Improving Supply Chain Performance: Five Strategies to Improve Inventory Management and Boost Profit
Many local, independent pharmacies struggle to maintain their position in our ever-changing – and volatile – healthcare system. Most struggle with the high costs associated with running a pharmacy and are always looking for ways to cut back on expenses. One of the first expenses traditionally trimmed is labor – but labor is only the second biggest expense, coming in behind inventory costs.
The challenge independent pharmacies face is finding the right balance of inventory to carry. Too little results in disappointed customers whose prescriptions cannot be filled in a timely manner. Too much can result in valuable inventory space being taken up by product that can’t be moved quick enough to realize a profit.
So, how do pharmacies strike that balance? We’ve taken the time to pull out five of the top inventory management strategies that independent pharmacies can implement to improve their review, analysis, and management of inventory – ensuring better inventory control, deeper customer satisfaction, and an increase in profit:
Improve/Enable Technology
The key to an effective supply chain strategy begins with your pharmacy’s responses to questions as simple as:
- How much product is in stock?
- Which products are nearing expiration?
- When faced with a medication shortage, who/where do we go to locate that medication?
Having the right technology and technological framework in place is the very first step to improved pharmacy supply chain management. Knowing what’s on hand in real-time, what needs to be moved out and replaced due to age, and which products are moving off the shelves quickest will offer more visibility to those charged with inventory management.
Having the right supports in place to assist with inventory control and electronic ordering/reordering will greatly reduce inventory costs, ensure medications are on hand – or close at hand – during shortages, and lead to more efficient and reliable customer experiences.
Conduct Scheduled Inventory Reviews
Stay on top of inventory and adjust for trends in your area. There are many factors that can cause fluctuations in medications and products dispensed.
Some inventory trends to look for include:
- Popular and frequently ordered items
- Product costs
- Seasonal variations
- Sell rates
By conducting regular reviews and identifying trends, inventory management can run more effectively. Perform these regular reviews in addition to your yearly physical inventory count.
Set Up a Foundation for Continuous Inventory
More pharmacies are starting to embrace perpetual (real-time) inventory strategies to optimize their supply chains. Ensuring changes in inventory are recorded as they occur provides an instantaneous account of inventory on hand.
Manual inventory methods create increased time and resource obstacles that negatively impact supply chain management. Utilizing perpetual inventory technology options and strategies enables pharmacies to be more proactive and anticipate changes to their drug supplies resulting in quicker, more reliable delivery of product.
Create Tracking Processes to Monitor Performance
Having the right systems in place to monitor performance results in better workflow strategies. Pharmacies should be leveraging and analyzing critical data.
Using administrative reports to monitor drug supply problems, fluctuations, and trends assists pharmacy administration in assessing the performance of its purchasing and inventory management. Some reports developed to assist in communicating inventory changes to the pharmacy area include:
- Weekly borrow and loan reports – accounts for borrow and loan transactions and aids in compiling proper reorder products and quantities of items.
- Annual inventory assessment report – tracks drug expenditures for a broad list of drugs and products compared to current and previous years.
- Quarterly expenditure reports – tracks nonformulary drugs (1)
When studied in relation to budget and supply demand, these reports can be incredibly useful in assessing the performance of your inventory management. The results provide a stronger understanding of your immediate market segment and a more organized and efficient inventory operation.
Engage Your Patients
Surprisingly, maintaining active and friendly relationships with your customers can be an enormous help with inventory management – especially when it comes to rarely-used and expensive specialty drugs.
When you have customers who need access to these types of medications, simply asking them to remind you shortly before the prescription is due can allow you to place order only when necessary. This practice saves space in your inventory, limits expensive drugs on your shelves to only what’s needed, and allows your customer to have a voice and play an active role in their healthcare – which can lead to increased medication adherence and healthier/happier customers.
Closing Thoughts
Re-thinking inventory management is long overdue. With advanced technologies and workflow designs becoming more accessible by the day, pharmacies have the opportunity to replace traditionally error-prone and time-consuming practices that lack visibility and put profit at risk.
Does your pharmacy currently employ any of these strategies? Which strategies do you utilize and how have they impacted – positive or negative – your inventory management? We’d love to know and may even share those experiences in future blog posts. If you’d like to add your experience, please contact brosario@alliantrx.com.
Be sure to follow this blog for more tips, insights and bulletins that can help grow your pharmacy and save you money – all from your partners at AlliantRx.
Sources: