Inventory Control Optimisation in a Nigerian Pharmaceutical Distribution Company Using EOQ Models

Inventory mismanagement in pharmaceutical distribution chains leads to drug stockouts, product expiry losses, and compromised patient care outcomes across Nigeria's healthcare system. This study applies the Economic Order Quantity model and its extensions, including the quantity discount model and the inventory model with shortages, to optimise the inventory control system of a pharmaceutical wholesaler operating out of Ibadan in Oyo State, South West Nigeria. Monthly demand data, holding costs, ordering costs, and lead times are collected for 35 essential drug categories over a 24-month period. Demand variability is analysed using coefficient of variation statistics to classify items under stable and uncertain demand regimes. Reorder points with safety stock buffers are computed using probabilistic demand distributions to achieve a 95 percent service level target. The optimal order quantities derived from EOQ analysis reduce total annual inventory cost by an estimated 22 percent compared to the current ad hoc ordering practice. Sensitivity analysis examines the cost impact of holding cost rate variations between 15 and 30 percent. The study further identifies 12 drug categories where quantity discounts justify deviation from the base EOQ recommendation. Implementation of the proposed inventory policy is projected to reduce annual expiry losses by 1.8 million naira. Keywords: EOQ model, inventory optimisation, pharmaceutical distribution, Ibadan, safety stock.