Stocking Success: Maximizing Profits with Pharmacy Inventory
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by Dr. Alex Toth<br/>
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Dr. Alex Toth is the Owner of Plumsted Pharmacy in New Jersey and Co-Founder of InStockRx. <br/>
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If you are a Community Pharmacy Owner or Pharmacist in Charge looking for new strategies to improve your margins, this is for you. <br/>
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Operating in a High Dollar, Low Margin Industry<br/>
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Pharmacists buy a lot of inventory daily. In fact, nearly 70% of total expenses in a pharmacy are tied up in inventory purchasing. For a typical pharmacy, this can mean millions of dollars of medications being purchased and (hopefully) sold over a year. Without proper inventory controls in place, the purchase frequency can create a situation where a pharmacy loses money. Sales dollars are high, but the margins are razor thin, requiring proper oversight of inventory.<br/>
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Fact or Fiction? You can buy your way to profitability<br/>
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In talking with pharmacy owners across North America, there is a common misconception that the only way to be more profitable is to buy cheaper medications from wholesalers. Certainly, “buying cheaper” from a wholesaler can help improve margins, but I would also argue that pharmacy owners should evaluate their own operations and seek to improve the efficiency of their inventory (check out this article on efficiency metrics like inventory turnover rate). The biggest risk that pharmacy owners face when trying to buy cheaper is the risk of creating an overstock situation.<br/>
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Five factors that can lead to overstock<br/>
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Overstock situations occur more frequently than most pharmacy owners admit. Common reasons for overstocks include: <br/>
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Employee errors <br/>
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Deceased demand for a product <br/>
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Incorrect Data/Reports <br/>
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Over ordering due to a suspected market shortage <br/>
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Over ordering to meet wholesaler minimums or promotions<br/>
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Overstock can turn to dead stock<br/>
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When purchasing from outside vendors, you face minimum order quantities and run the risk of buying unnecessary products that you didn’t need in the first place. It’s the old adage of “stepping over a dollar to chase a penny”. You may be faced with the dilemma of buying a single item to save a few dollars, yet you just spent $150 – $300 on other items to get free shipping.<br/>
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A better approach is to look to other pharmacies in your area to acquire the specific item or number of tablets without having to tie up cashflow with non-returnable fill in items. By sourcing just the item(s) you need, you can help prevent overstock and dead stock from building up on your pharmacy shelves.<br/>
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Leverage new platforms to buy smarter<br/>
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Platforms like InStockRx help pharmacies source the specific items and quantities needed – think micro-fulfillment – at competitive prices, so inventory levels stay under control.<br/>
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For example, when viewing “My Inventory” (screenshot below), a pharmacy can check on optimal quantities for a given medication.<br/>
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Resistance to purchase from outside vendors, especially from other pharmacies, is justified because most pharmacies lack proper recordkeeping methods for tracking invoices internally. It is critical that all your purchases from wholesalers as well as pharmacies meet DSCSA requirements so that when you need to pull that invoice there are zero concerns. At InStockRx we keep records for all your medication transactions between pharmacies (Buying Activity example below) so that you can stay focused on your patients and profitability.<br/>
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Ready to buy smarter and gain new insights on your optimal inventory levels? Click here to get started.<br/>
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InStockRx helps pharmacies turn problem inventory into cashflow by pulling back the curtain on what is really happening on their pharmacy shelves. <br/>
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by Dr. Alex Toth<br/>
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Dr. Alex Toth is the Owner of Plumsted Pharmacy in New Jersey and Co-Founder of InStockRx.