematical models and associated methodologies in the literature that can handle both link capacities and product flows as decision variables, along with nonlinear cost functions to capture congestion, as well as risk, we believe that, with this paper, we have made a contribution of specific relevance to humanitarian healthcare supply chains.

We will be presenting the paper at the 2012 POMS Conference that will take place in Chicago, Illinois, April 20-23. The paper has been accepted for publication in the conference Proceedings.