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Stocktaking to unlock efficiencies?

Running Your Business

Stocktaking to unlock efficiencies?

Christie & Co published its pharmacy market review for 2023 in October. Leela Barham highlights how a piece on stocktaking caught her health economist eye

The Christie & Co review is chock full of useful stats – including the number of contractors, where they are across the UK, the split between the small, medium and big players, and changes over the past year.

Christie & Co has packaged up data from others, including the GPC and the NHSBSA. There are some stats that aren’t routinely publicly available though; there’s a piece from Dave Brittle, head of pharmacy sales at Orridge PS Limited, a provider of specialist stocktaking services. Because it’s not part of routine reporting, it catches the eye. 

There are some interesting figures in there; for example, that the average stock value counted was £44,000, and that more than 80 per cent of NHS drugs counted were generic medicines. 

Stocktaking on the up 

Orridge delivered more than 4,000 stocktakes in the year to March 2023. That was nine per cent more than the year before. Just two per cent of these were for sale purposes; these make absolute sense since potential buyers will want to know the detail of what they’re buying and those selling up will want to recoup what they can from supplies already bought.

While that figure is small, change is expected, says Brittle: “It is anticipated that this proportion will increase significantly in 2023 due to the high volume of corporate divestment sales which require stocktake valuations to support the completion process.” 

But what about those with no plans to sell? Given that stocktakes have a cost – although this isn’t set out in the Orridge piece – they must think it’s worth it. 

What happens after a stocktake?

The value of a stocktake is in what happens next. It could spot ways to help the business do better. A stocktake is, after all, a key part of inventory management, and inventory management is really a means of driving efficiency.

Cegedim, a provider of inventory management services, has pointed out that a lack of stock can mean customers go elsewhere. Although these days, given wider supply issues, they may have the same experience even if they go to the community pharmacy down the road. A stocktake could highlight where gaps in stock are, albeit at a point in time. 

A stocktake can also spot the problem of holding excess stock. More importantly perhaps, given the manual check on stock and its quality that is part of a quality stocktake, it can help reduce dead stock. Holding medicines that have expired is not going to help make ends meet.

There are probably other sources of value that can be realised from a stocktake and changing things as a result.

Future efficiencies?

The Orridge piece in the Christie & Co review also makes the point that there is more interest in product level data and reporting being linked into stocktaking.

And the use of automation is growing, Brittle notes: “As the sector embraces technology and automation with the introduction of dispensing robots, etc, we have witnessed more stocktakes where automation plays a key role within a pharmacy’s stock management. Ironically, however, the inclusion of data from automated activities in stocktake reports requires manual pricing research/data entry to convert the robot’s stock printout to a value.”

Interest from independents is worth highlighting; many are looking at how to secure efficiencies, just like the bigger operators have been doing, by digging deeper. That’s likely because it’s a ‘must do’, given the wider pressure the sector is under. The hope has to be that going more granular will help identify more efficiencies.

Policy implications

The Christie & Co review is a great resource to support policy discussions since it brings useful statistics on the sector together in one easy-to-read piece.

Highlighting stocktaking might seem less relevant than numbers like the loss of contractors in England (a net loss of 101 in the year to March 2023, if anyone is wondering), but what it shows is just how important the NHS is to contractors, especially the independents. 

The Orridge piece shows NHS stock value by pharmacy operator: 82 per cent for independent operators, 50 per cent for multiple operators and 10-15 per cent for the corporates. Orridge suggests the average split between NHS and over the counter stock was 2/3 versus 1/3.

These stats arguably strengthen the Government’s hand; it knows that independent community pharmacy needs it (which it already knew, but now it knows just how much).

The more positive spin is that the community pharmacies that are doing stocktakes do so as part of doing their level best to run their businesses efficiently. It’s more credible to ask for government help if they’ve done all they can to help themselves.

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