Two-echelon pharmaceutical reverse supply chain coordination with customers incentives

Abstract

In the pharmaceutical industry, leftover medications that have not been properly disposed not only damage the environment but also might turn into a peril to people׳s health if being redistributed illegally in undeveloped countries. In contrary, if they are returned to the pharmaceutical producer before their expiry dates, they can be sold at subsidized prices or donated in such countries. In this research, we explore the role of providing incentives to customers in order to facilitate leftover returns and improve the sustainability for a real pharmaceutical reverse supply chain (RSC). Moreover, this research investigates the effect of having a proper coordination method between a producer of medications and third-party logistics (3PL) companies, responsible for collecting unwanted medications from customer zones. Finally, a technique is also proposed to share the RSC׳s saving among the producer and the 3PL companies. The experimental results on a real case study indicate that introducing incentives to customers could decrease the amount of uncollected medications from 18% up to 6.5%. Furthermore, having a proper coordination with 3PL companies could guarantee a full medication recovery.