Inventory Optimization Helps A Pharmaceutical Retailing Client Optimize Service Levels for Different Product Categories

Feb 27, 2018

Client: A leading pharmaceutical retailing company

Area of engagement: Inventory optimization

Typically, the pharmaceutical retailing industry consists of businesses that engage in retailing prescription drugs or patent medicines, cosmetics or toiletries, with primary activities including patent medicine, cosmetic, drug, perfume, and toiletry retailing; pharmacy retail operation; and prescription medicine dispensing. The pharmaceutical retailing industry is poised for significant growth, as the average age of the consumer is increasing rapidly. An aging population needs enhanced health care and prescription needs; thus, providing a growing customer base for pharmaceutical retailing. However, the growth prospects of the pharmaceutical retailing industry are expected to be influenced by a few factors including:

  • Sparse competition: With the increase in competition, payers and PBMs can negotiate with manufacturers as well as improve clinical outcomes. However, if some drugs don’t lose patent protection, there might be double-digit annual price increases.
  • Crippling policies: Existing federal policies hamper the ability of Medicare Advantage (MA) plans to completely leverage drug management tools to achieve lesser costs for beneficiaries. However, they require MA plans to provide the same drug coverage as fee-for-service to encourage prescribers to utilize high-value drug treatments.

Many such factors are compelling pharmaceutical retailing companies to leverage the use of inventory optimization solutions. Inventory optimization solutions help establishments eliminate out-of-stock situations, improve efficiency, and curtail inventory costs.

The Business Challenge

The client, a leading pharmaceutical retailing client with retail units spread across the globe, wanted to achieve its goal of improving working capital efficiency and reducing inventory while maintaining service levels and growing sales. Additionally, they wanted to reduce inventory costs by 10% in a year by carrying the right product at the right time to the right place.

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The Solution and the Business Impact

The inventory optimization engagement helped the pharmaceutical retailing client devise advanced processing capabilities to calculate product redeployment between stores and adopt a tiered strategy in providing services. Additionally, the client was able to make changes to staffing, fulfillment, and delivery processes to centralize products and inventories. This helped them reduce inventory costs by $0.25 million.

Inventory Optimization Solution Insights

Quantzig’s inventory optimization solutions help clients in the pharmaceutical retailing space to optimized service levels for different product categories. Additionally, companies can better define processes and monitor and manage high-risk categories.

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