Inventory management has a huge financial impact on your independent pharmacy. When your inventory isn’t being managed in an optimal way, it means cash is sitting on your shelves instead of in your pocket. This significantly restricts your cash flow and the ability to settle everyday expenses.
Today, we are going to crack the code on inventory for your independent pharmacy. We’ll do this by highlighting common mistakes, exploring best inventory management practices, and setting attainable goals for inventory turns.
The PDS benchmark is 16 inventory turns per year. To us, this indicates that inventory is being optimally managed. Some of our members have even exceeded this goal.
To achieve this goal, you need to know the ‘why’ behind your inventory levels. For many independent pharmacy owners, the reason is simply that they need to have the right products in at the right time. If you don’t have the right product in, you can’t dispense it. However, if you have too much of a product, it’s sitting on the shelf tying up your dollars. Taking control of your inventory means establishing best practices for satisfying your ‘why’ without overcompensating.
Some of the most common reasons for low inventory turns are a lack of proper policy and procedure, improper medical synchronization program, and a lack of team education.
The Impact of Inventory Control
In an ideal world, you would order your inventory and close up at the end of the day with nothing on your shelves and have no out of stocks. You would open the next day and have the same result. Although this isn’t a realistic goal for most pharmacies, it’s an important image to keep in mind when managing your inventory. When you optimize your inventory management with this in mind, you’ll experience greater operational efficiency, improved cash flow, and enhanced employee and patient satisfaction.
Creating a clear and straightforward process around inventory management unlocks operational efficiencies. Providing standardization of processes and reducing duplication of work allows you to reassign pharmacy duties and tasks to improve workflow.
Unnecessary inventory sitting on your shelf means fewer dollars in your pocket. When you manage your inventory with purpose and intention, reduce overstock, and increase inventory turns, you will generate greater cash flow for your pharmacy. This also means you will lose less money on outdated stock.
Employees and patients alike will experience greater satisfaction when you take control of your inventory. Staff will be less anxious and patients will deem your pharmacy more reliable when there are fewer out-of-stock products. Watch your pharmacy team thrive when you give them the opportunity to take ownership of this process.
As you dive into optimizing the management of your independent pharmacy’s inventory, be sure to consider each of these three areas separately: your medication inventory, your OTC inventory, and your supplies inventory.
Medication inventory is your main area of consideration because it has the highest value, meaning it has the greatest impact on your cash flow and your bottom line. In a poorly managed inventory, employees will allow your medication inventory to grow out of control to avoid out-of-stock concerns. In an optimal inventory management system, you have calculated the required number of each item to have on hand and your team simply needs to respond to the plan you have in place.
OTC inventory is important to your pharmacy’s financial health, but it can be easy to forget about. Use the same approach to your OTC inventory management as you do with your medication inventory and don’t hesitate to remove items that don’t sell. You can also take this opportunity to add higher margin OTC items. Think about what your customers are looking for and what you can offer to make your pharmacy stand out.
When it comes to supplies, your needs will vary based on the nature of your pharmacy. Assess your pharmacy’s unique needs and consider ways to increase efficiency in your supply chain. In your office, this may mean investing in a more energy-efficient printer that takes a less expensive toner. For packaging, you may explore a more cost-effective option for vials and labels.
Take Control With PDS
Your inventory metrics and goal setting should not be left to guesswork or trial and error. In fact, when you work with a PDS coach, you’ll have access to calculations and members-only documents to take control of your inventory management. Our worksheets include an inventory control worksheet, an inventory reduction worksheet, and an inventory calendar that will all help you optimize your inventory management and free up much-needed cash resources. Book a free consultation with us today to get started.