Inventory is the second-largest expense bucket in a veterinary practice, but by leveraging technology and following best practices, clinics can whittle down their inventory costs. The term “inventory” encompasses everything used in the veterinary clinic, including prescription and over-the-counter medications, syringes, gauze, bandages, testing supplies, gloves, masks, dog food, supplements, and more. When it comes to managing inventory, “the biggest mistake is foundational—not realizing how impactful and important inventory management is to a practice,” says Nicole Clausen, founder and owner of Veterinary Care Logistics, a veterinary inventory management consulting firm in Belgrade, Mont., and co-founder of Inventory Ally, an inventory management software program. “Not only does it affect patient care on the most basic level because if you don’t have inventory, you can’t care for patients, but it is also the second largest expense.” Nicole Clausen of Veterinary Care Logistics emphasizes that strong inventory management is foundational to patient care and profitability, and could be a major driver of practice expenses. Photo courtesy Nicole Clausen On average, a general, small animal veterinary clinic spends about 18 to 22 percent of its annual revenue on inventory, Clausen says, but veterinary practices with sloppy or inefficient inventory management practices can spend up to 30 percent of their annual revenue on inventory. The difference of a few percentage points of revenue spent on inventory can put a significant dent in the veterinary practice’s bottom line. “If a practice has annual revenue of $2 million to $3 million, that could be about $200,000 [extra spent on inventory] each and every year and it adds up very quickly,” says Clausen. Here are some tips from Clausen and other veterinary practice management experts on how to effectively manage inventory, cut costs, and ensure that the practice is neither overstocked nor understocked with medications and supplies. The key, she says, is to tackle inventory management on multiple fronts. “Inventory management is a little bit like putting an octopus back into a box,” Clausen says. “As soon as you get one under control, another one starts running away from you.” 1) Pick and train While large practices may have a dedicated inventory manager or veterinary practice manager, small practices with limited resources may hand over inventory management to a veterinary technician or a receptionist without providing adequate training or the resources to do the job right. “Inventory always ends up in the hands of a busy technician who is offered no training at all, and somehow they are expected to know reorder points and how to prevent overstocking,” shares Cody Waldrop, MBA, CVPM, SHRM-CP, a principal veterinary business consultant for PetSmart Veterinary Services. Training staff to manage inventory does not always have to be expensive or complicated. Webinars, videos, books, and conference sessions can all help educate veterinary staff on inventory management, says Clausen. You can also explore online groups focused on veterinary inventory management. 2) Keep inventory in a central location “Practices will have inventory stored all over the place, and they never really know what they have or where it is,” says Clausen. “That’s a good place to start.” In addition, creating a visual way to signal when supplies are low is helpful. At Goose Creek Veterinary Clinic in Goose Creek, S.C., practice manager Kyle McAllister, CVPM, uses clear bins and labels to quickly spot when supplies are running low. “At a glance, I can see, for example, our stock of IV catheters is empty, so I need to order more,” he says. 3) Leverage technology to streamline management A prime strategy for efficiently managing inventory is leveraging technology to streamline processes and better monitor supply levels. It is an approach veterinary practices are gradually embracing. “The vet industry can be the Wild West,” says McAllister. “There is very little uniformity in how we manage inventory. Some folks are just eyeballing things and not using technology at all, and you have some folks using practice management software and trying to project what they need and setting ordering thresholds using purchasing orders. I would say the percentage of practices using outside technology other than the practice management software is the smallest of all.” Practice management systems include inventory management tools with varying levels of sophistication, says Waldrop. “It can help with real-time tracking, automated reordering, expiration monitoring, and supplier integration,” he says. However, if the practice management system does not include an inventory management tool, or if the practice wants something more robust, he recommends looking for a stand-alone inventory management system. Goose Creek Veterinary Clinic, for example, began using Inventory Ally, an inventory management software, last year. Since then, the practice has reduced its on-hand inventory from about $56,000 to about $36,000, freeing up funds for other practice needs. Savings are achieved through more granular data that provides more precise projections of which supplies and medications are used and needed, and in what amounts and when. “Practice management systems look at transactional data, what is sold, but not necessarily all the things that are used or consumed during procedures. Inventory Ally looks not only at what is sold, but what is purchased and used, so it has more data points,” says Clausen. McAllister compares using the software to having a refrigerator stocked with food needed only for that week, rather than one filled with food that is not eaten and thrown away. “We are able to do better projections now and are able to have less on hand, but have on hand what we need.” However, even the best software will not be effective without staff commitment to best practices in inventory management. “Software can’t compensate for weak standard operating procedures and accountability,” says Waldrop. “If the software says it’s time to reorder, someone still needs to click on the button to reorder.” 4) Use tools to find the best prices on medications and supplies A veterinary practice can join a group purchasing organization or negotiate directly with vendors, suggests Waldrop. At Goose Creek, the practice uses a free software platform for veterinary clinics to compare prices and find vendors with the lowest prices. 5) Streamline what the practice keeps in stock Another strategy is to streamline the practice’s medication stock to reduce waste from unused or expired medication. For instance, instead of purchasing all the major flea and heartworm preventatives, select one or two best-selling products to keep in stock and direct clients who want to purchase another brand to an online pharmacy, says Waldrop. 6) Assess inventory on a regular basis Managing inventory is not a one-and-done process, says McAllister, adding, “Inventory is not a set-it-and-forget-it thing. You have to constantly adapt it.” When you get a new doctor, when you lose a doctor, when the seasons change … jump in and check in often.” That monitoring and adapting include adjusting prices as needed. “Have a system for increasing your price as costs go up. You should check the price every time you place an order,” says Clausen. Finally, she says, veterinary practices should not get discouraged if their inventory management is in disarray. “If their inventory is a mess, they are not alone, and help is available. There is help, there is support, there is training.” Julie A. Jacob is a communications professional and writer. She lives in Wisconsin with her poodle.
