During the continuing education this weekend, I got several questions about what to do when someone first starts managing inventory, so I wanted to share some insight into that.
First of all congratulations!! I think inventory management can be such a fun and exciting part of a veterinary hospital… as long as it isn’t frustrating! I enjoy managing inventory for all of the puzzles, the new and exciting products, the analyzing, and the data. It’s great!
Remembering back to when I first starting managing inventory, I recall how nervous and overwhelmed I was! I didn’t really know what I was supposed to be doing it, or the best way to do it, and I’m not a fan of not knowing how to do something. So in that spirit, I’m sharing what I recommend to do when you first start managing inventory.
The first things to do when starting to manage inventory:
Learn your hospital’s formulary.
It is important to know what products, medications, controlled substances, hospital supplies, and surgical or specialty equipment your hospital carries. In addition, it’s also important to be familiar with most medications, why they are used, and the doctor’s preferences. If you are also ordering food, I would recommend knowing which brands and types you carry, what they are used for and the benefits of each prescription diet. Also, it is helpful to have an idea of the full line of prescription foods offered by the brands you carry.
Resources: your practice management system (the inventory list), Plumb’s Veterinary Drug reference book, product catalog for the prescription diet’s you carry, etc.
Learn what your hospital sells a lot of (and what sits on the shelf).
It is important to know what products are favored, and how much is used or prescribed on a monthly basis. Ideally, your practice management system should be set up with reorder points (an inventory level of a product which alerts the system and you to order more). Read more about setting up reorder points HERE. If your practice management software is set up correctly, it will help you formulate purchase orders as things become low in your hospital.
Find out what your budget is, and if expense costs are higher than they should be.
When managing inventory, it is a balancing act to make sure you have what is needed in stock, but also spending wisely within a budgeted amount. Ideally, your practice should be monitoring cost of goods monthly and ensuring it is at an appropriate level in comparison to revenue. If you are unsure, I highly recommend running an ABC analysis. This will give you insight into your cost of goods in comparison to recommended benchmarks. In addition, it will review all of your products and calculate the cost, revenue, mark up percentage, and profit margin. Then, I’ll calculate reorder points and a cycle count schedule to help set up your inventory. You can read more about an ABC analysis and what it includes HERE. I would also read information on indirect costs, and how they may affect your hospital and profit. It is important to remember that there are more costs associated with purchasing a product than the cost of an item itself.
This will be especially helpful if you are newer to the veterinary industry. Check with the lead technician, or the technician with the excellent dental knowledge, or the person who knows the ins and outs of your in-house laboratory analyzers to help with reordering and the familiarity of products. If you need extra help, they could help you put together a list of what and how much should ideally be stocked in that department.
Consider extra training.
When you are new to managing inventory, it can be very overwhelming! I always like to explain managing inventory as a puzzle and there are two different important aspects. On one hand, it’s important to maintain a healthy cost of goods sold (COGS) as a percentage of revenue level. This will help ensure that you are not overspending and maintaining profitability for your hospital. Then, on the other hand, it’s important to have proper inventory levels so you can provide excellent patient care and client service. For example, Mrs. Smith gets 30 Vetmedin tablets every month so she’s going to expect that Fifi’s Vetmedin is ready for purchase every month.
So, when managing inventory, it’s just as important to know how to order but also what to order. It’s important to know how to maintain the balance between hospital profitability and having enough inventory on hand for patient care. If you need more training in this area, there are great options out there. The most comprehensive training opportunity is a RACE certified continuing education online inventory management course; Count Me In(ventory). This course will lay out the steps you need to get your inventory under control and set up correctly as well as teach the skills you need to be a successful inventory manager. Find out the course objectives and how it will teach you the skills you need here. Alternatively, if you need a inventory management manual that specifies how to procure an order, when to order, and other operating procedures, check out the Inventory Management Policy & Procedure Manual.
Other Helpful Resources & Articles
Also, as a side note, if you are not apart of our Facebook Inventory Management group, I highly recommend it! Everyone is very kind and helpful, and more than happy to give suggestions!
I hope this was helpful in pointing you in the right direction. Please let me know if you have any questions… I would be more than happy to answer!