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The Unexpected Impact of Information Sharing on US Pharmaceutical Supply Chains

Author

Listed:
  • Leroy B. Schwarz

    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Hui Zhao

    (Krannert School of Management, Purdue University, West Lafayette, Indiana 47907)

Abstract

This paper examines a change in business practices in the pharmaceutical manufacturer-to-distributor supply chain, a change that essentially forced pharmaceutical distributors to maintain lower inventories. This change also provided pharmaceutical manufacturers with information about distributor customer demand and inventories that had previously been withheld from them. Supply chain theory and practice in other industries suggest that by improving decision making and implementation, companies can operate with substantially lower inventories. This happened in pharmaceutical distribution when a Securities and Exchange Commission investigation led manufacturers to force distributors to operate with less inventory. Theory and practice further suggest that manufacturers who are provided with relevant information that they did not have previously would take advantage of this information to reduce their inventories. This evidently did not happen in pharmaceutical manufacturing. We contend that pharmaceutical manufacturers either do not know how to take advantage of such information or they do not care.

Suggested Citation

  • Leroy B. Schwarz & Hui Zhao, 2011. "The Unexpected Impact of Information Sharing on US Pharmaceutical Supply Chains," Interfaces, INFORMS, vol. 41(4), pages 354-364, August.
    • Handle: RePEc:inm:orinte:v:41:y:2011:i:4:p:354-364
    DOI: 10.1287/inte.1110.0571
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    References listed on IDEAS

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    Cited by:

    1. Liang Xu & Vidya Mani & Hui Zhao, 2023. "“Not a box of nuts and bolts”: Distribution channels for specialty drugs," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2283-2303, July.
    2. Didier Raboisson & Ahmed Ferchiou & Tifenn Corre & Sylvain Perez & Pierre Sans & Guillaume Lhermie & Marie Dervillé, 2021. "Could Contracts between Pharmaceutical Firms and French Veterinarians Bias Prescription Behaviour: A Principal-Agency Theory Approach in the Context of Oligopolies," Post-Print hal-03148045, HAL.
    3. Xiaodan Zhu & Anh Ninh & Hui Zhao & Zhenming Liu, 2021. "Demand Forecasting with Supply‐Chain Information and Machine Learning: Evidence in the Pharmaceutical Industry," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3231-3252, September.
    4. Hui Zhao & Chuanhui Xiong & Srinagesh Gavirneni & Adam Fein, 2012. "Fee-for-Service Contracts in Pharmaceutical Distribution Supply Chains: Design, Analysis, and Management," Manufacturing & Service Operations Management, INFORMS, vol. 14(4), pages 685-699, October.
    5. Faghih-Roohi, Shahrzad & Akcay, Alp & Zhang, Yingqian & Shekarian, Ehsan & de Jong, Eelco, 2020. "A group risk assessment approach for the selection of pharmaceutical product shipping lanes," International Journal of Production Economics, Elsevier, vol. 229(C).
    6. Chatfield, Dean C. & Pritchard, Alan M., 2013. "Returns and the bullwhip effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 159-175.

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