Selling Space is arguably a retailer’s most expensive asset. Therefore, having slow moving products costs pharmacists twice: first, these products do not turnover and secondly: they take valuable space from products that do sell. Any attempt to improve this situation will have a positive impact on the overall commercial performance of the pharmacy.

After many years of research, we can assure pharmacies that 15% to 20% of their stock is dead and costing them money by taking up precious space that could be used for other products.

Today, an average Irish pharmacy has more than 4,000 SKUs in their retail space. Our research highlights the fact that in the case of 20% of the total stock, only one unit sold in an entire year. Identifying these products and eliminating them is a winner because you can save space and at the same time reduce your stock holding without affecting your overall sales.

Concentrating on the key pharmacy lines will have a double benefit for any pharmacy as it will both increase revenues and reduce stock levels thereby increasing the overall margin in the FOC area.

Helping pharmacies operate and optimise their inventory is something we’re super passionate about here at PharmaSupport.

We have put together 3 key tips to consider when maintaining inventory accuracy and improving stock turns, gross margins and sales. If you have an EPOS system (most pharmacies do) you can start applying some of these recommendations straight away.

Tip 1: Use product categories

Using product categories (i.e. grouping the products that share some common functional characteristics, for example, OTC products) is something that pharmacies often skip due to time constraints, or because they think it’s unnecessary. It’s usually something that you’ll “Get around to later”. However, applying the right product categories to your existing product file can drastically improve your entire business performance.

Key benefits include having the ability to generate filtered and detailed report breakdowns achieving an increased efficiency in the use of inventory in your business. Most EPOS systems have entire lists of product categories and product attributes (product attributes include: sizes, flavour and type of material for example tablets or liquid) to tag each product into one category.

My top tip is that before you start anything, involve key members of staff in the process. Understand what the problem is you’re trying to solve. Cross-check whether your approach meets the needs and requirements of the pharmacy and the staff.

Applying consistent tags across entire product ranges is key. Have a think about how you will structure these. By applying certain attributes to count specific products in your stock listing, you are benefiting from filtered reporting and you develop the ability to run reports which allow you to understand the commercial performance of specific departments, suppliers or products.

The next step is to understand the uses of your tags and categories and to set them up correctly. Determine what you want to achieve so that you can breakdown reports into specific sets of information. Say you want to figure out how well this year’s Skin Care products are selling compared to last year: If you’ve applied the right categories and tags, you can easily filter your reports in most EPOS systems.

You can also apply this feature to different suppliers to manage their performance. The key to effective purchasing is managing suppliers correctly.

Order automation is also key for maintaining inventory accuracy. Within any EPOS system, you can automatically generate stock orders whenever a product drops below your pre-set levels with customizable reorder points.

Tip 2:  Pay attention to your inventory data

If you’re not tracking inventory data such as stock turn, gross margin (GM), return on investment (ROI), and shrink, you’re missing out. These metrics provide you with a wealth of data and insights that you can use to make important decisions such as what to stock up on, how to price your products, and when to mark down items.

What’s the best way to stay on top of inventory metrics? Ideally, your EPOS or inventory management system will have the analytical capabilities to give you the data you need. Check with your EPOS retail solution provider and ask them about any reporting capabilities they have available.

That said, you can also use third party tools or templates to fit your stocktaking needs. You can, for instance, handle inventory management using Excel, if your system doesn’t have the necessary reporting features.

Whatever you decide to use, the important thing to do is to collect the right data. Gone are the days when you could rely on intuition or guesswork to make decisions. With the pharmacy landscape being even more competitive than ever, it’s crucial that pharmacies make data-backed business decisions.

Tip 3: Store layout

Sometimes retailers think that more products mean more sales. However, having more customers is the only thing which results in increased sales.

Retail is about managing space correctly and efficiently. To maximise your space, use your sales data to map your pharmacy macro layout, allocating the correct amount of space to the correct categories. By doing this you will be able to increase sales and reduce stock levels, thereby increasing the stock turns and improving your GM.

The key concept to understand in order to maximise your pharmacy layout is that the pharmacy retail space is not a ‘stock room’ but your ‘display room’. In other words, the products should fit the category space, rather than the category space expanding to fit in the products.

Bottom line

We hope this post helps you streamline your inventory and prevent shrink and overstock in your pharmacy. Most of these pointers are quite easy to implement, so we encourage you to get started immediately. To recap, here are the things you need to remember to stay on top of your inventory:

Before you start setting up product categories, involve key stakeholders (talk to your staff about this) to agree on what steps to follow to have all products categorised correctly.

Apply consistent tags across entire product ranges. If you’ve applied the right categories and tags, you can easily filter your reports down.

Avoid “miscellaneous” products or “dump keys”. Implement a system to correct inventory levels when miscellaneous sales are made.

Always rely on data when making inventory decisions. If your EPOS or inventory system has reporting capabilities, make sure that you’re taking advantage of those features. Alternatively, you can use an inventory management template that can help you extract the information you need.

If you think that you may need some help please get in touch with one of our Retail Solutions Consultants here in PharmaSupport – we’d love to talk.