Inventory Optimization – managing product inventory levels based on expected patient demand while improving profitability and reducing excess holding and maintenance costs.
In this article, we’ll explore three ways to change the way your practice manages inventory:
- Order Size: Bigger is Not Better
Placing orders that are too large can tie up cash on hand and add pressure to move large inventory quantities before product expiration. This urgency to sell through inventory can result in price-cutting, impacting practice profitability. We recommend having 4-6 weeks of inventory on hand – not 6 months. If you run through your inventory quickly, you can always place another order! Speak with your manufacturing representatives about loyalty pricing discounts based on your purchasing history as you may be able to take advantage of product discounts without needing to place a large single order.
- SKUs: When Less is More
Carrying too many SKUs can cause increased confusion with your staff and patients. If you have too many product SKUs, your staff may have difficulty learning the benefits of each product and lack the confidence to communicate this properly to your patients. Many clinics end up with an abundance of SKUs because they take on products based on staff preferences. Carrying preferred products to meet your staff and patient desires is important, but carrying 50+ skincare SKUs will likely negatively impact your profitability. Start by evaluating your SKUs for profitability performance. Most successful practices carry 5-6 injectable products and 20 skincare SKUs. This allows you to optimize pricing with vendors and standardize patient offers.
- Profitability: Evaluate Margins, Not Revenue
Carrying SKUs with poor margins won’t support practice growth initiatives. Evaluate which products are impacting profitability and assess why. Perhaps they are your most popular products, but you’re throwing them in as an incentive instead of charging for them? Or, perhaps you have too many products that offer the same benefits? Once you’ve established which products you will sell, review your sales data at least once per quarter to analyze profitability. Remember, you can’t manage what you can’t measure. Calculate your overall ROI by SKU and determine which products have the highest revenue and profitability rates. The most expensive products do not always offer the highest profit margins (or the best patient outcomes). Use this data to inform your purchasing patterns and marketing strategies.
Setting Up for Success
Set your practice up for inventory management success by making sure your EMR is up to date. If your team isn’t properly tracking products and services, host a training to ensure you have accurate visibility to your data. Wherever possible, consolidate your orders with vendors who can offer broad portfolio solutions. This will enable you to take advantage of preferred pricing via loyalty programs. Take your profitability to the next level by adding bundling strategies to further improve practice growth.
At Synergy Aesthetics, we are here to support you. Our team is available to speak with you should you have any questions, contact us today—Your Success is Our Success!