Inventory Management Practices and Profitability of Pharmaceutical Companies in Enugu State

Poor inventory management remains a recurring challenge for pharmaceutical companies in Nigeria, resulting in stockouts, expired drug losses, and suboptimal cash flow management, all of which directly erode profitability in an industry characterized by narrow margins and strict regulatory oversight. This study examined the relationship between inventory management practices and profitability of pharmaceutical companies operating in Enugu State. The study was anchored on the economic order quantity model, which provides an optimal framework for minimizing total inventory costs including ordering and holding costs. A mixed-method research design was employed, combining survey and documentary analysis. The population comprised 124 inventory managers, financial controllers, and pharmacists working in registered pharmaceutical companies in the state. A sample of 95 respondents was drawn via census and proportionate stratified sampling. Structured questionnaires and financial statement data served as instruments. Data were analyzed using Pearson correlation and multiple regression analysis. Findings revealed that inventory turnover rate and adoption of computerized inventory tracking systems were positively and significantly associated with gross profit margin and return on assets. Firms that experienced frequent stockouts and expired inventory losses reported significantly lower profitability margins. The study concluded that disciplined inventory management is a material determinant of profitability in pharmaceutical firms. It was recommended that pharmaceutical companies in Enugu State should adopt real-time inventory management software integrated with sales data to minimize holding costs and stockout risks.

Keywords: Inventory management, profitability, pharmaceutical companies, economic order quantity, stockout