How clinics can cut inventory costs without risking stockouts: full analysis

A new Veterinary Practice News article is putting inventory management back in focus as veterinary clinics look for practical ways to protect margins. In the piece, Therese Castillo highlights how technology, disciplined purchasing habits, and stronger day-to-day controls can help practices reduce overspending on medications and supplies. That matters because, according to the article, a general small animal clinic may spend about 18% to 22% of annual revenue on inventory, and poorly managed systems can push that figure to 30%. (veterinarypracticenews.com)

The backdrop is a broader industry recognition that inventory is both essential and easy to neglect. AAHA has described inventory as a function that can “make or break” practice efficiency and profitability, while VHMA has framed it as a sophisticated business process with direct implications for the bottom line and practice value. AVMA education content based on its 2023 Practice Owners Survey says less than half of practices use a digital inventory management system, underscoring why this remains a live issue rather than a solved one. (aaha.org)

Castillo’s article centers on practical fixes rather than a single new product or policy. The recommendations align closely with long-standing guidance from practice management groups: designate an inventory point person, tighten product standardization, use reorder points and purchase-order workflows in the practice management system, and reduce manual work where possible. AAHA’s inventory resources similarly emphasize naming a responsible lead, relying on system data instead of memory, and using simple visual tools such as tags for harder-to-track supplies. (veterinarypracticenews.com)

The financial rationale is straightforward. AmerisourceBergen animal health guidance says holding inventory can add 8% to 15% of the total unit cost once storage, labor, spoilage, and related overhead are considered. Other industry materials commonly cite healthy inventory turnover in the range of 8 to 12 times per year, and note that expired products and duplicated stock quietly erode profitability. In other words, the cost problem isn’t just what a clinic buys, but how long items sit, how often they expire, and how much staff time is spent chasing them. (amerisourcebergen.com)

Expert commentary across the sector is notably consistent. AAHA contributors have said practices that assign a clear inventory lead tend to see better results, and that consensus product choices can improve purchasing terms while reducing unnecessary duplication. VHMA commentary has also stressed that inventory management should not be treated as a clerical afterthought, but as a core management competency tied to profitability. While the Veterinary Practice News piece appears to be an advice-driven feature rather than a study or regulatory development, the recommendations are well supported by established veterinary management sources. (aaha.org)

Why it matters: For veterinary professionals, inventory is one of the few major cost centers that can often be improved through process changes rather than cuts to staffing or care delivery. Better controls can reduce stockouts that disrupt treatment, lower expired-drug losses, improve cash flow, and free up team time. It can also support more consistent pricing decisions, because clinics are less likely to discover too late that their shelf cost, freight, or shrinkage assumptions were off. In an environment where labor remains the largest expense for many hospitals, reducing preventable waste in the next-largest controllable category can have an outsized operational effect. (vhma.org)

What to watch: The next phase is likely to be less about theory and more about implementation, especially around digital inventory tools embedded in practice information management systems, tighter formulary control, and cycle-counting routines for high-value products. If more hospitals act on this guidance, the practical benchmark to watch will be whether inventory expense and turnover start moving closer to recommended ranges without increasing stockout risk or adding administrative burden. (axon.avma.org)