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What are your pharmacy's inventory holding costs?
For many independent pharmacies, inventory efficiency is a daily struggle. Manage stagnant items and product lines with help from your Pharmacy POS
In the days before I sat comfortably behind my desk, I stood behind a cash register, set planograms, reordered stock and counted down cash drawers at the end of each day. Back then, I thought I was pretty darn efficient. I managed to help customers, answer staff questions, set new stock and each day run an entire department of the store through reordering. Today, I know better and I still have to cringe when I think of the time I wasted working an outdated ordering process, touching stock over and over again that just wasn’t moving.
Today, many retailers are still in the same situation and unfortunately, product that’s not moving is more than just wasted space on the shelf and a prevalent problem with dust bunnies. There are costs associated with any inventory that’s not moving, otherwise known as inventory holding cost. Here’s a great video on some basics of the carrying costs and all the factors that come into play when you have product that isn’t moving.
There are many different things that an independent pharmacy can do when faced with the problem of products that just aren’t selling, but the first step will be to identify those products. Your POS system can generate a report that will tell you what items haven’t sold for a specified period of time. Once you’ve identified the problematic products, it’s probably time to consider some changes.
But what changes should you make? How long is too long for inventory not to sell? What should you do with unsellable inventory?
How long is too long? Every store will be different, and I bet that every store owner or store manager probably has a gut feeling about how often most items should sell but a good rule of thumb is 30 days. Sometimes there are products you carry year round but just don’t sell much of during certain times of the year. For example, if you were a pharmacy in Washington State and you hadn’t sold sunscreen for 30 days in the middle of January, I wouldn’t worry too terribly much. It’s just important to be aware of slower sales on semi-seasonal products and adjust your inventory level accordingly. For items that don’t fall into this category, stop ordering and start marking down the price.
The product should be moving, why isn’t it? If it’s 90 degrees outside, your customers are on the way to the beach, and sunscreen still isn’t selling, it’s time to look at some options. Here are some things you can try.
Product placement-Where a product is in your store can have a huge impact on sales. Try moving the item or product line around to maximize visibility. Check out our blog on store organization for some tips on managing your store layout.
Check out your competition- Is the store down the road selling the product for less? If so, that could be a big reason why you aren’t making the sales you think you should be. If you can meet or beat that price, give it a try. If not, it may be time to think about replacing the product with something different.
Make strategic cuts-Sometimes, no matter what our perception is, a certain product line just may not be popular enough to sell. So take a hard look at what’s not selling versus what is, and consider some strategic trimming of some lines and expansion of others. For example, if hair accessories like headbands and bobby pins just aren’t moving but hair color products right next to them are flying off the shelves, shrinking down accessories and expanding hair color could make a nice improvement in your bottom line.
To store or not to store? Seasonal items like holiday decorations, Easter baskets and Fourth of July swag can still be hanging around when the holiday has long since passed. Your first step to clearing out these products is to pull out the sale signs. You might even consider putting seasonal items on sale a couple of days before the holiday, depending on what your competition is doing. If you are near any sort of big box store, you can bet that their seasonal product is hitting at least 60% off the day after the holiday and they’ve probably been running specials at 30-50% off for the last 1-2 weeks. They want the product off their shelves as quickly as possible to make room for the next round of seasonal shelves. Check out their advertisements, take a peek inside the store and make sure that your discounts are equally competitive. If clearance fails, you have a couple of options, get rid of it or store it. Storage may sound like an attractive option, but you’re taking up valuable space, risking damage or facing the possibility that the item may not sell again next year. Our recommendation is to donate unsellable items to charity. There are a plethora of options for these kinds of items, like schools, children’s museums or even nursing homes.
I hope that these tips help you if you’re battling inventory movement. If you are an RMS customer and you’d like to learn more about your inventory control and reporting options, just give us a call. If not, we’d love to learn more about your store and find out if we can help you with your overall efficiency and profitability.