Optimizing supplier relationships is key to inventory control and profitability

Jul 12, 2017 by Edward L. Blach, DVM, MS, MBA

Inventory and related services such as radiology and laboratory expenses represent the second largest expense category in most practices.  In most healthy practices, this cost category, known as Cost of Professional Services or Direct Costs, represents 15% to 20% of revenue or less.  In many practices, it can run from 20% to 35%, which means those practices are hemorrhaging profits in this area.  Every practice should pay close attention to managing inventory in order to maximize profits. 

To do so, veterinary practices should implement proven inventory management protocols.  One of the best ways to accomplish this is to work closely with your distributor partner, as they have every incentive to help you improve profitability.  If your practice is profitable, you will be a good customer for them.  If not, you will not be a worthwhile customer.  In addition, managing inventory is how they make money.  They operate with small profit margins, so inventory management is crucial to their success.  Most distributors will make commitments of their knowledge and resources to their most loyal clients.  Therefore, identify your best distributor partner and work closely with them to optimize your purchasing and your inventory controls. 

Your supplier partners are crucial to a profitable practice.  Develop a close relationship with your best suppliers to improve your inventory management and your profitability.

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