Six money-saving inventory management tips
If you run a Veterinary business, solid inventory management is a crucial part of your operations and one of the keys to success; in fact, it can make or break any business. While the ideal system is likely to be different for each sector and company, there are certain techniques that can improve your inventory management and, at the same time, your cash flow.
As a recent article on the Shopify website notes, good inventory management saves you money in a few specific ways. As well as avoiding the spoilage of perishable items, you avoid losing money on dead stock that is no longer saleable – perhaps because it’s no longer relevant to your market or simply out of date. In addition to this, you can save on storage costs and improve the cash flow within your Practice.
So, here are a few pointers on perfecting your inventory management approach:
1. Establish par levels
Par levels are the minimum amount of product that must be available at all times based on your historical rate of sale. Set these for each of your products and you’ll only order more when stock falls below the pre-determined level. This will systemise the ordering process and allow you and your staff to make decisions more quickly.
2. First-in-first-out (FIFO)
The basic principle means selling your oldest stock (first-in) first – not your newest stock. While this is particularly important for products that will expire, it’s also good practice for non-perishable items, as packaging can become worn or outdated over time. A FIFO system requires an organised warehouse or storage facility combined with staff compliance. Routinely, when restocking a shelf the old stock should be brought forward and the new stock placed behind it. Some company’s even use coloured stickers to remind staff to sell this stock first.
3. Contingency planning
Problems are always likely to arise, and you need to know your risks so that you can be prepared for them – including how you’ll react, how you will solve the problem and how it will impact your business. Example of such problems include: miscalculations leading to less inventory than you thought; not having enough storage space; a manufacturer discontinuing a product without warning; and cash flow shortages meaning you can’t afford an essential product.
4. Relationship management
Effective inventory management means adapting quickly to situations, whether that’s quickly re-stocking a popular item or returning a slow-selling product. This is where having good relationships with your wholesale suppliers can really help. Be friendly, ensure that communication lines are open and honest, and don’t be afraid to ask for lower minimum orders. Remember that Veterinary wholesalers or buying groups will record your order history so they may be able to help you in creating forecasts or best seller reports.
5. Spot checking
If you have a lot of products, or if you usually only conduct a physical inventory at the end of the year, consider regular spot checking throughout the year. This means selecting a product, counting your stock of it, and comparing the number to what it should be. It can be particularly useful for items that are problematic or fast moving.
6. Accurate predictions
Being able to accurately forecast demand for certain products – such as flea products during the summer months – can help you prepare for what’s ahead. This isn’t easy to do, but as a general rule, you can predict future sales according to market trends; sales made during the same period last year; the current year’s growth rate; seasonality; upcoming promotions and paid advertising spend. A Veterinary Practice may have many stock items so start with focusing upon your top 50 best selling lines, understand them by both value and by volume. Then focus on your slowest selling 20 lines and check your are not carrying excessive or expensive stock that rarely moves.
Hopefully these tips will help you think about your inventory management. If you are motivated to learn more, Vet Space and Centaur Services run free Inventory Management Workshops during the year. Click here if you are interested in attending the next event.