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Insights on improving operations in your pharmacy

Dear readers. I recently met Vita Spies who heads up the consulting arm of BCX. I was interested by her insight and stories of how independent pharmacies are totally absorbed in operations and don’t always have the time or know-how to find the numbers they need to manage with. This results in waste; waste of time, money and energy. So I invited Vita as guest author this month to share some of the things she picks up in pharmacy that might help you improve your business.

About Vita: Vita qualified as a pharmacist in December 2002, after graduating and completing her internship and community service at the Department of Correctional Services Pharmacy in Pretoria. She had exposure to Hospital and Retail pharmacy sectors in South Africa and the U.K. She moved on to become the BCX Data Bureau Manager, whereafter she joined the Service Delivery Management Team in 2017. She has a Post Graduate Diploma in Business Administration (PDBA) at GIBS (University of Pretoria). Since February 2018 she was tasked to start a consultancy department within the BCX Healthcare Vertical.

From Vita:

With Retail pharmacies becoming more and more dependent on technology in order to remain relevant in a challenging environment, monitoring and managing these aspects of your business can substantially improve your business. To quote Peter Drucker:

“You can't manage what you can't measure…If you can't measure it, you can't improve it”

An understanding of how profits are generated from trading stock by unpacking the Gross Profit (GP) contributions per stock department, per manufacturer, per medical aid claiming code etc. is important in order to identify potential opportunities and to prevent losses.

As an example

A department’s contribution to overall GP should be taken into consideration when floor space is allocated. It does not make sense to allocate 20% of your store space to a department that only contributes 5% of overall GP.  It would possibly make more sense to rather re-allocate some space to one of your more profitable departments.

The number of units sold and sales turnover per department should be taken into consideration when store lay-out is planned. You may consider positioning  fast moving items strategically. Perhaps consider expanding on fast moving ranges, or adding complementary products.

When refining mark-up settings, sales turnover and GP can be tracked to monitor the effect of selling price changes, i.e. to identify the point where slight margin increases starts to impact on sales turnover in order to optimize profitability without compromising sales.

It is also important to use reporting to identify where the operational losses are incurred, in order to put measures into place to prevent further losses:

Optimising stock control as a starting point:

Stock is one of your greatest expenses in a retail pharmacy, and at the same time one of your greatest potential assets. When your software package is underutilised, either stock management or time management will be compromised. The key to running a successful pharmacy is having the right product range with the correct stock quantities available on your shelves, while minimizing the amount of capital tied up in stock-value. Stock availability also ties in with good customer service. The pharmacy owner’s own time and the capital spent on skilled labour should also be taken into consideration when the business’ ability to “sweat assets” is being evaluated.

Efficient stock management depends on both accurate cost prices and accurate stock levels on your dispensing system. These figures enable reporting on sales history, sales turnover and gross profit (GP), which in turn should inform decisions around margins and stock holding. They also enable generation of reports required to curb losses as a result of dormant, expired or missing stock. Inaccurate stock levels will have a dire effect on efficiency and customer service during the dispensing process, and will make it harder to identify and address dispensing errors.

Accurate stock levels and sales history over at least six months will enable partial automation of the purchasing process. This functionality can greatly reduce the time spent on stock purchasing, while also streamlining the process to improve stock level management.

Every retail pharmacy trades in a unique environment and with its own unique history and challenges. Therefore considering a consultant to find ways of how to apply general principles such as the above to your specific scenario is a good starting point.

Note: Vita is contactable as a consultant to review your pharmacy’s optimization opportunities. Feel free to contact vita.spies@bcx.co.za to start the conversation.

Also, please feel free to share your own best practices so that we may share that with other pharmacists in South Africa.

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