Business operations

ICON_CP2025 Business operations

Modify back office operations to make use of assets, supply chain, administrative processes and people.


What is the pathway?

Improve back office operations to streamline business processes, including supply chain and product ordering, integration of dispensing, services and retail systems, leasing arrangements, utilities, and payroll and human resource management. Core objectives include:

  1. Helping pharmacies maxmise overall profitability
  2. Reducing the time and cost associated with back office activities
  3. Optimising product mix and supply chain efficiencies.

Why make the change?

It is no longer realistic in today's pharmacy operating environment to rely solely on the trust and clinical skills of pharmacist staff. Increased cost pressures and competition mean that pharmacies must maximise operational efficiencies if they are to maintain levels of profitability. Cost-efficient, scalable back office processes and systems are essential to enable community pharmacies to compete effectively, including against online retailers.

The opportunity for pharmacies

After cost-of-goods, the major expense lines for pharmacy are labour, rent, fit-out, IT and utilities. identifying and putting in place systems and processes to deliver efficiencies in each of these areas, can significantly reduce overall operating costs and increase financial resilience. It will also enhance the ability to take advantage of other growth pathways, whilst limiting cost increases.

It is important to develop a whole-of-business approach to determine which areas can deliver the largest efficiency gains for the smallest upfront investment. The initiatives are unlikely to be radical, and hence the associated risks should be relatively straightforward to identify, assess and manage. The effectiveness of the changes that are made are reliant upon them being sustained, systemised, measured and supported by pharmacy staff.

What happens if I don't make the change?

Inefficient systems, processes and procedures leave your pharmacy facing the prospect of unsustainable increases in costs and reduced ability to invest for future growth and withstand threats of disruption. With many pharmacies supported by the expertise of management groups, a failure to focus on overall business improvement may render your pharmacy increasingly uncompetitive and increase the underlying costs of any role enhancement initiatives.

Champion

You are not alone – champion story
John Cao – Mount Hawthorn Community Pharmacy, WA

John is optimistic about the future of community pharmacy, but sees the need for owners to recognise the new operating environment they are in, and to make the changes that are needed to prosper in it.

John has applied a number of  key performance indicators to ensure his staff (which are divided into teams based on their primary function) work as efficiently as possible. John has a strong focus on maximizing net profit growth by being cost efficient. He has used systems including task and inventory management software.

John believes that ongoing business operations monitoring can help owners spot any problems or negative trends.

“One pharmacy cannot cater to every patient segment; we need to make business decisions to please as many patients and customers as we can whilst maximising the store's net profit as a retail and health destination."

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Market research

Pharmacy owners have a high degree of self-confidence in their business skills with 71 per cent believing they are excellent or good at managing cash flow. However, when asked to assess their capabilities in regard to digital connectivity, innovative products and services and strategic planning, half or fewer rate themselves as excellent or good.  In the face of these threats and opportunities, 44 per cent of owners believe that 'major' or 'fundamentally different' business models are needed going forward.

Orima Market Research Report - September 2018 (members only)

Quick wins

Consult with your staff and business advisers on opportunities for efficiencies and work with them in developing and putting in place a business improvement plan for your pharmacy.

What can I do now?

  1. Identify opportunities for efficiencies through observation of processes and workflows, and review of procedures.
  2. Review your quality management systems.
  3. Undertake some initial planning. Establish a budget. Talk to your team so they are aware of your plans and have the opportunity to provide input.
  4. Identify skills and knowledge gaps which may be impacting on the efficiency of your business operations.
  5. Put in place a business improvement plan with systems and allocate responsibilities for implementing it.
  6. Establish key performance indicators that can be tracked to measure performance against industry benchmarks.
  7. Review and evaluate, together with your staff, to track progress so additional changes can be made over time.
  8. Continue investing in your staff as your best business improvement asset, including at the business management level.
  9. Consider whether you could benefit from an expert business adviser.

Who do I talk to?

Make sure your pharmacy is accredited to a nationally recognised quality management standard. Utilise the relevant QCPP business plans and checklists. Talk to a recognised pharmacy business adviser.

More information

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Page last updated 31 July 2019