Research from Washington University in St. Louis’ Olin Business School demonstrates that the distribution and delivery system for influenza vaccines needs to be improved to avoid shortages.
In the U.S., influenza is the most prevalent cause of death from diseases that are preventable with vaccines. Unfortunately, there is a vague guideline for on-time vaccine deliveries and during peak influenza season, there may be shortages of the vaccine. This happened in 2014.
The new research suggests a novel contract scheme that would decrease the amount of time that patients spend waiting for their influenza vaccine.
“In the past, we have seen major flu vaccine shortages during the vaccination season, even though the total supply for the flu vaccines was abundant,” Fuqiang Zhang, professor of operations and manufacturing management at the Olin Business School, said. “The major reason for this is because of late delivery.”
Vaccine manufacturers begin developing seasonal influenza vaccines month ahead by estimating which strains need to be included in the vaccine. If they estimate incorrectly, then they will need to restart their development.
Retailers, subsequently, plan for the shipments to be delayed. They order small amounts of the vaccine to avoid having unused doses on hand, which makes manufacturers hesitant to produce large vaccine quantities.
“Two parties are making their own decisions, but they are dependent on each other,” Zhang said. “When you have a decentralized supply chain with independent parties and they are self-interested, they may not want to make decisions that are optimal for the entire supply chain. They will make decisions that maximize their own payoff or profit.”
Zhang recommends a Buyback and Late Rebate contract. These time sensitive buybacks would eliminate the feedback loop.
“If you use buyback and late rebate separately, they don’t solve the whole problem,” Zhang said. “We found that combining these two incentive contract terms, we optimize the supply chain’s performance and maximize its efficiency.”
