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Australian Journal of Pharmacy : October 2006
retail ‘The [pharmacy] that fails to build a SKU level decision-making process into its man- agement information system will never dis- cover which 80 per cent of its total SKUs represent break-even or loss sales levels.’ Doug Tigert, Tigert’s 22 Retailing Tidbits. Only the dispensary department and a handful of retail categories actually make a profit. Unless pharmacy owners utilise reliable data from properly man- aged retail point-of-sale (POS) systems, they will never know where the profit is really made, nor which retail products lose them money. What’s more, nor will they be able to improve their retail prof- itability. As outlined in my March 2006 article, ‘Every pharmacy dispenses—so what?’, there are five elements that can deliver opportunities to differentiate your offer from all competition. These were: • Location—store environment is a determinant of store choice. • Merchandise—health solutions. • Value proposition—what you stand for that’s highly important to customers and highly different to other retailers. • People—the moment of truth when the offer lives or dies. • Communication—get the message out. The objective is to be competent (com- pared with all competitors) in all five ele- ments but have very clear wins over all competition, including supermarkets, in two of them. And don’t say ‘we win on service’ because, in isolation, it doesn’t wash in reality. One of our client pharmacy groups employed a mystery shopper and found that their service was sub-standard compared to the nearby lowest-price warehouse pharmacy. The retail healthcare offer Those who make these critical choices can then move on to focusing on the three key principles that will support and deliver the selected retail healthcare offer. retail management Johnston Rorke partner in charge of pharmacy services and AIPM Fellow Bruce Annabel Systems—it’s not a four letter word The three cornerstone principles of effec- tive management begin with: • Systems—can’t manage without accu- rate data. • Supply alliances—who will you sup- port to obtain the best deals? • Logistics—lowest cost supply. These are glued together by retail and business management skills that are sadly lacking in community pharmacy. So, in many ways, management skills found in most community pharmacies is more akin those applied in a cottage industry. Efforts must be made by the universi- ties, industry leaders and in particular the owners themselves, to begin a revolution- ary change—something that most phar- macy owners don’t appear ready to com- mit to at the moment but must! Systems—pharmacy v competition The very best retailers excel at building effective business systems, particularly competitors such as Chemist Warehouse, Priceline Pharmacy and supermarkets. For example, did you know that Wool- worths supermarket staff don’t order stock? This is because their systems are connected via an electronic data interface (EDI) with their nine distribution centres where manufacturers’ orders are gener- ated automatically and replenishment is carried out based on minimum/maxi- mum formulas. They call this Continuous Replenishment Planning (CRP). Woolworths’ systems represent world best practice but it’s not necessary nor expected of community pharmacy to emulate low-cost perfection because their objective is delivering healthcare out- comes and not lowest price. However, a reasonable competency must be gained for pharmacies to efficiently deliver these services. It’s also critical if they have any hope of sustaining their healthcare offer now and in the future. It’s vital that owners don’t just realise this, but take ownership of it. Time is not on the side of pharmacy. We have a 72 ? THE AUSTRALIAN JOURNAL OF PHARMACY VOL.87 OCTOBER 2006 Health Minister who appears to take advice driven by ideology from depart- mental advisers who may well be still embedded for the next Health Minister and, perhaps, the next Government. In its Retail and Consumer Outlook publication, 2006: the path continues, Price Waterhouse Coopers wrote: ‘Pharmacy should actively review their business models and use the next [four] years to position themselves for a more competitive future post July 2010.’ Owners must be mindful that these realities are looming large and do some- thing about it now. It’s important to cre- ate a culture in your business that addresses issues requiring change. The right attitude is: ‘I should/must do this because of...’. Unfortunately I hear far too often: ‘I can’t/ won’t do this because of...’. Not a four-letter word When I raise the subject of systems and data with my clients, most roll their eyes to the heavens and utter a four-letter word. That typical reaction, which reflects owner attitudes rather than the systems themselves, has resulted in atro- cious utilisation of systems and data. For instance, many owners still: insist on doing the books; don’t value POS sys- tems nor the data they produce; and involve valuable staff in too much process instead of delivering customer value. Added to that, all pharmacies operate in an environment where the lack of con- nectivity between store shelf and manu- facturer leads to huge logistics/distribu- tion costs and other inefficiencies. But the critical issue is not so much about the systems but about the four-let- ter word, ‘data’, that the systems produce. Reliable data, properly gathered and understood, will improve profitability, support the retail offer and help lower costs. That means systems are fundamentally about delivering data for use in three broad management categories: