How technology can optimize your pharmacy inventory
Having the right medications in the right place and at the right time is at the center of every pharmacy practice. But with today’s skyrocketing drug costs, reduced reimbursements and heightened competition, we must start looking at that inventory differently. Rather than resigning to the fact that it’s simply the cost of doing business, you need to start considering it a manageable part of your working capital. That inventory is an investment, the bottles on the shelves represent real money and are likely the single largest expenditure your pharmacy has, often even greater than labor and facility costs.
Slow-moving inventory, or medications that can sit on the shelves until they expire, can end up costing significantly more than their retail value. Without an effective strategy, many pharmacies continue to automatically reorder inventory at the same levels without re-evaluating their movement.
In fact, most pharmacies use the applications in their pharmacy management systems to keep medications in stock at their current levels. When a prescription is filled, it’s tracked by the system and replaced on a one-for-one basis with the pharmacy’s next delivery from its distributor. That happens regardless of whether the replacement medication is needed that week, the following week, next month or next quarter. If demand for a certain product changes, it can take a few ordering cycles to identify the problem and make the necessary adjustments.
A better approach is employing tools to analyze prescription fulfillment trends in real time and forecast when the replacement medication is likely to be needed, along with current inventory levels and expiration dates of the current stock.
That way you can spend the money when it’s needed rather than having working capital sitting on a shelf in the form of a medication that may not be prescribed for a few months. Implementing inventory management software like that offered by Supplylogix can help you gain visibility into — and provide thoughtful management of — inventory purchasing habits across each and every pharmacy location. These tools can help pharmacies realize as much as a 35% improvement in inventory turns and minimize losses from unsaleable returns by as much as 25%.
Using the software to automatically group medication families into ranked categories based on their prescription volume, as well as the total dollar value, and the percentage of total output, gives you the data you need to answer key inventory questions across your organization:
- Are you holding enough inventory in your fastest-moving drugs?;
- Are you holding too much inventory in your slowest-moving drugs?; and
- Are you still stocking drugs with little or no movement?
Effectively managing your inventory ordering process will allow you to id entify potential inventory surpluses. This gives you an opportunity to return stock to the distributor within the prestated policy guidelines to maximize refunds, or identify the minimum amount of a specific medication you need to have on hand at any moment without the risk of running short of expected demand. You may also be able to periodically adjust your spending on certain medications to take advantage of changes in quantity, availability, demand and market price.
Being able to see where your inventory dollars are spent in relation to the prescriptions you are filling lets you make data-driven decisions on the ordering process, spending appropriately on fast moving medications and scaling back on those that tend to sit unused. At the same time, you’re likely to increase the productivity of the inventory you do have on hand, better control your carrying costs to meet your financial goals and, most importantly, reduce the working capital needed to maintain optimal inventory levels.