Page 12 - Inventory Manager

10001.1 – BUDGETING INVENTORY

Result: Accurately counted and updated Cost of Goods Sold in AVImark will keep the hospital with
budgeted 18-23%.Error! Bookmark not defined.

Inventory is the second highest expense to the hospital behind payroll. It is CRITICAL that we
do not over-order, or under-order. If the inventory manager does the following well we should
always be within the budgeted range for Cost of Goods Sold (COGS) of 18-23%:

1. Inventory is accurate in AVImark at all times (10001, 10002)
2. Order points and order quantities are followed. Order book is organized (10005).
3. Orders are received, counted, and price/cost adjustments are made correctly (10006)
4. Exec director and/or director of admin are consulted on price specials, expired products,
changing order point/quantities, and new products (10004.1 item 2d).

Over-ordering costs too much, troubles making room for all products, and having products on

the shelf that will expire before they are sold. It also takes money away from the hospital that
is sitting on the shelves. This money could be used for pay raises, bonus programs, equipment,
more staff, etc.

Under-ordering causes us to be out of stock on certain products. This causes inconvenience for
the doctors, clients, and staff. It leads to a lack of confidence and loyalty of our clients. They
perceive that we are not well-managed. It wastes MANY hours of time for staff. In some cases
it can lead to improper treatment of pets. This can me more pain, sickness, or death in serious

cases.

Drill:

1. Why is staying within budget so important?
2. What are somethings that can happen when there is too much product on
hand? Not enough product?

[10]