Are you managing inventory or is it managing you?

There’s a TON of work that goes into getting an accurate inventory. It’s understandable that pharmacies can struggle with implementing a data-first approach to inventory, especially across departments. I’ve spent my career dedicated to long-term and retail pharmacy operations and inventory management and joined SureCost after many years as a customer. Now, I work with our customers across the country, empowering them with best practices for using SureCost, as a Customer Success Specialist. Recently, I got to thinking about what makes inventory management so challenging.

Many of my colleagues often feel like they’re held hostage by their inventory management system or don’t have a reliable, user-friendly solution at all. Your inventory management solution should be facilitating a user-friendly, data-driven approach to replenishment that supports a modern, streamlined and holistic approach to inventory. As an early adopter of the SureCost inventory system, I can personally attest to the impact this solution can have on a pharmacy.

The Challenges of Today’s Inventory Management Process

Most pharmacies are looking for a solution to increase efficiency or create standard practice among departments. When those opportunities exist, we often find that they’re due to the inventory shortages and staffing shortages persisting over the last two years from the pandemic. Those inefficiencies often result in excess inventory and multiple versions of the same drug—not to mention lost savings opportunities. So, how do you regain control of your inventory when you have so many factors that are out of your control?

Here are just some of the challenges we see out in the field when it comes to inventory management. If any of these challenges sound familiar, you’re not alone!

1. Inefficiencies or standard practice gaps across departments
2. Staffing shortages
3. Excess inventory
4. Inventory struggles
5. Multiple NDCs of the same product

When it comes to addressing these challenges, we’ve come up with five things to consider along the way as you revamp your inventory management process.

Five Things to Consider When It Comes to Improving Inventory Management

1. Work as a Team

Whether you are the sole purchaser or working with a team, chances are that you’re collaborating with folks who have a different agenda than you. Your pharmacy’s priority is to provide the right drug to the right patient at the right time, which means having one of everything—or better yet, two. Meanwhile, your billing department may be influencing which NDCs to buy for reimbursement or coverage. That's coupled with the fill staff trying to limit excessive NDC changes and your inventory staff trying to save money wherever possible.

When it comes to inventory, we know working as a team can be challenging. That said, having reliable data will facilitate those conversations.

If the data from your pharmacy system or inventory solution is hard to get to and convert into usable metrics, it’s like not having anything at all. Most purchasers are familiar with the workflow deficiencies occurring in the pharmacy, but without hard data to back it up, it’s difficult to quantify the impact of the deficiency or even identify the threat. For things to improve, you need metrics, reasonable solutions and measurable goals. Once these are defined, it’s more likely you’ll have success with rallying the troops.

Focusing on team morale around inventory management helps ensure it’s a priority. This can be really challenging when you're dealing with customers, market shortages, and frankly, trying to keep your pharmacy staff healthy and present throughout the recent pandemic. That said, every position or department within a pharmacy impacts or is impacted by the other in some way. A true collaborative approach is a two-way street of compromise and empathy for each team member’s role and challenges.

To summarize, when it comes to working as a team, consider the following:

• Keep in mind each team or role may have different focus areas or goals.
• Focus on solutions that are reasonable and measurable.
• Use data, data and more data to facilitate the conversations.
• Set and measure goals based on that data, and share updates across departments.

2. Diagnosing the Problem 

Diagnosing the actual root cause of your inventory management problems can be tough. Determining what's contributing to excess NDC changes, excess inventory on hand or shortages in the market is critical. Unfortunately, it’s all too common to see new versions of the same mistakes or inefficient practices, especially if you don't have transparency based on real metrics.

In other words, if you're using a model which is solely based on purchase history, and those purchase practices were flawed, how do you stop repeating those same mistakes? 

Using only purchase history can lead you in the wrong direction, so how would you know if the increase in volume for a particular item or group of items was legitimate or if someone just accidentally ordered too much? Diagnosing the problem is critical, yet it cannot be done accurately without a holistic, data-driven approach. Having a platform with easy-to-use, minable and comprehensive data at the micro- and macro-levels will provide a more accurate diagnosis of the problem.

3. Consider Data-driven Solutions

At SureCost, we’re big fans of data. That’s why one of the key features of our solution is the monthly purchasing volume report, which can guide users on how many packages are ordered each month. And while that data is helpful, it's really only part of the solution. A truly data-driven model compares monthly purchases against dispenses at the GCN/GPI level to identify where one or the other is misaligned. This will avoid perpetuating the same flawed buying practices by showing you where purchases exceed dispenses and identifying where excess inventory should be addressed.

SureCost Inventory Management is a data-driven solution because we combine purchase history and dispense history at the product group level. Moreover, you have the ability to customize your product groups based on specific circumstances. SureCost provides an additional level of transparency to ensure inventory goals are met, whether it's increasing turnover, decreasing out-of-stocks or having a more accurate routine valuation on COGs.

When evaluating inventory solutions, consider these questions: 

• How does your inventory model deal with exceptions to the global inventory rules? 
• Do you feel like your system is working with you, or are you constantly fighting against it to get the results that you want? 
• How does the system create a standardized process for the pharmacy, and how flexible is it? 
• Does it help you account for seasonal fluctuations or plan ahead for significant increases in script count? 
• Are you capturing the return rate of those products? 
• Can you determine if the increase was due to a market shortage resulting in multiple NDC changes just to keep the product in stock?

All of these questions reflect why we love data here at SureCost. We want to help our customers minimize human error wherever possible by utilizing a strategic, data-driven model to influence buying decisions.

4. Consider Staffing

Staffing is on everyone's mind these days. The impact of the pandemic has highlighted the weaknesses in our business as a result of a persistent lack of staff. If you’ve been fortunate enough to not have experienced a shortage, you're probably the exception.  

But what about planned absences? When your purchaser returns from PTO, how much time is spent recovering from their absence and correcting mistakes made during their time away? More importantly, are you prepared for a long-term situation occurring from employee turnover? How long would it take for a new purchaser to be trained and be effective, and what expense would that have on your bottom line in the meantime?

Your inventory management process must insulate you against unpredictable staffing changes. SureCost offers automation to ensure your inventory system still runs without necessary human intervention, but it still provides an opportunity for verification before the order is submitted.

All of this leads us to another critical question when considering inventory solutions: How does your new solution integrate with the systems that are already in place at your pharmacy?

You don’t want data silos; you want something that's going to fit right in, talk to all the other systems, then manage your inventory accurately and efficiently. A great inventory solution will work like a well-oiled machine but also “play well” with others. You expect your staff to work as a team and collaborate, and your inventory solution should do the same.

The pharmacy industry has a lot of skilled purchasers that know the business like the back of their hand. But if they are the sole keeper of that information and you're relying on their intuition, it’s easy to see the risk of losing that individual. That’s why SureCost enables your team to capture both dispense and purchasing history. Doing so means your business is relying on actual data and not someone's memory or instinct.

I sat down with my colleague Kelly Cicero to discuss the challenges of staffing when it comes to inventory management. As our Solutions Specialist, she’s an expert in SureCost’s capabilities. Kelly does an incredible job educating, explaining and teaching customers about how to harness SureCost to save more, stay compliant and work smarter.

When Kelly and I spoke, she shared a really interesting story from one of our customers:

We were talking with a pharmacy customer, and they shared that their inventory is efficient and accurate. So you think, “Well, why would they ever want to sign on for a different tool?” Well, our customer had a problem. She was very good at her job. In fact, it took up her whole day, and she was never able to leave the pharmacy because it was hers and hers alone. So not only did inventory management take away from her just being able to step away from the pharmacy, but it also took away her ability to interact with her patients—which for a lot of our SureCost customers, we hear it all the time, ‘that's why you got into pharmacy: to be able to interact and take care of your patients.’ And so that was a big driving force for her to say, "All right, I need help. I need to take my brain, put it into SureCost Inventory Management and I need it to help me so I can step out the door.

Hearing Kelly’s story reminded me of some other key questions that you should ask about your current system: How often are variances in actual on-hands reported? Can you easily identify when there are trends in count discrepancies and who is responsible for supporting and tracking those instances? How much time is currently spent or should be spent managing inventory? What if you could allocate those resources elsewhere?

Whether you’re the sole purchaser or run a team of purchasers, you want to be able to analyze trends so that you're utilizing your inventory solution to make informed, data-driven decisions. Having insight into on-hand quantities for ordering is great, but again, it’s only part of the picture. Consistently and accurately tracking inventory shrink doesn’t have to be time-consuming or complicated if you have the right tools.

5. Determine How to Measure Success

Some of the things that you can ask and test with your system to measure success are:

• Can the inventory management system accurately measure the amount of excess inventory on hand? Excess inventory is the same as cash sitting on your shelves.
• If you have multiple locations, can your solution support a process that would make inventory available to those other locations or suggest items that could be returned to your vendor?
• Does your system clearly define which items have the biggest impact on your COG? And can it identify both shrink and excess inventory?
• Once you’ve identified the excess inventory; how does your current system help you manage it and prevent a recurrence?

SureCost’s Excess Inventory feature and Inventory Turnover Ratio Analysis reports are great ways to set some key performance indicators and create milestones for success. The efficiencies offered by a data-driven system like SureCost allow your inventory to run independently with some basic maintenance like cycle counts and on-the-go scanning with a smartphone. It will replace the overall time spent by your staff, potentially save thousands of dollars in physical inventory service fees, provide breathing room on cost of goods and even give you that time back with your customers—which is probably why you went into the pharmacy business in the first place.

Modernizing Inventory Management Isn't Easy BUT It’s Worth It

There are so many things to consider when it comes to modernizing inventory to ensure you’re managing your inventory solution rather than it managing you.

How does your inventory model deal with exceptions to global inventory rules? Do you feel like your system is working with you or are you constantly fighting against it to get the results that you want? How does the system create a standardized and automated process for the pharmacy based on data? Are there gaps in the data? Is it difficult or too time-consuming to manage?

Working as a team, working around staffing challenges, documenting the process, measuring your success to determine the answers to these questions and move forward: none of these things are necessarily easy, but they’re worth it.

Implementing a holistic, data-driven approach to marry up dispenses and purchases will save time and money in the long run.

To learn more about how SureCost Inventory Management features support smarter inventory, watch our one-minute video.