Mergers and Acquisitions in Blood Banking Systems: A Supply Chain Network Approach

Blood banking systems in the United States over the past decade have been faced with a volatile demand for blood, specifically, a decrease in demand for red blood cells, for a variety of reasons. This change in the blood supply chain landscape, accompanied by an increasing emphasis on cost efficiency, is a driver of Mergers & Acquisitions between blood banks. In this paper, we first present supply chain network optimization pre- and post-merger models. The models handle perishability of the life-saving product of blood, include both operational and discarding costs of waste, capture the uncertainty associated with the demand points, as well as the expected total blood supply shortage cost and the total discarding cost at demand points. They also incorporate capacities on the links. Their solution yields the optimal path and link flows plus the frequencies of activities associated with blood collection, shipment, testing and processing, storage, and distribution, and incurred total costs. We provide a cost efficiency (synergy) measure associated with a merger or acquisition in the blood banking industry, as well as measures capturing the expected supply shortage and surplus. The methodological framework and its applicability are then illustrated via a large-scale blood supply chain network example inspired by a pending merger in the real-world in both status quo and disaster scenarios.