The Hidden Costs of Inventory

person sitting on the floor with a bulldog beside her, with financial statements and calculator spread out in front of her

As the second largest expense for veterinary practices, inventory costs are often the first thing that practices look to pare down.*

What you may not know is that some of your inventory costs don’t necessarily show up on your inventory expense line — meaning that your practice may not be accounting for certain hidden costs affecting your profit margin.

These hidden costs can be divided into two categories:

Ordering Costs: Labor-Related Expenses

  • Shopping for the best price
  • Assessing amount needed
  • Accounting for back orders
  • Requesting the purchase
  • Receiving and unpacking goods
  • Pricing and shelving
  • Keeping and managing documentation

Holding Costs: Owning & Keeping Inventory

  • Cash tied-up in inventory
  • Personal property taxes
  • Facility costs to protect inventory
  • Insurance premiums
  • Obsolescence, theft, and spoilage
  • Pharmacy licensing fees

Luckily, some veterinary practices have identified the same hidden costs and have come up with different control strategies. Here are a few for your consideration:

Only if you really, really need it…

Keep a “working inventory” in one area that’s accessible to all staff and place all additional stock in a different area under lock and key. Not only does it protect your inventory as an asset, but you can also control the amount of working inventory available, rationing based on need.

Coming right up!

This control strategy entails increasing the frequency in which you reorder while simultaneously decreasing the amount you reorder. This is particularly helpful for in-house products that don’t sell very well and have fewer turnovers, maximizing your inventory cash flow.

Get your pharmacy online

This is a growing trend among veterinary practices as the pet owner population has shifted towards the younger, tech-savvy generation. An online pharmacy effectively expands your in-house inventory and reduces the amount you carry in-house, while improving turnover management.

“In the last ten years, we have over tripled our business, staff, traffic, and inventory — all of which needs to be stocked! Instead of trying to hire one or two more inventory managers, I wanted to meet all of my clients’ needs by offering a Home Delivery solution without overstocking my clinic and over-stressing my staff.”

Chief Operating Officer

Dr. Stacy Beddoe

Southwest Animal Hospital Center

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Vetsource’s impact on inventory costs is significant. Through our Home Delivery program, your simultaneous purchase and sale of pet products never get tied up to your practice’s cash flow while freeing up shelf space and the expense of storing inventory. We eliminate concerns over product dating or supply shortages while providing quick and easy reporting to reconcile revenue, cost-of-goods-sold, and profit.

*courtesy of Patterson Veterinary University: Inventory Management