An optimal “Trade-Online-Deliver-Offline” strategy for recycling unwanted medicines by reutilizing the existent informative pharmaceutical sales network

Abstract

Circular economy and sustainable development resort to creating friendly and profitable environment of recycling unwanted goods in practice. This research aims to design a novel “Trade-Online-Deliver-Offline” (TODO) system to recycle unwanted medicines (UMs) by reutilizing the existent informative pharmaceutical sales network, which is the first dual-channel recycle system with synergies of manufacturer, chain drugstores and governments. Cross-selling effect, i.e., the additional sales from the customers who visit the drugstores for returning UMs, is also considered in this system. With a given revenue-sharing contract, a bi-level programming model is built to formulate such a recycle system, where the drugmaker is the leader and the chain drugstores are the followers within a decision mode of the Stackelberg game. Through reformulating, this complicated model is solved by developing an efficient smoothing algorithm. Scenario analysis and sensitivity analysis are employed to validate the built model and reveal valuable managerial insights. Main findings include: Compared with the existing modes, the proposed TODO mode is more efficient in terms of the recycled UM quantity and the reduced government burden; Cross-selling effects enhance the profit of drugstores without damage of customer’s surplus, but without significant impacts on the drugmaker’s profit; An increasing revenue-sharing ratio is beneficial to the drugstores in certain scenarios, but reduces the total profit of the recycle system; Resale prices of UMs and governmental tax relief policies both dominate the drugmaker’s optimal ratio of the resold and donated UMs.