Plugging the Profit Leak: Smarter Veterinary Inventory Management

Effective inventory management in the veterinary practice is crucial for maintaining operational efficiency and financial health. Understanding the inventory lifecycle, from forecasting to consumption and reordering, allows practices to optimize their processes, reduce costs, and improve strategic pricing. This article explores key aspects of inventory management and strategies for plugging the profit leak.

The Inventory Cycle

• Forecasting and Planning: How many times have you told yourself you could really tighten your inventory if you could simply predict the future! In a real practice situation, the inventory lifecycle begins with predicting the future, in a sense, and forecasting your unique practice demand to determine optimal stock levels. Accurate forecasting (or seeing into your future) is essential for minimizing stockouts and overstocking, both of which can negatively impact profitability.
• Consumption Rates: Analyzing historical consumption rates helps predict future demand. By understanding how quickly products are used, veterinarians can adjust their inventory levels accordingly. This is the part that doesn’t require you to have a crystal ball! You already know your consumption rates but perhaps those rates simply haven’t been closely followed or even calculated in quite some time. In addition, this is the calculation that also can benefit from your input of practice plans and marketing. Maybe you’re planning to start a practice promotion or service line growth and, therefore, need to include this in your inventory needs.
• Lead Times: So, what happens if we predict too tightly in planning for lead times? The time it takes to receive new inventory—is critical. Longer lead times require higher safety stock levels to buffer against potential stockouts. It is also important to consider the potential for backorders and plan accordingly to manage customer expectations.
• Receiving and Pricing Confirmation: Accurate and timely receiving processes are essential for maintaining inventory accuracy. Goods received must be verified against purchase orders to ensure the correct items and quantities are added to the inventory, while also confirming best prices. At the same time, many practices use pricing tiers in their strategy but fail to establish a Standard Operating Procedure (SOP) for when each model is to be utilized. It may be difficult to discern which protocols to use at which times unless a SOP is established.

Promotional Pricing

The veterinary industry is full of promotional pricing and rebates throughout any given year, yet many practices simply don’t track this impact or even promote the savings. Promotional pricing can stimulate demand and reduce excess inventory.

Monitoring and Alerts

Monitoring inventory levels and setting up alerts for critical thresholds can help veterinarians proactively manage their stock.

• The practice management system is a good solution for inventory alerts, but it must be set up comprehensively so that the practice doesn’t make the mistake of setting it and forgetting it while a great portion of inventory items continue to live outside that system. However, the system can provide timely notifications about low stock levels, potential stockouts, or other inventory-related issues, enabling prompt action when properly utilized.
• Inventory Tags: While not as trustworthy as system-based alerts that are tied to actual spending, inventory tags for reorder can offer real-time visibility into inventory levels and consumption rates facilitating informed decision-making.

Inventory Reduction and Optimization

So, what happens when the calculations reveal room for improvement? Of course, reducing inventory levels can immediately free up capital and decrease holding costs, but a phased reduction to inventory can allow the practice to gradually optimize stock levels without disrupting operations. Establishing a good cadence for monitoring and adjusting inventory practices is essential but requires careful decision-making for the sake of the veterinary practice overall.

Conclusion

By focusing on forecasting accuracy, efficient ordering, strategic pricing, and continuous monitoring, businesses can optimize their inventory lifecycle to achieve significant cost savings, improve customer satisfaction, and gain a competitive advantage. Implementing these strategies requires a commitment to data-driven decision-making and a culture of continuous improvement.

VETERINARIANS SHOULDN’T HIT FRICTION POINTS!

Hopefully now, as you read this, you understand the outcomes you’re looking for are really achievable if you just do a few key things to get hyper focused. Of course, to do this, it does take change, and I know that can be a little daunting. So, if you’d like some customized advice, you’re welcome to schedule a free call directly with me. Just click the calendar link below:

Finally, as you were reading this you may have thought of a friend or network that would find it useful, please share it with them – I’d really appreciate it.

Melanie and James have been responsible for numerous success stories of their own, transformed practices into skyrocketed growth, and helped practice owners take back their personal and family time from the crushing weight of business fears. They are outspoken advocates of independent veterinary practice, Friction Pathfinder experts, and nationally published healthcare Fellows. They both have MBAs in health services and operations management from top graduate universities.