chapter  6
20 Pages

- Logistics and Retail Pharmacies: Providing Cost-Effective Home Delivery of Prescriptions

ByYi-Chin Huang, Michael J. Fry, Alex C. Lin

The retail pharmacy industry in the United States is dominated by a few large drugstore chains and pharmacies associated with grocery and discount stores. CVS, Walgreens, and Rite Aid are the three largest drugstore chains; combined they hold more than 35% of the total market share in the United States. Grocery stores and discount chains such as Kroger and Walmart also make up a large portion of retail pharmacy sales. This makes it very challenging for smaller drugstore chains and independent pharmacies to compete, especially on accessibility. Many smaller retail pharmacy chains emphasize high customer service levels and additional services not available at the larger chains in order to compete. One additional service offered by some smaller

CONTENTS

6.1 Introduction ................................................................................................ 125 6.2 Background ................................................................................................. 126 6.3 Modeling Background: Traveling Salesperson Problems (TSPs)

and Vehicle Routing Problems (VRPs) .................................................... 127 6.4 Data Preparation ........................................................................................ 130 6.5 Scenario I: Decentralized Scenario Models............................................ 131

6.5.1 General TSP Model ........................................................................ 131 6.5.2 Max-Flow Model ............................................................................ 132

6.6 Scenario II: Hybrid Scenario Models ...................................................... 133 6.6.1 Revised TSP Model ........................................................................ 134

6.7 Scenario III: Centralized Scenario Model ............................................... 135 6.7.1 Vehicle Routing Problem .............................................................. 135

6.8 Solution Comparisons ............................................................................... 136 6.9 Conclusions ................................................................................................. 140 References ............................................................................................................. 141

pharmacies is home delivery of prescriptions. Many customers receiving prescriptions are elderly or ill. Traveling to the pharmacy to pick up prescriptions can be an added nuisance and, in some cases, impossible for these patients.