Tuesday, February 12, 2013

Reduce the Inventory or YOU WILL DIE

"Reduce the Inventory or YOU WILL DIE." Seems harsh, doesn't it? No, Corporate hasn't really said that yet, but they might some day.

At my company, Corporate muckity-mucks and pencil-pushing accountants who have NEVER stepped inside a pharmacy are once again singing the mantra of reduced inventory. Your inventory is too high, you must reduce. They chant this over and over again but no one steps back to really look at this from a logical viewpoint. Honestly, they're brainwashed or something.

Ok, look, I'm not some stupid idiot. Before pharmacy, I worked in retail and I have a business degree and an MBA. I know all about Japanese inventory models and I see the value of reduced inventory IN MANUFACTURING. Unfortunately, no one at Corporate has bothered to see the difference between AMBULATORY PHARMACY and MANUFACTURING. You simply can't run a pharmacy the same way you run a production line in Detroit. What makes low inventory work in Detroit is that they get part deliveries up to four times a day. Most pharmacies get inventory delivery only five times a week. That's a big difference. Why does no one at Corporate get this? I've brought this up with upper management and they just look at me like I have bananas growing out of my ears.

The simplest way to put this is the hospital model: NO ONE IN THEIR RIGHT MIND would expect the pharmacy of a hospital to NOT stock a high percentage of all medicines available to treat their patients. Can you imagine a hospital telling a patient, "I'm sorry, we don't have your med in stock. We can order it for you-- have it here tomorrow by 11:30am."  I'm NOT talking about a medicine like Anascorp ($25,000 a dose)  for a rare condition like a scorpion bite. I'm talking about standard drugs.

I have a patient on Aggrenox that gets it EVERY SINGLE MONTH. Because the muckity-mucks have their hands on our computer ordering system, the computer will not automatically generate an order for more until it gets a negative on hand quantity. So EVERY MONTH this poor lady has to wait a day to get her medication. There are several people in the same situation with various other drugs. We do our best to order ahead of time for our patients but some slip through the cracks and they don't get seamless drug therapy and that pisses me off. It's completely unnecessary.  

MOREOVER, we LOSE BUSINESS with this narrow-minded view. Consider eyeball and ear solutions and suspensions of every kind. They don't cost much to keep on the shelf, but if we order a variety of them after a month the computer says REDUCE YOUR INVENTORY and send them back. So then someone does come in for the med, we don't have it, and we end up losing the sale, the patient, and all future business from them by not having the med they need WHEN they need it... WHICH IS NOW, NOT TOMORROW! 

So, Corporate muckity-mucks, add that into your spreadsheets... the LOST BUSINESS when we don't have something in stock and all the future business from that patient. I'll bet it adds up to a lot more than the measly bucks you save by turning us into a car manufacturing plant.


Pharmaciststeve said...

try and order a car from Detroit... it will take 4-6 wks.. we can't project what people we have come in on a particular day.. let alone the request for meds.
The last staff job I had.. was to open a apothecary in a out patient mental health facility.. I was told up front that I was expected to produce 24 turns a year..
After 9 months.. the place was doing 500 K per month on a 15% margin and my turns were in the mid 30 range.. but.. the CFO could not understand why my inventory could not be held below 100K... and the Rx $ volume was growing 5% -15% month to month.. We did a lot of auto-refills and on Monday would sell ~ 50% of the dollar value on the shelves. At one time, the CFO asked if I could get the turns into the 40's.. IMO.. trying to work on a 7-9 days inventory level.. is nothing short of NUTS!

Crazy RxMan said...

Thanks for your comment, Steve.

From my experience it appears there is such a huge disconnect from upper management and the store level that the business guys simply can't understand that there is an optimum level of performance/profit which maxes out sales and minimizes the inventory (a "sweet spot) --to a point where it can not be massaged further without having a negative effect.

I once said to my RPM, "I'd like to do $1,000,000 per day and have no inventory at all, but since that's just not possible how about we have a normal inventory?"

The RPM looked at me like I was an idiot.