Order quantity optimization in a two-level pharmaceutical supply chain

Drug has a great and crucial role inboth the health systems and the quality of life, and thereforeits shortage can cause death.In order to the important role of drugs,pharmaceutical supply chain(PSC) shouldensure that drugs are delivered to people in the right time with the best quality.On the other hand, thesupply chain (SC) members depend on each other for resources and information, and it has increased in recent times due to outsourcing, globalization and rapid innovations in information technologies. This increase brings some extent of risk and uncertainty along with benefits for them and so, SC coordinationis a crucial issue. Thispaper studies a PSCmodel witha single active pharmaceutical ingredientsand a single finish pharmaceutical product. For this purpose, decentralized and centralized structures are investigated. Then,a coordination mechanism is developed based on the buyback contract in order to encouragethe SC members to make decision by considering each other's profit to simulate the condition of decentralized SC versus centralized one.In order to demonstrate the effect of the proposed coordination model, numerical examples and sensitivity analysis are provided. The results show that by applying buy back contract, in coordination structure the order amount of raw material and the profits of the pharmaceutical supply chain will increaseso it can effect on the amount of manufacturing orders.By using buy back contract, the profit of each SC member increasesin comparison with the decentralized decision-making structure.