Managing Up for Inventory Management
For a growing number of pharmacies, inventory management becomes the topic of discontent and frustration. Yet it doesn’t have to be that way. True, these problems grow as your pharmacy increases in size, but improving your cash flow doesn’t have to feel like a picturesque dream that can’t be realized.
The Highs and Lows
So why is inventory such a stressful topic for so many? Aren’t we just talking some basic “numbers-in versus numbers-out” math here? Why are people making this more difficult than it needs to be?
If you’re asking these types of questions, it is time to step back and look at the whole picture.
First, let’s acknowledge that the work involved in getting an accurate inventory has a wide range of labor involved that is easily impacted by a myriad of both system and personnel shifts. And when you mix that reality with dynamics between those managing the inventory and those trying to understand and solidify numbers, sometimes emotions can rise and fall as quickly as numbers can. This can happen even in the most open and collaborative pharmacies.
Different Teams, Different Focus
These problems start with the fact that different teams focus on different things. No matter how many meetings or discussions are held to review goals, the reality is that upper management is typically focused on leaning up an inventory and improving cash flow. And they should be; making the books shine is a big part of their job. Meanwhile, even your best inventory managers that try their best to integrate those thoughts and goals into their daily work, are often drowning in far more minuscule details. ‘Why is this NDC always off?’, ‘Where’s my order?’, ‘Where did this NDC come from, it’s not what I ordered!’, and one of my personal favorites, ‘Why do we have 3 bottles open?’
Tasks as seemingly simple as managing NDC changes (depending on pharmacy systems, dispensing systems, and vendor agreements) can range from a simple and understood workflow to an overburden that is completely bogging down not just your inventory team but your production too.
To avoid this grief, all stakeholders in the pharmacy need to step back and have some open dialogue regarding expectations and realities.
Identify and Change the Status Quo
Too often the status quo of business leaves in too many assumptions of why things have to be the way they are. To get out of this whirlwind, those managing inventories need to have the ear of upper management as much as upper management needs theirs. But having their ear isn’t enough; both sides need to listen to understand and ensure that they’re seeing not just the same problems, but the same causes and impacts.
When factoring your purchasing, dispensing, and inventory numbers to make decisions, the more places you have to get it from exponentially increases your chances of differential errors.
I’ve found a helpful way of combating this dynamic is setting some clear “tripwires”. A tripwire could be an indicator or set of indicators that, once “tripped”, lead to an actionable. But you’ll need to work together to make sure you agree on the tripwire and its associated actions.
For example, let’s say you set the expectation that your inventory manager, we’ll call him Joe, alerts you if your daily spend increases more than 3%. This is actually a purchasing tripwire more than it is an inventory one, but as is fairly common in a lot of pharmacies, Joe manages the purchasing too.
This may seem reasonable from the upper management perspective but what is “the actionable” for Joe when this happens? Is he supposed to arbitrarily return 3% off the shelf? Are you going to tell him to make sure he buys 3% less the next day? What if you get new orders in that make that impossible?
With the slightest amount of scrutiny, what may have seemed like a simple and reasonable request is quickly revealed to be at best a misplaced Band-Aid.
A good tripwire will stand up against heavy scrutiny. Why look at the purchasing excess in a silo? If you bought 3% more but you received 5% more orders the previous day are you still concerned? What if the 3% is the result of a bunch of items you had back-ordered from a vendor that finally came in? What if you forgot about the fact that you told Joe to stock up on the flu vaccine? As you can see, the room for impact is rarely a one-to-one relationship. If Joe has an answer for the differences on a bad tripwire like this, he’s either making them up or spending way too much of his time researching every day.
A better tripwire may be to tell Joe that if the daily spend is above 3%, see what 5 items were the most expensive on that last order and cycle count their groups. This gives Joe a clear actionable that could lead to an investigation that may uncover the real issue or the fact that there is no issue at all. Maybe just by looking at that invoice, Joe will spot that new HIV med you had to order. Now you have something you can educate Joe on. Maybe the answer is setting lower mins and maxes on all HIV medications or scheduling the orders just a day or two before the anticipated fill date. Now you’re getting somewhere!
A good tripwire should make effective action relatively clear. But the side effects of this are fantastic too. Better communication surrounding clear tripwires can bring those doing inventory management and upper management on the same page quickly. Why? Because now you’re solving the same problems! Both teams will find this collaboration much more rewarding because it is centered on clear and meaningful actions that bring results.
Keep Your System(s) on the Same Page Too
Just as important as keeping teams on the same page is ensuring that your data is accurate and measured appropriately. When factoring your purchasing, dispensing, and inventory numbers to make decisions, the more places you have to get it from exponentially increases your chances of differential errors.
The SureCost’s Perpetual Inventory solution provides seamless integration between the dispensing data coming from your pharmacy system, and your purchases, transfers, and contract compliance workflow in SureCost. All backed by the SureCost Support Team and Emerlyn Technology. Request a demo to see how.
Thanks For Reading!
Hopefully, you found this article helpful! If you enjoyed it, please check out my companion article titled Modernizing Inventory Management for more insights on this subject. As always, feel free to reach out to our team to find out more about how SureCost can help your teams work better together.