Essentials of Pharmacy Management.pdf

A good percentage of graduates will end-up either having their own pharmacy or working as registered pharmacist in community pharmacies. 8  The role of pharmacists has dramatically evolved throughout the past century. Community pharmac...

A good percentage of graduates will end-up either having their own pharmacy or working as registered pharmacist in community pharmacies. 8  The role of pharmacists has dramatically evolved throughout the past century. Community pharmacy entails intricate details beyond the scope of filling prescriptions and preparing extemporaneous medications. 9  Running a community pharmacy, is running a small to intermediate business that entails all the details of day to day business operations. To effectively run such a business, a sound background on topics such as finance, accounting, marketing and human resources is essential for the business. 10  The emerging concept of chain pharmacies, made it compelling for community pharmacies to run business with maximum efficiency. Loading… Survival of community pharmacies will depend on its ability to compete in this very competitive scene. 11 The evolving role of pharmacists The profession of pharmacy has witnessed progressive and continuous evolution since the turn of the 20th century. At the turn of the 20th century, the role of pharmacists in this part of the world was nearly inexistent. 12  Preparation and delivery of medicaments was largely dependent on physicians in towns and city centers whether in their clinics or hospitals. A formidable percentage of “remedies” was prepared and sold by herbalists or barbers at the turn of last century, especially in less affluent areas. 13  It wasn’t before the 40’s of last century were the concept of “community pharmacy” has emerged. At that time, many medications were extemporaneously prepared by pharmacists at the pharmacy. 14  This involved purchasing and storing bulk quantities of drug components to be ready for compounding. The 50’s constituted a turning point in this profession with the establishment and opening of several drugstores and regional offices. 15  This boom in this sector coincided with the establishment of pharmacy unions and associations with the increasing number of students taking this path. The opening of those drugstores meant that a large influx of ready made efficacious medications are easily available in pharmacies. 16  That transformed the role of pharmacist more towards “dispensing” rather than “compounding”. With the exploding number of newly established drugstores, pharmacist now are subject to have more financial transactions with multiple vendors and various accounts. 17  This meant dealing with cheques, bank accounts, credit terms and grace periods. 18  With the extended opening hours and the increased volume of business, more pharmacies are hiring registered pharmacists to deal with the arising business needs. This mandated a sound background in people management and human resources. 19 Components of pharmacy management Overview of financial terms Assessment of financial needs. Identification of sources of capital. Development of operating budgets. Management of assets. 20  Assessment of financial needs: What are the financial needs for establishing a community pharmacy? 21 A thorough assessment of needed capital to start and operate a pharmacy must be performed. Needed capital is influenced by a number of factors including: location, rent, interior design, equipment, initial drug orders, number of needed staff and monthly expenses. 22  Identification of sources of capital. Once the needed capital is accurately estimated, sources of capital need to be identified. Sources of capital can be: -Internal: savings, funds..etc. -External: loans, financers, partnerships..etc. 23 Limiting the amount of external capital is critical to the survival of pharmacy, as income may not be sufficient to cover all needed expenses and pay loan installments at the same time. 24  Development of operating budgets. Definition “Detailed projection of all estimated income and expenses based on forecasted sales revenue during a given period(usually one year)” 25 Operating budget must contain all recurring expenses. An accurate estimate of the total monthly budget must be determined. A buffer amount of 5 to 10 % of the operating budget should be kept as a safety net. 26 Example of an operating budget Office Drug Rent Utilities Salaries Expenses Orders Others Subtotal Buffer Total 200 75 350 50 2000 100 2775 277.5 3052.5 27  Management of assets. All “assets” of pharmacy must be properly managed to maintain profitability and minimize waste. Depreciation of equipment must be taken into account to avoid high maintenance cost. 28 Components of pharmacy management Overview of accounting terms and principles Book keeping. Managing cash flows. Loading… Profitability analysis. Computing taxes. 29 Definition of book keeping: “Bookkeeping is the process of recording and classifying business financial transactions (activities). 30 Essential definitions in bookkeeping: Assets. Liabilities. Net Worth. Revenue. Expense. Investment. Drawing 31  Assets Formal Definition: The properties used in the operation or investment activities of a business. 32  Assets Informal Definition: All the good stuff a business has (anything with value). The goodies. 33  Fixed assets ( long term acid ) - Alife more than one year. - E.g. buildings, lands, vehicles. - Not easily converted to cash. 34  Current assets (short term assets) - Intended to be held less than one year. - E.g. shares, inventory (can be sold) receivables. - Easier to be converted to cash. - It helps business meet their short term needs (wages, bills). - Liquid assets (cash) considered among them. 35  Liabilities Formal Definition: Claims by creditors to the property (assets) of a business until they are paid. 36  Liabilities Informal Definition: Other's claims to the business's good stuff. Amounts the business owes to others. 37 Current liabilities Amounts due to be paid to creditors within twelve month e.g. cash, account payables, short term debt. 38  Net Worth Formal Definition: The owner's rights to the property (assets) of the business 39  Net Worth Informal Definition: What the business owes the owner. The good stuff left for the owner assuming all liabilities (amounts owed) have been paid. 40  Revenue Formal Definition: The gross increase in owner's equity (capital) resulting from the operations and other activities of the business. 41  Revenue Informal Definition: Amounts a business earns by selling services and products. Amounts billed to customers for services and/or products. 42  Expense Formal Definition: Decrease in owner's equity (capital) resulting from the cost of goods, fixed assets, and services and supplies consumed in the operations of a business. 43  Expense Informal Definition: The costs of doing business. The stuff we used and had to pay for or charge to run our business. 44  Investment Formal Definition: Increase in owner's equity (capital) resulting from additional investments of cash and/or other property made by the owner. 45  Investment Informal Definition: Additional amounts, either cash or other property, that the owner puts in his business. 46  Drawing Formal Definition: Decrease in owner's equity (capital) resulting from withdrawals made by the owner. 47  Drawing Informal Definition: Amounts the owner withdraws from his business for living and personal expenses. 48 Accounting Equation: Mathematical expression of the relationship of property and property rights. Also called the Balance Sheet Equation. 49 Accounting Equation: Assets = Liabilities + Beginning Owner's Equity (Capital) + Additional Owner Investments + Revenues - Expenses - Draws 50 Transaction: Any event or condition that must be recorded in the books of a business because of its effect on the financial condition of the business, such as buying and selling. A business deal or agreement. 51  Managing cash flows. Managing cash flow is largely dependant on the calculated operating budget. Timing of orders plays a major role in maintaining a comfortable level of available cash. 53  Profitability analysis. Maintaining profitability is vital for the very survival of your pharmacy. Performing profitability analysis is key to maintaining profitability. 54 The ultimate goal in a profitability analysis is to use comparable information to identify products, customers or locations that are underperforming and then make sensible decisions that will increase the overall profitability of pharmacy 55 What are the main steps in performing profitability analysis? 56 1. Gather Financial Information A profitability analysis starts with gathering pertinent, accurate, and timely information. Sales by location, product, or customer must be obtained. Analyzing sales figures, will give a better understanding on items movement. 57 1. Identify Key Performance Measures Performance measures must be determined according to each pharmacy. Performance measures can include average weekly sales, profit margins, average order size or high versus low volume drug categories 58 1. Set Performance Benchmarks Performance benchmarks are necessary for maintaining high performance. Minimum performance criteria for each of the key performance measures identified for the products, customers, or facilities. 59 Performance benchmarks chosen can be set as total dollar value or categorized to drug and non-drug sales. Setting clear benchmarks will enhance performance by employees. 60 1. Identify Problem Customers, Products and Locations The profitability analysis will evaluate performance levels based on the minimum criteria and then categorize the segments as: I. Good and therefore retained. II. “watch listed” requiring further evaluation or monitoring. III. Bad-keep to minimum 61 Components of pharmacy management Overview of marketing terms SWOT analysis. Identification of competitive advantage. Merchandising 62  SWOT analysis. SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture 63 It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective 64  Strengths: Attributes of the person or company that S are helpful to achieving the objective Weaknesses: Attributes of the person or company that are W harmful to achieving the objective Opportunities: External conditions that are O helpful to achieving the objective Threats: external conditions which could T do damage to the objective 66  Identification of competitive advantage “Competitive advantage is the means by which a firm manages to keep making money and sustain its position against its competitors” 68  Competitive advantage can be realized through one of the following methods: 1. Cost leadership - Cost advantage occurs when a firm delivers the same services as its competitors but at a lower cost 2. Differentiation - Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors 3. Focus (economics) - A focused approach requires the firm to concentrate on a narrow, exclusive competitive segment. 69 1. Cost leadership in pharmacy: Identify slow, intermediate and fast moving items. Maintain a suitable stock level ,taking into consideration a higher level for fast moving items. Attempt to secure FOC goods on fast moving items to compensate for any possible discounts and increase margin. 70 1. Differentiation in pharmacy: Ensure reflecting a higher level of service to customers. Concentrate on activities that reflect uniqueness in services and are unique to your pharmacy e.g. free delivery, reminders for refilling chronic medications.. 71 Differentiation in pharmacy Exceptional level of service differentiates one pharmacy from the others 72 1. Focus in pharmacy: Identify high-revenue market segments e.g. insurance companies provide a sustained level of discounted yet bulky revenues. Concentrate on high revenue market segment. 73  Merchandising “Merchandising is the methods, practices, and operations used to promote and sustain certain categories of commercial activity” 74 Introduction to Pharmacy Merchandising What is Pharmacy Merchandising? Definition: Pharmacy merchandising involves strategies and techniques used to enhance the visibility, appeal, and sales of products in a pharmacy setting. Importance: Effective merchandising increases customer satisfaction, boosts sales, and improves the overall efficiency of the pharmacy. Objective: To explore strategies for successful product placement, promotional activities, and customer engagement in a pharmacy. 80 Objectives of Effective Merchandising Enhance Product Visibility: Ensure that products are easily seen by customers. Improve Customer Experience: Create an inviting and easy-to- navigate shopping environment. Increase Sales: Implement strategies to boost product sales. Promote New Products: Introduce new products effectively to the market. Manage Inventory: Optimize stock levels to meet customer demand without overstocking. 81 Key Elements of Pharmacy Merchandising Core Elements of Effective Merchandising Product Placement: Strategic positioning of products to attract customers. Store Layout: Organizing the physical space for optimal customer flow. Visual Merchandising: Use of displays, signage, and decorations to enhance appeal. Promotional Strategies: Discounts, bundles, and loyalty programs. Customer Service: Training staff for excellent service 82 Product Placement Strategies Effective Product Placement Techniques High Traffic Areas: Place high-margin products in high-traffic zones. Eye-Level Placement: Position products at eye level for maximum visibility. Loading… Cross-Merchandising: Place complementary products together (e.g., cold medicine with tissues). Seasonal Displays: Create displays for seasonal promotions and holidays. 83  Store Layout Best Practices Designing an Effective Store Layout Entrance and Exit: Ensure clear and inviting entry and exit points. Aisle Organization: Logical arrangement of products for easy access. Checkout Area: Efficient and customer-friendly checkout process. Accessibility: Ensure the layout is accessible to all customers, including those with disabilities 84  Enhancing Store Appeal Through Visual Merchandising Visual Merchandising Techniques Attractive Displays: Use colorful and appealing displays for products. Effective Signage: Clear and informative signs for product categories and promotions. Lighting: Use appropriate lighting to highlight products and create ambiance. Seasonal Decor: Incorporate decorations to reflect seasons or holidays 85 Promotional Strategies Implementing Promotional Strategies in Pharmacy Discount Offers: Temporary price reductions to encourage purchases. Bundling Products: Offer discounts for purchasing products in combination. Loyalty Programs: Rewards for repeat customers. Seasonal Promotions: Special offers for holidays or events. 86 Measuring Merchandising Success Evaluating the Effectiveness of Merchandising Efforts Content: Sales Metrics: Track sales data to measure the success of merchandising strategies. Customer Feedback: Collect and analyze customer feedback. Inventory Turnover: Monitor stock levels and turnover rates. Visual Assessments: Regularly review the effectiveness of displays and store layout 87 Challenges and Solutions in Pharmacy Merchandising Common Challenges and How to Overcome Them Challenge: Limited space for displays. Solution: Use vertical space and creative display solutions. Challenge: Managing inventory effectively. Solution: Use inventory management software and regular stock audits. Challenge: Keeping up with changing customer preferences. Solution: Regularly review and adapt merchandising strategies. 88