Alt DistributionBy Osama M. Elhelw
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Alt Distribution · Osama M. Elhelw

Inventory Optimization Model — EOQ · ROP · DOH · Authored by Osama M. Elhelw

Model Parameters

Network Parameters

Downstream pharmacy network

Wholesale Acquisition Cost

$

Units per partner per year

Cost Parameters

Processing, shipping, admin

$

Storage, insurance, capital cost

$

Supply Chain

Order-to-delivery window

Buffer inventory in days of demand

Growth Assumptions

Per-partner unit demand increase

+2%

New partners joining network

+1%

Wholesale acquisition cost increase

+0.5%

Processing & shipping cost trend

0%

Storage & capital cost trend

+0.25%

18-Month Network Projection

Modeling 50 downstream pharmacy partners ordering at WAC $125.00/unit with 2% monthly demand growth

Inventory Alerts

5 partners outside suggested range

1 Below ROP
4 High DOH
PharmaLink Dist.
trade
30.8d/ 17.8d target
QuickScript Cash Rx
Cash
32.6d/ 17.8d target
Metro Pharmacy
unassigned
27.9d/ 17.8d target
Valley Health Rx
unassigned
32d/ 17.8d target

EOQ per Partner

141 units

Month 1 → 164 at Month 18

Reorder Point

79 units

Safety stock: 46 units

Days on Hand

17.8 days

Avg inventory per partner

18-Month WAC Revenue

$30.75M

50 partners × 234.8K total units

Total 18-Month Inv. Cost

$230.1K

Ordering + holding across network

Avg Monthly Demand

13.0K units

Across all partners

Network Inventory Value

$1.17M

Month 18 avg on hand

WAC per Unit

$125.00

Wholesale Acquisition Cost

Partner Network Classification

9 total

Drag partners between zones to classify as Trade (contracted) or Non-Trade (cash-only)

Unassigned Partners
3

Drag partners into a network zone below

Metro Pharmacy
Valley Health Rx
Summit Care Pharmacy
Controlled Network — Trade Units
4

Contract-based partners with negotiated trade pricing & terms

CareFirst Rx
MedStar Pharmacy
National Drug Supply
PharmaLink Dist.
Non-Trade Units — Cash Only
2

Cash-pay pharmacy partners, no contract pricing

QuickScript Cash Rx
DirectPay Pharmacy

Fee Revenue Summary — 18 Months

Total WAC Revenue (18 mo)$30.75M
Distribution Fee @ 3.5%$1.08M
Prompt Pay Discount @ 2%-$21.5K
Data Fees (9 partners × 18 mo)$24.3K
Compliance / Licensing (18 mo)$9.0K
Analytics / BI Access (18 mo)$4.5K
Volume Rebate (qualified)-$461.3K
Net Fee Revenue (18 mo)$631.3K

Partner Mix

4

Trade

2

Cash-Only

3

Unassigned

Pharmacy Network Growth Model

18-month forecast

Model pharmacy partner onboarding, churn, and revenue contribution — feeds into network contracts

New pharmacies/month

Monthly acceleration %

%

% partners leaving

%

Annual units ordered

units
$

% of network on contract

%

Days to activate

days

107

Month 18 Partners

117

Total Joined

75/32

Trade / Cash

$26.5M

18-Mo Revenue

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 280306090120

Inventory & Cost Growth Trend

Total Network Inventory (units)

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 2802.5K5.0K7.5K10.0K

Total Monthly Costs

Oct 26Dec 26Mar 27Apr 27Jun 27Jul 27Sep 27Nov 27Jan 28Mar 28$0$4.0K$8.0K$12.0K$16.0K
  • Ordering Cost
  • Holding Cost

Total Inventory Value & Revenue

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 28$0$600.0K$1.2M$1.8M$2.4M
  • Monthly Revenue
  • Inventory Value

EOQ & Reorder Point (per Partner)

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 2804590135180
  • EOQ
  • ROP

Days of Inventory on Hand (DOH)

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 2805101520

WAC Revenue & Inventory Value (Total Network)

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 28Mar 280600000120000018000002400000
  • $ WAC Revenue
  • $ Network Inv. Value

Inventory Cost Breakdown (Total Network)

Oct 26Nov 26Dec 26Jan 27Mar 27Mar 27Apr 27May 27Jun 27Jul 27Aug 27Sep 27Oct 27Nov 27Dec 27Jan 28Mar 280400080001200016000
  • $ Ordering Cost
  • $ Holding Cost

18-Month Projection

MonthDemandEOQROPSafety StockDOHAvg Inv.Orders/MoOrder CostHold Cost
Oct 26200141794617.81171.4$106.07$106.07
Nov 26204143804717.61181.4$107.26$107.26
Dec 26208144824817.51201.4$108.46$108.46
Jan 27212145844917.41211.5$109.67$109.67
Mar 27216146855017.31231.5$110.90$110.90
Mar 27221148875117.21251.5$112.15$112.15
Apr 27225149895217.11261.5$113.40$113.40
May 27230150915316.91281.5$114.68$114.68
Jun 27234152925416.81301.6$115.96$115.96
Jul 27239153945516.71311.6$117.26$117.26
Aug 27244154965616.61331.6$118.58$118.58
Sep 27249156985716.51351.6$119.91$119.91
Oct 272541571005816.41371.6$121.25$121.25
Nov 272591581026016.31391.6$122.61$122.61
Dec 272641601046116.21411.6$123.98$123.98
Jan 282691611066216.11421.7$125.37$125.37
Mar 2827516210863161441.7$126.78$126.78
Mar 282801641106415.91461.7$128.20$128.20

Formula Reference

Economic Order Quantity (EOQ)

EOQ = √(2DS / H)

D = Annual Demand (units)

S = Ordering Cost per Order ($)

H = Holding Cost per Unit/Year ($)

Reorder Point (ROP)

ROP = (d × L) + SS

d = Average Daily Usage

L = Lead Time (days)

SS = Safety Stock (units)

Days of Inventory on Hand (DOH)

DOH = (Avg Inv. Value / COGS) × 365

Avg Inv. = Average Inventory Value ($)

COGS = Cost of Goods Sold ($)

Alt Distribution Fees

Distribution Margin

Alt Distribution markup on WAC

3.5%

Floor fee regardless of WAC %

$

Payment Terms

Net days for invoice payment

days

Discount if paid within prompt window

2%

Days to qualify for prompt discount

days

% penalty on overdue invoices

1.5%

Service & Data Fees

867, 852, chargeback data feeds

$

DSCSA serialization, pedigree

$

Dashboard & reporting access

$

Per-claim processing fee

$

Volume Incentives

Annual units to qualify for rebate

50000 units

% rebate once threshold is met

1.5%
Osama M. Elhelw·Author & Architect — Inventory Optimization & Distribution Network Modeling
AboutContactAltEOQ Analytics · By Osama M. Elhelw

Authored by Osama M. Elhelw: 18-month pharmaceutical inventory optimization model calculating Economic Order Quantity (EOQ), Reorder Point (ROP), Days on Hand (DOH), WAC pricing, distribution fee schedules, partner efficiency rankings, and automated contract templates.

EOQ, ROP & DOH Mathematical ModelingWholesale Acquisition Cost (WAC) & Distribution Margin DesignTrade vs. Cash Pharmacy Network ClassificationPrompt Pay, Data Fee & Volume Rebate ForecastingManufacturer & Pharmacy Distribution Agreement DraftingQuarterly Business Review (QBR) Executive Reporting
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