Order quantity optimization in a two-level pharmaceutical supply chain

Drug has a great and crucial role in both the health systems and the quality of life, and therefore its shortage can cause great damages. in order to the important role of drugs, pharmaceutical supply chain (psc) should ensure that drugs are delivered to people in the right time with the best quality. the supply chain (sc) members have a great dependence to each other and share resources and information. this dependence increases 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 coordination is a crucial issue. this paper studies a psc model with a single active pharmaceutical ingredients and a single finish pharmaceutical product. for this purpose, decentralized and centralized structures are investigated and a coordination mechanism is developed. this mechanism is based on the buyback contract in order to encourage the 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 increase so it can effect on the amount of manufacturing orders. by using buy back contract, the profit of each sc member increases in comparison with the decentralized decision-making structure.