FUNDAMENTALS OF INVENTORY

Although one person should be in charge of inventory, a second team member or manager should be able to fill in as needed. If an emergency happens to the inventory manager, another team member should be able to effectively step up without creating a glitch in the system. Distributor and manufacturer phone numbers, account numbers, and order histories should be readily available. The front of an order book or Rolodex is an excellent place to keep a summary of all distributors and manufacturers. Small orders may need to be placed with specialty companies, and if there is easy access to their information, orders can be placed quickly and efficiently (Box 15-2).

This information is only the beginning of establishing a successful inventory system. Excellent books are available through the American Animal Hospital Association and the American Veterinary Medicine Association to help improve existing systems and build a more profitable practice through inventory management.

An organized manager must determine which technique is most effective to maintain inventory. A variety of techniques are discussed in this chapter; however, the combination of several techniques may work better. Each practice is different and each manager must be flexible in determining the best technique.

Drugs might be arranged in a pharmacy area in such a way as to help improve the efficiency of a team (Figure 15-1). Drugs may be arranged by category, such as oral solids, oral liquids, injectable, ophthalmic, otic, and/or external topical medications. Other pharmacies may be arranged by type of drug, such as tranquilizers, analgesics, cardiac, diuretics, and so forth.

DISTRIBUTORS AND MANUFACTURER REPRESENTATIVES

Distributor representatives generally work for a company that carries a full line of manufactured products ranging from equipment to pet foods. Manufacturer representatives sell products to distributors or, in some cases, distribute products themselves. Manufacturer and distributor representatives may discuss specials with the inventory manager and educate the veterinarians when new products are launched.

Manufacturer and distributor representatives can provide team members with valuable information regarding products and how they may increase sales for the practice. They can provide a sales history, allowing a prediction for the use of product for the next year (this is an excellent tool when preparing a budget for the following fiscal year). They can be an excellent source of continuing education for team members and can provide brochures to increase the level of client education. (Box 15-3).

Caution should be used when companies have sales promotions. Many practices cannot sell the minimum amount of product, and product should not be purchased for the reason of a good friendship. Product should only be ordered when it has been determined that it can sell within a 3-month period.

Working with a limited number of distributors and manufacturers allows larger orders to be placed at one location, usually allowing shipping and handling fees to be waived by the company. These fees are generally imposed on smaller orders and can add up quickly. Many distributors will guarantee the best price to their top clients, eliminating the need to “shop around” on a weekly basis looking for the best price available. These representatives work for the practice; they want the business and will find the product or equipment requested in a reasonable amount of time.

DESIGNING AN INVENTORY SYSTEM

Two methods exist to create and maintain an inventory system. Computer software generally integrates inventory management into the system and is easily accessible from any computer (Figures 15-2 to 15-4). A manual method takes time to maintain but is almost always accurate.

Categories must be refined when entering products into the computer. By refining these categories, reports can be generated regarding product order and sales history as well as a client usage report. Categories may include antibiotics, injectables, pet foods, shampoos, radiographs, surgical supplies, or laboratory services. Reorder points and quantities can be established when entering these products into the computer. A physical inventory must be taken at the same time so the amount on the shelf is the same as that entered into the computer. A weekly reorder report can be produced and checked against the shelf items to ensure the report is accurate. Once the product arrives, the invoices can be entered into the computer. The date, distributor, product, and price are entered into the computer from the invoice. The software will pick up any price changes from previous orders, verify the change with the operator, and amend the price if cleared to do so. This allows the practice to prevent the loss of any profit from the changing price of products. These advantages of the computer software system far outweigh any disadvantages.

The disadvantages to computer inventory software are minimal. Human error does occur; therefore reports must be verified. Without verifying product inventory, incorrect quantities may be ordered. It can be difficult to effectively trace bandage material, suture material, surgical or exam gloves, or any other items used to complete services. For a computerized system to be effective, all items must be entered each time they are used. It can be more labor intensive to add a pair of exam gloves to each ear cleaning or anal sac expression than to check the inventory levels each order period.

Manual inventory systems are time consuming; however, they are generally quite accurate. When products are received, invoices are reviewed and entered onto individual alphabetized index cards. The date, distributor, product, strength, quantity, and price are entered on the card. Any changes in price should be observed by the person making the entries, and a price change should take effect immediately.

A complete review of all products is made weekly or bimonthly to create an order. The inventory manager should have a listing of reorder points and quantities on the index cards to help facilitate the correct order. To help the inventory manager maintain a successful system, a red flag system may be developed (Figure 15-5). Once the reorder point has been established, the manager can place a red flag on the product bottle, with the date the product was received. When a team member takes that bottle, the red flag is removed and placed in a designated area. The inventory manager can review the flag, look at the date of purchase, and determine if, when, and how much product should be ordered.

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