Key suppliers should be strategic partners

Feb 15, 2017 by Edward L. Blach, DVM, MS, MBA

Inventory and related services such as radiology, laboratory, and others is the second highest expense category in most veterinary practices.  Typically, this category, known as Cost of Professional Services (COPS), represents between 15% and 35% of revenue in a veterinary practice.  Most healthier practices have COPS that represent less than 20% of revenue.

Optimizing the amount you spend on COPS requires close attention to all aspects of inventory management, fee capture, and supplier relationships.  No longer should practices spend many hours comparing prices on every single product with multiple suppliers.  The cost of doing so is no longer feasible.  Instead, practices should seek to establish strategic relationships with their primary suppliers that will yield best pricing on a full basket of supplies that can be programmed into your system for automatic markups and full accounting when used in the process of delivering a service.  Obviously, if a product is high volume and high visibility, focusing on cost of those individual products is important to ensure competitiveness in your market.

Optimizing your supplier relationships has many advantages.  Your suppliers have many resources and capabilities that they are often willing to lend to your practice such as inventory management expertise and systems, automated product accounting capabilities, add-on services such as OSHA training, workmen's compensation education, merchant account processing, credit cards, marketing support, and many other services that are often made available to practices who commit a large share of their business to a specific supplier partner.  Think about the companies you do business with.  They, like you, have to spend significantly to sell their wares to practices like you.  If they know that you've committed your business to them, they can focus instead on committing resources to support your practice, rather than having to sell to your practice.  Your service will get better, because you will be seen as a strategic partner.  Develop your strategic supplier relationships today.  They will make life easier and return significant cost savings to your practice that will help you to improve profitability and practice value.

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