Drug inventory management and distribution: outsourcing logistics to third-party providers

Purpose – The purpose of the present research is to explore the current situation and future expectations on whether to self-manage or outsource logistics operations in centralized healthcare networks, and to analyse and quantify the relationships between logistics outsourcing, costs and performance. Design/methodology/approach – The paper is based on a thorough study of a local Italian healthcare network, which evaluated the economic sustainability of logistics outsourcing. The data were collected using interviews, documentation and observations in hospital pharmacies and wards, and by referring to public information available on the internet. A system dynamic simulation followed by a sensitivity analysis was used to investigate the impact of changing key variables as well as the advice of logistics providers. Findings – The sensitivity analysis demonstrates that logistics outsourcing is often the most economical choice. Social implications – Performance-oriented concepts applied to healthcare have many pros in terms of sustainable delivery of quality healthcare at affordable costs. Originality/value – While there are numerous studies on logistics outsourcing in many industries, when it comes to the healthcare sector literature is scarce, probably due to the great changes this sector has faced in recent times: thus, the paper's quantitative findings should be seen as a first attempt to assist the “make-or-buy” decision process toward sustainable development of the healthcare sector.