Getting Technical columnist Sandy Walsh is a veterinary practice management consultant, speaker and adviser. She is an instructor for Patterson Veterinary Management University and continues to work in a small animal practice. She has over 35 years of experience in the veterinary field and brings her in-the-trenches experience directly to readers.Read Articles Written by Sandy Walsh
Inventory management is a challenge for most veterinary practices. Drugs and supplies are typically a clinic’s second-largest expense and the most difficult costs to control. We must stock enough products on the shelves, without going overboard, to meet the needs of clients and patients. It’s a balancing act. We can’t afford to run out of the medications and products we need to provide the necessary medical care.
Add to the challenge the uptick in pet ownership and the demand for veterinary care and we have an even more critical need for sound inventory management systems. Managers and veterinary technicians spend a great deal of time managing inventory or supervising others who do. Let’s make that time count with some simple strategies and maybe a renewed emphasis on our online pharmacy options.
The first step in getting a handle on inventory is to figure out its status. Look at your financial statements to check the percentage of monthly revenue spent on inventory items. You must know where you are to see where you need to go. Next, check industry benchmarks and use them as a guideline for acceptable inventory costs. Just keep in mind that every practice is different. What works for other clinics might not work for yours. Once you know what you’re spending on inventory, you need to evaluate what’s on the shelves. It’s the fastest way to decide whether your inventory is in line.
A lack of time, too little training and the inefficient use of software are the most common causes of out-of-control inventory. This expense category cannot be left to chance. If you visualize your inventory as stacks of cash sitting on the shelf, your perspective might change, reinforcing the fact that inventory is a practice asset. Like any other asset, your stock must be controlled and protected.
Start With Your Reports
Print a complete inventory list from your practice information management system. The goal is to clean up the ugly. For example:
- Delete or inactivate obsolete items.
- Make sure everything is classified correctly.
- Check for typographical errors. Medications and products are reflected in the medical record, so make sure the descriptions are accurate.
- Identify duplicate items and think about consolidation.
Address the issue of duplicate products with the doctors. Such items can and should be pared. If several products accomplish the same goal — similar heartworm medications, flea and tick products, antibiotics, NSAIDs and shampoos, for instance — determine which ones need to be kept in stock. When new products launch, give them careful consideration before adding any to your inventory. If the new item can replace an old favorite, there is no reason to carry both. Also, conduct a review based on best medical practices and have only the products that support your philosophy. You can sell other items through your online pharmacy. That way, you can offer products your clients demand and not have to stock them on your shelves. This advice also applies to pet food.
Do a Physical Count
Once the cleanup and consolidation are done, the next step is to look at what’s on hand. Here’s how:
- Count each item.
- Check expiration dates, pulling out-of-date items and setting them aside for return or proper disposal.
- Flag short-dated items for return or immediate use.
- Update your software with the correct inventory totals.
Now that you have a new starting point, enter all the items into your PIMS. Set your desired minimum quantities and the reorder points. When properly accounted for, all items dispensed, sold or used in-house are tracked within the software. You will have a reliable accounting of product movement. Accuracy is essential in inventory management. What you want to avoid from this point forward is garbage in, garbage out.
Watch for Trends
Paying attention to turnover rates, lead time and reorder points will help prevent an overstock situation and ensure that items are available when needed. The ideal turnover rate for most inventory items is 10 to 12 times a year, or roughly once a month. With good inventory management, you should be able to order your most-used items once a week. Ordering more frequently is not cost-effective because of the increased staff time spent on the task. If you manage your inventory well, you will sell or use items before paying for them.
Keep in mind the importance of inventory protection. Shrinkage — the loss of damaged, outdated, misplaced or stolen items — is an issue any time inventory is stocked in-house. Establish a first-in, first-out rotation policy. Remember to lock up expensive items such as heartworm and flea preventives and limit access to them.
Rethink Your Online Pharmacy
A trend that has become more popular because of pandemic concerns and restrictions is the desire to order online and ship products directly to a client’s home. Pet owners shop for medications and food online, and it’s not always about the price. It’s also about convenience. So, why not send clients to your online pharmacy rather than approve prescriptions for filling somewhere else?
If you don’t sell online, get started now. You can generate revenue from all the products you once carried in-house. Plus, you won’t incur many of the expenses of stocking the items on your shelves. It’s a win-win for these reasons:
- Less inventory on the shelf.
- Less time ordering and restocking products and entering them into the computer system.
- No shrinkage.
- Better client convenience and compliance.
- More revenue.