On the value of warehouse sharing in an inventory system for medical consumables

Purpose This paper investigates the value of warehouse sharing when a third-party service provider (3PS) manages medical consumables inventory instead of hospitals. With the advancement of information technology, the 3PS commonly establish central warehouses to facilitate horizontal collaboration, replacing separate client-specific warehouses. Design/methodology/approach We examine warehouse sharing in a decentralized supply chain with multiple suppliers, multiple hospitals and a 3PS, considering two scenarios: no sharing and warehouse sharing. Based on the economic order quantity (EOQ) model, cost functions for suppliers and the 3PS are built in a continuous-time, constant-demand setting, where delivery intervals are sequentially determined. Findings Warehouse sharing results in more frequent shipments from suppliers than no sharing when the delivery frequency required by hospitals is high, but causes more frequent 3PS shipments than no sharing under intermediate hospital delivery frequency requirements. When requesting a low delivery frequency, both suppliers and 3PS may make less frequent deliveries than without sharing. Numerical experiments show that warehouse sharing benefits suppliers but may harm 3PS profitability due to misaligned scale effects. Furthermore, collaborating with larger hospitals that require more suppliers is more profitable for the 3PS. Originality/value This research analyzes warehouse sharing in a decentralized healthcare supply chain and identifies how hospital delivery requirements non-monotonically affect warehouse sharing's value, revealing a counterintuitive cost trade-off: warehouse sharing improves supplier efficiency but reduces 3PS profitability due to misaligned scale effects.