Objectives Outsourcing an online pharmacy logistics business to a third-party logistics service provider (TPLSP) may provide two advantages: saving logistics costs and improving logistics services. However, difficulties exist in balancing the interests of online pharmacies and TPLSPs. In this paper, we studied the dynamic coordination mechanism of online pharmacies and TPLSPs with a shared savings contract.
Methods To find out whether online pharmacies have decision-making power or not, we analyzed the dynamic optimal decision-making modes of both TPLSPs and online pharmacies. By combining the shared savings contract with the logistics outsourcing contract, we established a dynamic inventory and transportation integrated optimization (ITIO) model of an online pharmaceutical supply chain based on a shared savings contract. With that model, we analyzed the dynamic optimal decision making of the sharing arrangement, the effort level and the logistics service price and compared the dynamic decision-making process of decentralized optimization with ITIO, and analyzed the impact of the shared savings contract and the level of effort on the dynamic ITIO and system performance.
Results In the dynamic ITIO model, the profits of the online pharmaceutical supply chain and logistics service provider are both higher than those of the decentralized optimization model. However, compared with the LSP, the profit of online pharmacies was less. In the dynamic ITIO model based on a shared savings contract, the profits of the whole supply chain, the online pharmacies and the logistics service providers all increased with the shared saving parameter within a certain range. The profits of online pharmacies and logistics service providers also changed as the contract parameters varied within this range.
Conclusions A shared savings contract is an effective way to realize dynamic inventory and transportation integrated optimization in an online pharmaceutical supply chain and can increase the income of the whole supply chain and of each participating party.
Acknowledgments This research was financially supported by the NSF of China (Grant Nos. 71262031, 71362029, 71562036), Youth Leaders of Academic and Technical Projects of Yunnan Province (Grant No. 2014HB009) and Yunnan Provincial Doctoral Discipline Development Plan (Applied Economics).