IMPROVING EFFICIENCIES IN PHARMACEUTICAL DISTRIBUTION CHANNELS USING THE ECONOMIC ORDER QUANTITY MODEL

The purpose of this study was to investigate empirically the potential cost savings to a pharmaceutical wholesaler using the Economic Order Quantity (EOQ) model. This model allows for calculating the order quan tity that minimizes both ordering and holding costs. A regional pharma ceutical wholesaler was selected for a case analysis study using the E OQ model. Eleven brand name products were randomly selected for the an alysis. The average yearly cost savings using EOQ was $31.92 per produ ct. The potential yearly cost savings based on 8500 brand name stock-k eeping units was $271,320. Using EOQ can therefore assist pharmaceutic al wholesalers in minimizing holding and ordering costs and improve ef ficiency for pharmaceutical distribution channels.