Taking Control of Your Veterinary Inventory
September 29, 2014
Taking control of your veterinary inventory doesn’t have to be that difficult, although it does require a plan, an inventory specialist, budget, and given the appropriate time to be maintained.
The worst part of any day in a veterinary hospital is needing something and not having it! This could be a prescription refill, anesthetic drug, disinfectant, specialty diet or surgical instrument. Nothing is more frustrating! One of those times you want to scream, “HEADS ARE GONNA ROLL!”
I imagine you have experienced this scenario. It is baffling this occurs with all the newest technology, overnight shipping, skilled team members, and online options. Together we will identify ways to improve your supply and demand needs.
Benefits of Having an Inventory Plan
Without a focused inventory plan, inventory (or more appropriately the lack of it) will manage your practice instead of you managing it! There a many advantages to having a defined, applicable plan. Benefits include:
- Increased profitability (that’s a good thing)
- Improved cash flow (another great concept)
- Improves decision making (we all need guidance in this)
- Increases client satisfaction (the primary reason we exist, for the client)
With these outlined benefits, it seems like a no-brainer, having an inventory plan is a Win/Win situation!
Inventory Manager/Specialist/Team Captain
In my experience, identifying one or two people to oversee your inventory, is imperative! Inventory is a Team Sport, with everyone on the team understanding their role, with one Team Captain calling the shots, having a bird’s eye view and empowered to handle the Ins and Outs of Inventory. This person can increase communications around inventory, accurately count inventory on hand, establish reorder points, make orders in a timely fashion, oversee intake and restocking, update data entry, training, and much more.
A team member possessing the following traits can become an incredible asset when they are allowed to take the reins and empowered to maintain the hospital’s inventory, becoming the Team Inventory Captain or Specialist:
- Communicates well with managers, supervisors, veterinarians and team
- Detail oriented, working within a budget and offering reports on a quarterly basis
- Ability to delegate and train team members
- Computer savvy
- Willing to build strong relationships with pharmaceutical representatives
- Enjoys researching and data entry
- Desire to see your veterinary hospital succeed by keeping supply costs down and properly maintained
As in all positions in the hospital, a job description is crucial to establish expectations of the role. Listed are a few duties and tasks. You can find a detailed job description on CATALYST Veterinary Practice Consultants’ Facebook page in the Notes section: https://www.facebook.com/catalystvetpc?ref=hl
- Maintain, oversee and direct actions for appropriate ordering & stocking of pharmaceuticals, hospital & office supplies.
- Design & implement an effective inventory-turnover tracking system that is both efficient & saves money.
- Annual review & update of minimum drug and hospital supplies.
- Train staff to properly utilize inventory Standard Operating Procedures (Ins & Outs of inventory)
- Establish and/or maintain data entry & budget for accurately inventorying products & supplies.
- Place orders for supplies, take a weekly hand count of primary drugs & supplies, weekly.
- Create & maintain professional relationships with industry partners & distributors.
- Oversee online pharmacy working closely with the practice manager.
Continue to support your Inventory Team Captain with courses and formal training. Often times your Distributor and Representatives will provide training. Statistically, we use 20% of the computer veterinary software and this may be the case with your inventory applications. Consider formal training in regards to using more of the software you currently have. The American Animal Hospital Association (AAHA), Veterinary Support Personnel Network (VSPN- Inventory Ins & Outs: https://www.vin.com/ce/STAF170-1014.htm) and MWI offer advanced training workshops in Inventory Control. Take advantage of these courses and empower your Inventory Specialist.
When managing a Western Slope veterinary hospital, we did identify a team member as a prime candidate to oversee the inventory. Kelly and I developed her new job description (¾ technician duties and ¼ inventory specialist). At the beginning, we met on a weekly basis to make sure all was going as planned. She was given a flexible schedule which allowed her to come in on the weekends for data entry and physical inventory count. She was able to drastically improve inventory control in three months. I strongly recommend you support one team member (or two) as your Inventory Specialist. When we first created her position, she spent 10 hours a week focused on cleaning up the data entry, entering appropriate calculations, comparing on-hand quantities with computer counts, and creating ordering templates. AAHA states, “The average time spent for a full time team member in the veterinary practice would be about 11% or 4 hours a week.”
Establishing ordering and restocking protocols offers consistency in training. Creating Standard Operation Procedures (SOPs) around inventory maintenance is an effective way to create continuity. The benefits of having established SOPs for inventory include:
- Fewer mistakes and adequate supplies on the shelf
- Decreases frustration and builds confidence
- Policies are followed and updated with formal training
- Tasks are performed properly & consistently
You may be familiar with Pareto’s Law, also known as the 80/20 Rule. This concept applies to inventory as well. 20% of your inventory is used 80% of the time. Focus on these supplies and NEVER RUN OUT! Decrease “Heads are gonna roll” scenarios!
Be sure your SOP contains an accurate list of your top 20% of drugs and hospital supplies. Other categories include seasonal supplies and special veterinary requests. Outline the drugs and supplies your clients can order from your Online Pharmacy. Outline weekly, monthly, quarterly, semi-annual and annual orders and reviews of inventory. Remember, year-end inventory can be a Team Sport, delegating specific areas, zones or supplies between team members. Your SOP will include a protocol for receiving inventory, properly communicating information on the invoice, restocking, and data entry. Establish a policy for soon-to-expire drugs (that means BEFORE they expire!), especially the Controlled Drugs.
A predominant duty of your Inventory Specialist is training of your new team members. Incorporate Inventory training into your Phase Training program.
Yes, budgeting directs the purchases and guides buying decisions. I often see various benchmarks for inventory supplies. They can range anywhere from 15% to 20%. I think the difference depends upon what you choose to track. As an example, your Inventory Budget may include Drugs & Supplies, Nutrition Products, and Flea & Tick supplies. The important thing is to track the same items the same way, consistently, each time. I have seen Chart of Accounts set up so randomly that a team member may enter a supply under one category one month and different category the next month. You are encouraged to evaluate your Accounts for simplicity and consistency.
To establish your budget, determine historical ordering and establish your targets for a weekly or monthly tracking. Current Benchmarks for inventory may be found by researching on the internet, Budgeting, it’s not hard and it will saver your bacon (https://veterinarycalendar.dvm360.com/budgeting-its-not-hard-and-it-will-save-your-bacon-proceedings ), purchasing the most recently published Study of Well-Managed Practices (https://www.industrymatter.com/benchmarks2013.aspx ), or speaking with your accountant. Again, some benchmarks will read between 16%-18%, but that may not include laboratory supplies or pet food. Be consistent in your tracking.
OH, my, auditing can show you precisely where your hospital is losing money, left and right! These are services you are offering and the charges are being left off the invoice (for a variety of reasons!) Jamie, a credentialed veterinary technician working at a large, general practice in California, audits medical records and inventory data. She explained to me in the first 4 months of her new position as auditor she:
- Identified over $30,000 in what would have been lost charges
- Discovered gaps in training protocols
- Designed a team approach to revenue retention
- Improved protocol compliance
- Implemented a more simplified charging structure
- Fashioned a smoother control drug audits/compliance
Need I say more!?
For a couple of years I worked at a human hospital in rural Colorado and it was my job to stock and track charges in all departments of the hospital. When I identified missed charges I would literally hunt down invoices, cross reference and investigate the fees. That’s all I did and I paid for my wage four times over! The point is, regardless of the size of your hospital, establish an internal invoice auditing system. As Jamie has shown, in a year’s period of time she has easily paid for her wage and properly invoiced their clients for services they have already received. Here is an interesting article on the same topic of lost charges, How to Pull Through the Tough Economy: https://veterinaryteam.dvm360.com/how-pull-through-tough-economy?id=&sk=&date=&pageID=2
Another topic that has received hours of dedicated time at local, state and national conventions: Online Pharmacies. The simple question is this, “How can you offer a valuable service and convenience to your clients?” The answer is offer an Online Pharmacy.
- Trim down to a mean, lean in-hospital inventory level (this is a GOOD THING!)
- Computer reminder pop-ups stating pet needs a prescription refill and team members contact the client, increasing client satisfaction, bonding and compliance (more GOOD STUFF!)
- Client convenience, they are ON the computer, make it easy to use your online services!!
- Online pharmacies have become far easier to navigate and may save your Inventory Specialist time,
- Your team will have less training and fewer drugs to recommend and “sell” in-house,
- Decreased shipping/delivery charges….and the list goes on…..
- Properly charging for the drug online, but that has to be a priority for in-hospital supplies, too.
- Having a website, which if you don’t have a website you probably aren’t reading this material
- …….that’s about it on the con side….
By taking control of your veterinary inventory you improve the bottom line, efficiency and client satisfaction. Seems like a Win/Win situation! What is your inventory plan, now? Will you be identifying an Inventory Specialist or offering your current inventory manager educational courses? Will you be defining a budget or reviewing your established budget against benchmarks? What about designating a person to review invoices and creating an internal audit position? How about the Online Pharmacy offering?
Let CATALYST know how we can help you. We are eager to help you get your inventory under control and establish protocols that serve your team and clients.
Rebecca Rose, CVT
Founder & President
CATALYST Veterinary Practice Consultants