Improving the Efficiency of the Influenza Vaccine Supply Chain
ISE Magazine – Volume 49: Number 04

Every fall, people decide whether to get vaccinated for the upcoming influenza season. When the vaccination is paid for by a publicly funded healthcare system, the government orders the vaccines from the vaccine manufacturer and then administers the vaccines through the public health system.

In an influenza vaccine supply chain consisting of government, manufacturer and people, uncertainties in both vaccine demand and vaccine supply make it challenging to manage the supply chain. First, the manufacturing process involves the use of eggs and is subject to uncertain yields, causing uncertainty in supply. Second, vaccine demand depends on choices made by people who act in their own self-interest. Specifically, people’s vaccination decisions depend on factors such as vaccination cost, infection cost, other people’s vaccination decisions (the “free-riding effect” where people experience a lower infection probability if other people get vaccinated) and the total amount of vaccine available.

Researcher find that people have limited incentive to vaccinate due to the free riding effect when there is no vaccine shortage but maximum incentive when there is a vaccine shortage. The vaccine manufacturer and the government have limited incentives for vaccine production and vaccine demand promotion. In addition, because of uncertain demand and uncertain supply, the efficiency of the influenza vaccine supply chain is low.

To improve the performance of the vaccine supply chain, this research proposes several contracts, including a payment between the government and the manufacturer, that lead to coordination. This includes an outcomes-based contract where payment partially depends on the number of infections and a contract with a simple piecewise linear structure based on order quantity. These findings provide a viable method for the government to design contracts to manage the vaccine supply chain efficiently.