Success in cutting waste, boosting profit starts at top

Success in cutting waste, boosting profit starts at top

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Apr 01, 2007

Current trends toward bigger veterinary practices — with more people using supplies, technology and equipment — and more part-time practitioners who don't have the concerns and pressures of ownership lead inevitably to decreasing profitability and higher debt.

What is the answer? Fee increases can go only so far. In today's competitive market, several other issues may need to be addressed. A critical one we will discuss here is practice waste and excess inventory.

Private veterinary practice has never had much fat to allow waste, so practice managers must look for solutions in every corner. Many of them look to their partners in industry for ideas, knowing that veterinary vendors live in a somewhat parallel universe of economic pressures.

A key component of any successful practice management initiative is leadership. This is where we differ from our suppliers. Veterinarians are striking in their disregard for rules and standards. They preach quality care and doing the right thing, but when it comes to policies and procedures that increase quality outputs at reduced cost, they balk. After all, doctors know what's best for the patient, and that includes the inventory on hand, how it's used, how it's priced, how it's stored and a whole slew of other ancillary issues that have little to do with diagnosing, prescribing and performing surgery.

In short: doctors of veterinary medicine feel they are better than the rules that pertain to everyone else.

Until a practice's board of directors (possibly just a single person) agrees to the rules and to abide by and enforce them, how can the practice improve? That applies, not just to inventory management, of course, but to all aspects of practice operations.

Let's start small, though.

Several multi-owner practices recently have sought our help in implementing procedures and policies that corporate America does well. Although corporate America (a majority of the veterinary professions' vendors and suppliers) apparently succeeds in policy execution, people who work in veterinary practices/small businesses stumble. Just ask anyone who has moved from a position in a larger company to a management position in a privately owned professional practice.

Let's focus on the practical aspects of implementing purchasing systems that replicate corporate America. Why? Because wasteful use of supply is common in private practice, ranging from how things are stored, to whether doors are locked at night and where commonly used keys are hidden. (It's kind of ironic that everyone in the practice knows where they are, including the one to the controlled-substance locker!) It is amazing how many practice managers are not able to overcome these and other shortfalls.

Practice managers generally know about supply requisition and purchase-order systems (two first steps in cost control), but are never able to implement them as they are meant to be used. Why? Doctors, try not to be offended, but you are the problem.

Until practice owners make ordering, purchasing, security and inventory management daily priorities, it just isn't ever going to work. Veterinary practices will continue to suffer waste and poor profit margins.

The following guidelines model a requisition and purchase-order system that can be adapted to virtually any aspect of practice operations, especially where doctors repetitively break rules.

Practice managers: Use this article as part of your report to practice owners. Hopefully, they will see the logic. Until they do, don't expect any consequential change, and the practice will continue to suffer financially.

It starts with good governance

Do the following statements sound familiar?

  • "I'm too busy to go through a requisition process for something I want. I need it, so just order it."
  • "I don't have to turn in credit-card receipts. I'm too busy for that. Just deal with it."
  • "Nothing will get done unless I just call and do it. And why should I have to tell the bookkeeper about it? I pay her check."