Inventory is the amount of pharmaceuticals, medical supplies, food,
and retail items a business keeps on hand to meet the demands of
customers and patients. Depending on the nature or type of practice,
the efficiency of your inventory management plan may have a
significant impact on your cash flow and, ultimately, your business
success or failure. Inventory remains one of the leading expenses
that veterinarians face, and continues to be an area of very low
management. Inventory impacts the practice; financial, operational,
and managerial.
In other industries, an inventory analysis consists of inventory turnover
and average age of inventory. While these numbers are important, it
is necessary to count inventory regularly to maintain an average cost
of inventory on hand. The nature of veterinary medicine requires
veterinarians to keep more medications readily available in case of an
emergency. One can’t predict how often cases such as head trauma,
snake bites, or other critical emergencies will be seen and, therefore,
it is difficult to predict how much inventory to keep on hand. These
examples cause a portion of cash to experience little to no turns for
the year. The veterinary profession is unique, in that veterinarians
buy one drug and sell it five different ways and often don’t take the
time to reconcile inventory for every use. This can make managing
inventory quantities and tracking profitability very difficult. There are
numbers that can be tracked easily that do not require extra time in
your software. How often are you comparing your actual spending to
prior periods or to your budget? Do you have a budget? Is that budget
communicated to your staff?
Managing one of the largest expenses or assets requires a plan. This
plan should consist of the right combination of duties by employees
and a standard process by which the practice operates. The two most
important steps in creating a solid inventory management system are a
budget and established standard operating procedures. By combining
the right person(s), the right practice, and the right solutions,
inventory will maintain number two; behind your number one
expense, employees, to care for your clients.
Part 1: Right PersonFor successful inventory management, it is imperative to choose the
right person for managing those responsibilities. Inventory managers
should be hard-working, detail-oriented employees. Every practice
doesn’t have the luxury of hiring one person to solely manage
Inventory Management: The Right Inventory PersonArticle by Mary Brookings, Inventory Consultant, MWI Veterinary Supply
Over the next three months, this series will address a critical topic for practice management, inventory management, and the three most critical components for success: The right person, the right plan and the right solution. We start with the right person. We hope you find this series helpful – Your Business, Your Success, Our Goal.
AAHA
inventory. Most practices split inventory duties among several staff
members. It is a common practice for an employee to inherit the job
of ordering drugs and supplies when another employee leaves the
practice or retires. The problem with this scenario is that most of the
training for the new leader is limited to only what was done previously.
The veterinary management team must equip the inventory manager
to make the right decisions. The single most underutilized piece of
information provided to the inventory manager is a budget. A budget
is a guideline for the practice and the new inventory manager. While
some employees may not understand each drug and how it is used,
most would understand how to track the amount spent and how to
stretch a buck. The right plan is to provide the inventory manager with
the training and knowledge to make the most informed decisions.
Below we will look at why the inventory manager should have a budget,
how to research valuable information on inventory trends, and where
to go for current software training.
Set a BudgetUtilizing a budget keeps controlling expenses and awareness of what
can afforded foremost in the decision-making process; before the
money is spent. Budgets should be reviewed monthly with key staff
members, such as purchasers and managers. The average American
Animal Hospital Association member spends almost 15% of their
annual revenue on drugs and supplies alone. Spending can be itemized
on your vendor invoices using the General Ledger/Personalized
Product Code system within your mwivet.com account. A General
ledger code, or accounting code, is a number that a company assigns
to account groups, such as vendor payables. This coding system allows
the practice to monitor how much is spent on different categories of
inventory such as; drugs/supplies, heartworm/flea/tick medications,
and food. The inventory manager and practice manager should
compare the total spent, by category, for a specific period by creating
a simple spreadsheet of the budget for the period in one column and
the amount spent
per category in
another column.
For more details
on budgeting, find
the article Budgets
Made Easy, by
Angela Schneider
on mwivet.com;
from the main,
select Practice
Management, then Finanical Matters – Articles, or type this URL in
your web browsers address bar: http://www.mwivet.com/Portals/0/
POST/PracticeManagement/
FinanceArticles/Doc_InventoryBudgetsMadeEasy.pdf.
Purchases vs. Sales HistoryWhile understanding the workflow/caseload is important when
replenishing inventory, you can also utilize your purchase history of
ordering common drugs and supplies. If you are new to ordering drugs
and supplies, using your mwivet.com account’s reporting options can
provide you with the details of your previous purchases. The purchase
history is a great tool to use and will help new employees disguise
different names used for one drug or supply, for example; Microbore
Extension Set and T-port, Phenylbutazone and Bute, or Furosemide
and Lasix. The practice management software also keeps track of
what drugs have been sold. It is recommended that an analysis of your
inventory sales is completed once a year. The analysis, or ABC analysis,
should contain a priority list based on sales, usage, and cost. By sharing
this information with the entire practice team, the inventory manager
can make better decisions on how much to buy and which products
should be monitored more closely.
Provide software trainingSoftware that can save time, reduce errors, and increase profitability is
available to help manage these processes. Just as you understand the
life cycle of a flea - egg, larva, and adult - your inventory should follow
a cycle; before and after each purchase including, Starting Quantity,
Purchase Order, and Receipt of Order. Veterinary practices should
understand their current inventory software module before considering
a switch. Changing the program used to track inventory still means
spending time and energy on the system; just a different one, that also
entails a learning curve. Remember the saying, “Garbage in - garbage
out.”
• When is the last time you or your staff had training on your software’s inventory module? Most veterinary software implementations do not cover specific
training on tracking inventory. The sole focus during a new install
is to complete training centered on starting invoices, using medical
records, and setting up the profit centers for professional services.
Most training providers do have an option to “pay as you go” for
training, or offer some form of free training through workbooks/
instruction guides, online tutorials, or videos.
• Are you willing to pay for additional training if you change to new software? Investing in software and staff; missing this valuable opportunity,
the team never learn how to properly utilize the inventory tracking
system, once the support is gone. The inventory cycle should start
with using clean inventory/vendor codes, suggested reorder levels
that drive a purchase order in your practice management software,
and should end with receiving the purchase order to update current
pricing and agreed quantities, for starters. When the inventory
manager has been properly trained you will feel more confident in
empowering your staff to make the right decision when creating the
right inventory plan.
Resources:Talk to your MWI/AAHA MARKETLink Sales Representative about activating the General Ledger code feature or granting user access to a Report Library for invoice summaries. For related questions, call E-Commerce Support at (888) 562-3405.
For more resources on setting a budget, contact your IMC Inventory Consultant at [email protected].
For tips on how to create an ABC analysis, register for an Inventory Management workshop on mwivet.com or contact an Inventory Management Consultant via email at: [email protected].
Mary Brookings is an Inventory Management Consultant with MWI Veterinary Supply. She has supported practices with inventory strategies since 2008. Mary has maintained her Registered Veterinary Technician status in the State of Texas since 1998, and her Certified Pharmacy Technician status since 2008. For over ten years, she worked in a variety of roles and practice settings including, rural practices, surgery and internal medicine teams, as well as, managing teams, inventory and equipment.
AAHA
In Part One of this series we discussed the importance of having the right person in place when creating the right inventory plan. The inventory manager and practice manager or owner should be working together to create a weekly budget that will help the long-term goals of the practice. The inventory manager should be familiar with using a purchase history and sales history to assist in ordering inventory based on previous trends, monitoring prices, and product turnover. Now it is time to establish goals and outline the procedure for using your software or other available resources for ordering, receiving, and monitoring accountability of inventory.
Part Two: The Right PlanThe intent of this section is to highlight the right practice of
implementing a job description and standard operating procedures
to include analyzing your practice’s sales on a yearly basis. While the
act of writing instructions may seem daunting, it is an important step
that will create a culture of accountability and security for practice
owners to fall back on year after year. These legacy documents should
serve as training tools for new employees and will need to be kept up
to date. Employees can easily follow the plan if there are clear, written
instructions. The right solution(s) for managing inventory may differ
from practice to practice. We find the most successful practices are
using a combination of high- and low-technology based methods for
managing the inventory cycle. In Part Three, the final article in this
series we will discuss inventory solution ideas and tips.
1. Create a Job Description for Inventory Team Members
A job description is a written agreement of employee duties. We hire
employees with the expectations to complete certain tasks such as
greeting customers, checking in patients, monitoring anesthesia, or
maintaining a clean boarding facility, but often times do not have the
proper documents to review with a new hire. Some employees have
Inventory Management: The Right Inventory PlanArticle by Mary Brookings, Inventory Consultant, MWI Veterinary Supply
CONTINUED ON NEXT PAGE
AAHA
had previous experience and others have not had any experience. A job
description clearly outlines what is expected before and after a person
is hired. A job description should be the first document reviewed
during an interview and repeated the first week of training. While you
may only consider including inventory management duties on one or
more job descriptions, it is necessary to include inventory duties for
every position in the hospital. Inventory travels through the hospital
and passes through the hands of many staff members, a job description
can serve as a proactive approach to protecting your investment and
the patient. Below is a list of veterinary positions and inventory duties
that may relate to that position:
• Customer Service Representative – Field phone calls related to
prescription refills, check in medications for boarding animals, check
out customers with prescriptions, and invoice inventory.
• Technician Assistant/Kennel Staff – Check in medication for
boarding animals, assist in medication administration, unpack vendor
shipments, and invoice inventory.
• Accredited Technician/Senior Technician – Check in medication for
boarding animals, administer medications in house, fill prescriptions,
order/receive inventory, and invoice inventory.
• Practice Manager/Office Manager – Create inventory budget, order/
receive inventory, matching invoice/statements, bookkeeping duties,
and invoice inventory.
• Associate Veterinarian – Prescribe medication, administer
medication, assist in pricing strategy, order/request inventory, and
invoice inventory.
• Veterinarian/Owner – Create budget, create profit strategy, prescribe
medication, administer medication, order inventory, invoice
inventory, and pay vendor.
NOTE: If you hire a team leader to manage inventory within the
practice, take the time to create a job description and view expectations
from the perspective of owner and employee.
Labor time is a major concern in maintaining a successful inventory
control plan. From determining the amount to order to paying the
invoice already takes approximately four hours a week, and that doesn’t
include the new inventory projects’ tasks you would like to be doing.
Consider including a time table of duties to keep employees on track.
Both the Inventory Management Job Description and Inventory
Management Time Chart should be reviewed annually.
2. Create a Standard Operating Process for InventoryDoes your practice have standard operating procedures for inventory?
A practice generally assumes the act or objective of “keeping low stock,
while not having an overstock” is considered an operating procedure.
Most practices do not have written instructions on how to manage
the inventory procurement process. By not having a simple guide
on how and when to purchase drugs and supplies, the inventory
manager is practicing a reactive approach vs. creating a proactive plan
to managing inventory. The inventory manager may become the only
person that really knows what is being done. All inventory operating
procedures should be documented in the event that someone should
need to fill in for the purchaser or if the employee is replaced. Standard
operating procedures can be written by a team using a team approach.
This means that if one person is very detailed in the “unpacking” of
inventory; ask them to help write down each step. This guide can start
simple, but ideally should become an extensive document capturing
the full perpetual inventory cycle.
Create a list of inventory duties to be done daily, weekly, monthly,
quarterly, semi-annually, and yearly. Then document a sequence of
steps to accomplish each duty. Among these lists and steps, be sure to
include:
1. Review reorder reports and want list.
2. Calculate budget for ordering.
3. Ordering, receiving, and stocking.
4. Monitor and adjust internally used items.
5. Cycle count inventory and record variances.
6. Review re-order points.
7. Complete an ABC analysis on yearly sales and purchases.
8. Annual review of inventory operating procedures.
Note: Each duty or inventory function should be outlined in your
Standard Operating Procedure for Inventory.
Resources: Talk to your MWI/AAHA MARKETLink sales representative about consulting with an Inventory Management Consultant.
Find a Standard Operating Procedure template on managing inventory, an Inventory Job Description and more at: http://www.mwivet.com/PRACTICEMANAGEMENT/SystemsProcedures.aspx#manual, or log onto www.mwivet.com and search under Practice Management.
Mary Brookings is an Inventory Management Consultant with MWI Veterinary Supply. She has supported practices with inventory strategies since 2008. Mary has maintained her Registered Veterinary Technician status in the State of Texas since 1998, and her Certified Pharmacy Technician status since 2008. For over ten years, she worked in a variety of roles and practice settings including, rural practices, surgery and internal medicine teams, as well as, managing teams, inventory and equipment.
AAHA
Greetings! Let’s discuss the final portion of The Right Inventory Plan.
Part one of this series addressed the importance of aligning the right
person for managing inventory functions; part two highlighted how
to implement job descriptions and standard operating procedures
for inventory functions. This section will discuss evaluating the right
inventory plan for moving forward.
The right solution for managing inventory is different from practice to
practice. We find that most successful practices are using a combination
of both high and low technology-based methods for managing the
inventory cycle.
Part 3: The Right SolutionTo determine the best solution for your practice, start first by writing
down how you currently operate. Do you use a practice management
system? What are its limitations? Are you using it to its full capability?
Do you have a person responsible for inventory? What are your current
inventory plan’s vulnerabilities?
Next, make a list of the critical items needed to improve your inventory
system. Some possible scenarios might look like these:
Scenario A: We are not currently using a Practice
Management Software program, and feel now is the
time to invest in one. A Critical Items list for this
scenario might look like this:
• Identify needs.
• Research software capabilities.
� MWI Tip: For an excellent resource on software options, refer to
the AAHA Reader’s Choice Software Survey 2012 at http://content.
yudu.com/A1y1w7/AAHATrendsSept2012/resources/31.htm
• Take a test drive.
Scenario B: We are currently using a Practice Management Software
program, but we are not using it to its full potential. A Critical Items
list for this scenario might look like this:
• Bring software up to date.
• Expand software usage to store all important information such as
vendor information, item codes and reorder levels.
• Take advantage of the system’s Purchasing Work List functionality
to generate a record of clinic purchases.
Scenario C: We are currently using a Practice Management Software
program and are ready to introduce new tools to supplement our
software’s capabilities. A Critical Items list for this
scenario might look like this:
• Implement Reorder Point Cards to flag items not
tracked in the software.
� MWI Tip: Did you know that you’re MWI
or AAHA MARKETLink Representative can
provide you with complimentary Reorder Point
Cards? They are even available in a variety
of colors so that you can visually distinguish
products by category.
• Establish “Templates” within mwivet.com based on each area of our
clinic. Utilize these templates for quick reordering of supplies and
drugs, and to print physical count sheets that correspond to each
room when it’s time to take physical counts.
� MWI Tip: If you are unfamiliar with the Template functionality of
your mwivet.com or aahamarketlink.com account, you can view a
quick overview video of the system on the MWI YouTube Channel
at http://www.youtube.com/watch?v=UCqci8qB4Gg.
• Bookmark the mwivet.com mobile ordering site on our phones so
that we can access our Templates and place reorders while walking
the clinic.
� MWI Tip: Place orders away from your desk by visiting our mobile
ordering site, m.mwivet.com.
Inventory Management: The Right SolutionArticle by Mary Brookings, Inventory Consultant, MWI Veterinary Supply
CONTINUED ON NEXT PAGE
In this final installment of our 3-part series on Inventory Management, we will delve into the concept of creating an inventory plan based on where your practice is today and what investments you may be considering for the future.
AAHA
Scenario D: We are currently using the Cornerstone® Practice
Management System and would like to streamline the product
replenishment process by implementing SmartOrder™ functionality.
• Confirm that our Cornerstone® software is version 8.3 or higher.
• Schedule and receive Cornerstone® Purchase Order training.
• Identify team members that will be responsible for entering MWI
Item Codes into the SmartOrder™ system.
ConclusionWhen considering these critical items, recognize fully the dedication
that the project of implementing these changes will require. We suggest
you begin the process by having your team responsible for making
changes to your inventory management processes create an Inventory
Project Statement to keep everyone focused on the shared goal.
Last but not least, commit to the challenge.
Take at least one action step in the first 24 hours.
Case StudyMWI thanks Boat Club Road Animal Hospital (BCRAH) of Fort
Worth, Texas and particularly Katherine Harold, Assistant Practice
Manager, for sharing with us their process and experience in
implementing “The Right Plan” for their inventory management needs.
In an interview with Katherine Harold, MWI had the opportunity to
do a post-project review.
MWI: Overall, was the project successful?
BCRAH: Total Revenue increased by 19.7%
Total Inventory Cost increased by 7%
Cost as a % of Revenue decreased by 3%
MWI: How did MWI help you meet your inventory project goals?
BCRAH: MWI’s assistance was invaluable to us as we began trying
to get a handle on our inventory and COGS. We could tell
by our balance sheet that things were out of whack, but had
no idea how to proceed with changing it. MWI’s Inventory
Specialist really gave us a quick education about all things
inventory and gave us real, specific instructions about how
to start making some changes. It’s also very helpful to us that
we can rely on MWI as a reliable partner for our supplies
and inventory - we receive our deliveries in a very timely
manner and can count on them.
MWI: What tips would you provide others that are trying to
“streamline” their inventory processes?
BCRAH: I’d say the most important things are to have an
understanding of how your inventory controls are working
(or not) right now and know clearly where you want to get
to; know your goals. Also, make sure that all staff members
who have anything to do with inventory control have a good
working knowledge of how it affects the running of the
hospital, both medically and financially.”
Mary Brookings is an Inventory Management Consultant with MWI Veterinary Supply. She has supported practices with inventory strategies since 2008. Mary has maintained her Registered Veterinary Technician status in the State of Texas since 1998, and her Certified Pharmacy Technician status since 2008. For over ten years, she worked in a variety of roles and practice settings including, rural practices, surgery and internal medicine teams, as well as, managing teams, inventory and equipment.
OCT 2011
NOV 2011
DEC 2011
JAN 2012
APR 2012
MAY 2012
DEC 2012
JAN 2013
FEB 2013
MWI provides inventory basics and e-commerce training
Team creates Inventory Project Statement
Team conducts physical inventory and tracks cycle counts
MWI and the Team complete ABC analysis
MWI and the Team review twelve month budget tracker to measure success
Team begins process of implementing Cornerstone® SmartOrder™ Electronic
Inventory Solution
Team successfully completing 72% of all orders using SmartOrder™
Team sets 2012 Inventory Goals: - Order once weekly using budget
- Reduce COGS to 22% - Go paperless
MWI activates General Ledger codes to track spending and trains staff on creating a
budget tracking sheet
Team creates Inventory Standard Operating Procedures
MWI and the team conduct a six month business review
Boat Club Animal Hospital Inventory Management Plan Timeline
AAHA