I have made plenty of mistakes along my career as an inventory manager (hello ordering 1 of something instead of a box… or ordering the wrong size of something!) and even as a veterinary professional, but the biggest one I have ever made is not realizing the importance inventory management. I didn’t realize or fathom the impact that proper (or even more so… improper) inventory management has on the success and profitability of a hospital. But, I was young and new to some of the business aspects of owning a veterinary practice.
On the other hand, I think that what drives and lights a fire in my belly today. One of my biggest missions or goals is to make sure no matter how or where you manage inventory, that you feel like there is someone there who a) gets it, b) cares about you, and c) wants you to succeed. On the flip side, I want the small veterinary clinic to succeed, I want every practice owner out there to be successful in their goals and dreams. I think inventory management is SO IMPORTANT because in order to survive as a private practice we must focus on inventory (along with social media, marketing, and really making smart business decisions).
So let’s talk about it; why is inventory management so important?
Well, we know why it is important to us:
- We have the supplies, medications, and other things need to make sure our patients have the best care
- It means that no one is freaking out, because we are out of something
- We don’t have to call another clinic in a panic because we are out of something
- It means that we don’t have to pull our hair out because we have a standard system for ordering, receiving, stocking and so forth
But what does it mean for the owners, the bosses, and the managers? Usually GROWTH or success & profitability of the practice. Let’s look at an example:
A Hospital Comparison
| Hospital A | Hospital B | |
|---|---|---|
| Annual Revenue | $1,750,000 | $1,750,000 |
| COGS % | 18% | 30% |
| Cost of Goods $ | $315,000 | $525,000 |
| Difference | + $210,000 |
Let’s just think about that comparison. Hospital A and Hospital B have the exact same revenue, but Hospital B has a much higher cost of goods as a percentage of revenue sold. This equates to $210,000 of missed revenue or revenue left on the table. What does this equate to for the hospital? As an example, this could mean a brand new ultrasound and a $12,000 raise for a staff of 15. That is HUGE!! What could your hospital do with the cost savings/extra revenue?
So know that we know how important inventory management is, where is the first place you should start?
- First thing I would do is calculate your cost of goods as a percentage of revenue sold. This can be expressed by costs / revenue.
- I would HIGHLY, HIGHLY recommend an ABC analysis. It will point you in the direction of where to start and what things you can do to help decrease costs. I think it is a great starting point.
- Look at different ways to get your inventory under control HERE, and brush up on top inventory tasks to complete on a regular basis.
- Review important goals for inventory management.
- Join the Facebook Veterinary Inventory Management Group for a group of wonderful, like-minded professionals.
Feel free to have your owners, doctors, or other team members to read this so they can understand just how important your job is, and how valuable your time doing inventory management is. Of course, if you have any questions, need someone to vent to, or need some support – I’m here!
