Make More by Stocking Less

For veterinary practices that have already mastered basic inventory management (process controls, consolidated ordering, and the like), the next challenge is to increase inventory turns.

Why?

Because increasing inventory turns increases your practice’s profitability. Stock that sits on a shelf is like cash stashed in a mattress.

Wouldn’t you rather earn some return on that cash?

The less cash you have tied up in stagnant stock, the more you have to invest elsewhere, in ways that will yield greater returns than inventory can.

Here’s a simple example:

Let’s say you have 1,500 units of various products on your shelf, at a total investment of $5,000, and you’ll earn about $5,000 profit at the end of three months when you sell every last item on the shelf.

Now let’s say you decide to cut the shelf-sitting time to 1.5 months.

To do that, you only order half as many products as usual.

You’ve just freed up $2,500 for the next 1.5 months.

What can you do with it?

If you do nothing but let it sit in the bank at 3% interest, you’ll earn enough to buy a sandwich.

But what if instead you invested that $2,500 in a reminder (postcard, email, call) campaign tightly targeted to senior patients, which resulted in 15 additional senior wellness exams?

Depending on the nature of the exam and what it uncovers (and your fee structure), you’ll recoup some, most, or all of your investment immediately. Even better, you’ll lay the groundwork for ongoing revenue as patients buy into the idea of regular care for their senior pets.

If you like the results, keep the shelf-sitting time at 1.5 months. That will turn your inventory eight times per year.

Every time you reorder, take the $2,500 you are not spending right this minute and invest in another tightly targeted reminder campaign. Rotate campaigns through the most common recurring needs: dental care, heartworm preventive, core vaccinations, senior care, and nutrition.

When You Buy, How Much You Buy

Changing the timing of your orders only affects when you buy product. It doesn’t affect the volume of product you buy or sell, or how much revenue you generate.

Unless you order products on an uncommonly regimented schedule, you will see few additional costs for administrative or delivery fees.

In effect, by increasing inventory turnover, you give yourself a free, short-term loan.

Invest it wisely, and you may recoup the full amount immediately, or you may earn it over a period of months—with a recurring source of income continuing to pile up over time.

As with all investments, carefully weigh your options and invest where and how you have the greatest opportunity for long-term success.

Finally, remember that you don’t need to increase turns for your entire inventory all at once.

Start by increasing the turns on little-used products, if you like. Though this approach yields less “seed money” to invest elsewhere, it allows you—and your staff—a measure of safety as you grow into the process.


Constance Hardesty, MSc, is former editor in chief of AAHA.

Photos: © iStock.com/CatLane | © iStock.com/fstop123