How to Make Your Inventory Work for You

Older female veterinarian standing in an aisle of pet food inventory, she's holding a small bag of food in each hand and smiling at the camera

Ninety-five percent of veterinary practices think their inventory systems could use improvement, according to a 2018 survey from Veterinary Hospital Managers Association. If you’re reading this, chances are you also think your practice’s inventory systems could use a little work.

Inventory is one of the biggest expenses for any veterinary practice, requiring significant up-front investment and hours of staff time to manage. Implementing more efficient inventory processes means your practice can:

  • free up cash and shelf space,
  • save staff time so you can focus on client and patient care, and
  • reduce shrinkage due to expired product, theft, or damage.

The good news is that inventory also has the potential to be one of your best revenue streams. When you’ve got good systems in place, you can ensure proper storage for all products (such as temperature or lighting needs) and reduce loss. You can also more easily assess your on-hand stock, perform quicker and more accurate physical counts, deter theft, and make record-keeping easier.

Start with an Inventory Analysis

One of the best tools for analyzing your inventory needs is the ABC method of classifying your products into one of three groups to determine stocking levels.

Group A — Your most important items represent the top 20% of your sales. These typically include products crucial to patient care, emergency medications, and items that are your biggest revenue generators or most frequently sold. These should be counted consistently (daily or every other day) to make sure you never run out.

Group B — The next 30% of your sales is Group B. These are items that are regularly sold, but not as frequently, or they’re items that don’t drive as much revenue for your practice. You can count these items less frequently, perhaps weekly or every two weeks. You may also want to consider shifting some sales to your own online pharmacy. This reduces the costs and labor of carrying it in-house, and makes it easy for your clients to purchase the items you prescribe when needed.

Group C — These are the low revenue generators and items sold infrequently, the bottom 50% of your practice’s sales. If you have an online store, these are the perfect items to carry online only, eliminating the cost of keeping them on hand. Regardless, you’ll want to evaluate whether they’re worth carrying, and you can probably safely stick to counting this type of stock monthly.

Once you’ve analyzed your practice’s inventory performance, you’ll have a clearer picture of where to focus your efforts. Next, follow the three tips below to turn inventory management into an efficient, headache-free machine.

1. Only Buy What You Need

Do you carry over a lot of inventory from quarter to quarter, or even year to year? Or are you buying only what you need? The recommended turnover rate for veterinary practices is 5-8 times a year. However, more frequent turnover increases your profit.

One inventory management guide for veterinary practices suggests that high-demand items should turn every 30-45 days and moderate-demand items every 60 days. So even though it can be tempting to buy in bulk to get a discount, it’s not a good strategy unless you know your practice will turn that inventory over quickly. If you end up having to carry over that bulk order, it can eat into your profits.

2. Have a Dedicated Inventory Manager and Strategist

Veterinarian holding french bulldog puppy in a veterinary hospital, surrounded by pet food and inventoryInventory management isn’t just restocking cabinets and placing orders — it’s also about evaluating sales data, proactively adjusting inventory levels and product mix, and generally keeping an eye on profitability. With that in mind, you need someone who is dedicated to making a strategy for your inventory management and implementing it.

Ideally, you’ll hire a dedicated inventory manager so they can make managing your inventory their sole priority. For many practices, however, this role may be fulfilled by the practice manager. It could also be a front desk supervisor or a vet tech with a skill for systems and organization. They’ll need to be organized and on top of deadlines, of course. But you’ll also want someone with an ability to spot patterns and trends in data and a keen sense of when to be flexible with the inventory strategy.

Regardless of whether this is a full-time role or part of another role, someone dedicated to consistently reviewing your data and keeping the bigger picture in mind is invaluable to the success of your business. Having that be a dedicated role means you’ll be more likely to proactively generate revenue for your practice.

3. Leverage Your Practice Management Software

Nearly all practice management software includes inventory management tools, so take advantage of them!

You can use it to review your purchase order and sales histories to establish reorder points as well as minimum and maximum quantities for products. It should also be able run expiration date reports, and it’s a good idea to implement a “first in, first out” rotation system. This will help you avoid loss due to outdated products.

Make sure you run regular reports (daily or weekly) to keep your practice on track and quickly identify any patterns that may be affecting your bottom line — this is where you’ll really see the benefits of having a dedicated inventory manager and strategist.

And take advantage of your practice management software to reduce or avoid manual counts when you can. For example, you can run reports to do a quick spot-check on certain Group A items or more easily spot items with low or no sales to stop carrying in-house.

The Bottom Line

A smart, nimble strategy for inventory management is crucial to the success of today’s veterinary businesses. With some careful planning and implementation, you can get a better picture of your practice’s inventory needs and use that information to start making immediate and lasting improvements.

 

Interested in learning more about how Vetsource Home Delivery can help your practice reduce inventory costs and increase revenue?