Inventory Flashcards
Distributor/Vendor/Supplier are?
Terms that are used interchangeable. It is the entity that you are purchasing drugs and supplies from. It can be the manufacturer or a distributing company.
Inventory/Supplies are?
Terms that are used interchangeably. It is the actual item that is purchased.
Inventory management is?
A critical component of practice profitability.
Inventory management is the _______ _______ cost of operation of the veterinary practice.
second largest
The first largest cost of operating a vet practice is?
Staffing
Lack of effective inventory systems is?
A common cause of poor cash flow in a veterinary practice.
In most practices a veterinary technician is?
Put in charge of all or parts of the inventory management system.
Inventory is specifically defined as?
All the goods owned and held for sale or use in the regular course of business.
What is included in inventory?
- Drugs and supplies purchased to resell to clients (dispensing items)
- All inventory items used to provide medical and surgical services
- Office and computer supplies
- Cleaning and janitorial supplies
- Maintenance supplies
Inventory control is?
The process whereby the need to maintain sufficient inventory to meet the hospitals needs is weighed against the cost of carrying the inventory.
*Tax definitions of inventory may be different.
Optimum inventory control ensures that?
The practice will never be out of a needed item and that the cost of purchasing and carrying inventory is kept to the lowest possible level.
What are the 3 costs associated with inventory?
- Unit Cost
- Ordering Cost
- Holding Cost
The cost for each item of inventory purchased must be?
Calculated for the unit it is used or dispensed in.
*This is called the unit price.
The unit price of the item includes?
- Sales tax charged to the practice by the vendor on each item sold to the practice (not charged by vendor in all states, but it is charged in New York State).
- Shipping costs.
Most ordering costs are?
Labor-related expenses.
- Hourly wage paid to the employee performing the work.
- Associated payroll taxes.
- Employee benefit programs.
What tasks do labor costs include?
- Determining the amount needed.
- Shopping for the best price.
- Placing the order.
- Meeting with the manufacturing representatives.
- Accounting for back orders.
- Receiving and unpacking the orders.
- Comparing the purchase order with the shipping invoice.
- Pricing and placing the items on the shelf.
- Posting the costs of the items in the practices disbursement register.
- Providing statements to be paid to the appropriate person (bookkeeper, practice manager, etc).
- Logging the appropriate Controlled substance items.
- The entire inventory ordering activity expends quite a bit of employee time.
- Ordering costs can account for a much as 15-20% of the total unit cost.
Holding costs are?
The costs of owning and keeping inventory on the premises in anticipation of use.
*The largest holding cost is the capital tied up in purchasing the inventory
Holding costs also include?
- Personal property taxes paid on the inventory value as of a specific valuation date. (usually end of year to the IRS).
- Insurance premiums paid on the average value of the inventory to protect against the risk of loss in the event of a disaster, theft, or damage.
- The cost of protecting inventory from heat, cold, humidity.
- Costs associated with outdating and spoilage, especially if inventory is not used or sold immediately.
- Pharmacy licensing fees in states where applicable (In NYS there is no licensing fees, but a veterinary pharmacy is under the same regulations as the human pharmacies).
- The cost of maintaining OSHA regulation compliance.
The proceeding holding costs range from?
8-15% of the unit cost.
The holding and ordering costs, combined, comprise?
25-40% of the total unit cost depending upon:
- Amount of time inventory is held (on the shelf).
- Success of discouraging pilferage (theft).
- Efficiency of purchasing.
Inventory costs amount to?
Much more that what is paid to the vendor.
Optimum inventory control includes?
An astute purchasing policy that minimizes ordering and holding costs while at the same time ensuring that the items required to operate the hospital are available when needed.
Goals of inventory control & management are?
If inventory control and management are effective, the following should be true:
- Medications and supplies are available to treat patients when needed.
- Clients can obtain refills and other items when requested.
Quantities of drugs and supplies are controlled to?
Minimize hospital expenditures to the lowest practical level. Large stock quantities that tie up cash are avoided unless discount savings can be shown to adequately offset the dollars tied up in idle inventory amounts on the practice shelves
What are some additional goals of inventory control & management?
- Staff can efficiently order, stock, and dispense the needed items.
- Controlled drugs are properly monitored and secured.
- Appropriate security systems and safeguards exist to insure that drugs and supplies will be used as intended.
- Staff is trained to correctly handle supplies that represent potential health and safety hazards.
- Fees charged for pharmaceuticals and supplies are adjusted on a regular basis and price increases are appropriately passed on to the client.
- The desired level of profit is achieved.
