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.
You Can Count on It
Proper inventory management saves money by ensuring that your practice stocks precisely what it needs. Your online store can sell even more products.
Start With Your ReportsPrint 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.
Do a Physical CountOnce 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.
Watch for TrendsPaying 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 PharmacyA 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.
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.