Inventory Management 101 – and why it matters

inventory-liquidation-500x327 images-39With so many exceptional offer around on great product, we wondered how many practices and clinics manage their inventory to best serve their business.

We also wondered what policy some of the suppliers had on expired stock and how clinics can manage their inventory to minimise wastage and maximise profit.

Ideally your average order will not have less than 12 months’ shelf-life. Even if it is discounted. And ideally no stock with less than 6 months’ shelf-life should be sold to a customer. More than that, following are some general guidelines which should help…


• Ensure that each stock delivery is checked, item by item, and has an acceptable shelf-life, based on your rate of use.
• Do this check before you unpack the order and mark the invoice for payment! Returns of damaged, incorrect or expired stock should occur as quickly as possible.
• If you are ordering more stock than 2 months worth of your usual sales, reconsider the size of your order. Will the discount exceed the interest you will pay on the stock before it is sold? Or will you stop ordering a comparable product from another supplier? Or create a promotion?
• Ideally stock should be as low as possible without affecting your choices.
• Conduct stock-takes frequently, at least every fortnight, to ensure that stock used equates to the amount of stock remaining on shelf. You may choose to include a display space for expiry date.
• Keep stocks secured. Theft or loss is referred to as ‘shrinkage’ and can be a burden for your business if not managed well.
• Establish a minimum stock level: the critical ‘re-order’ point at which ordering of stock becomes automatic eg. 3 boxes left order another 10.

CRITICAL INFORMATION for your business

•RATE OF SALE or SELL-THRU:A calculation comparing the amount of inventory held  against what is actually sold to the consumer. This is the speed at which units of any product are sold. You can calculate the rate by days, weeks or months.
Important to know to estimate your minimum stock level.  Consider: sales of 10 units per day, supplier takes 2 days to deliver. You need to keep at least 20 – 30 units at any time.
• STOCK COVER: Determine how many average weeks or days of stock ‘cover’ you want to keep in the clinic – this will affect your cashflow if too high or performance if too low. If the supplier has a minimum order or lengthy delivery time, this measurement will be very important.
• MANAGEMENT: Appoint one staff member to administer stock control.  This will allow them to have a more intimate knowledge of stock requirements and their performance can be measured with parameters including the number days of stock on hand.
• STOCK ROTATION: Store your stock so that older items are most easily accessible / at the front. Think of stock as fish – the first in should be the first out or you will be left with old, useable or out-of-season stock.

These principles apply to any consumable stock.