Thursday, April 11, 2013

Pharmaceutical shortages

Today I have completed a paper about pharmaceutical shortages. My primary finding was that the bullwhip effect was starting at hospitals out of fear of a potential pharmaceutical shortage. This fear is leading hospitals to stockpile inventory, which makes the pharmaceutical even worse.

The bullwhip effect, for those that don't know, occurs when demand increases at one point in a supply chain and triggers ever increasing demand throughout the supply chain. For example, if we all go and buy milk before a storm, then our grocer will order more from their supplier of milk. This supplier will see an unusual spike in demand and will order even more from its supplier, thus amplifying the problem. This cycle continues through out the supply chain, until demand drops off suddenly, because everyone is over stocked. Once demand drops off, the entire cycle starts over again. This variance-of-demand cycle is not good for a firm's production schedule.

To prevent this from happening firm's within this supply chain should communicate and share more information. In addition, better lead times and forecasting can help. Also, government policy can play a role in allowing manufacturers to respond more rapidly to changing demand. Currently, government policy restricts pharmaceutical manufacturers from making more product than was originally forecasted. Therefore, if more is needed, a manufacturer must ask the Drug Enforcement Agency (DEA) if this is okay to do.

The best part about finishing this paper is how good it feels to have it done and out of the way. I wish I could bottle the feeling! Now...on to the next one.