Don't Get Stuck with Expired Stock! [Use A-B-C Grading for Smarter Pharmacy Ordering]

A-B-C product grading determines how valuable a particular SKU (Stock Keeping Unit) is depending on how much revenue it brings to your pharmacy. The system is a critical component of optimizing your pharmacy's inventory. The classification determines how you should treat the products in each category to limit the occurrence of expiries. Proper use of the grades can save money, ensuring you channel funds to items that drive your pharmacy's profitability. The process helps you determine what product to focus on when funds are scarce. The A-B-C grading system is a tool for removing blockages from the inventory side of your pharmacy in the context of cash flow.

Product A grades are SKUs (Stock Keeping Units) that account for 70 to 80% of your revenue. The items in this category are the most critical in achieving your pharmacy business goals. When funds are scarce, choose to stock products from this category. Always keep your eye on their inventory levels. You might fund that the SKUs (Stock Keeping Units) in the A category account for only 20% of physical stock. The reality aligns with the Pareto principle, stating that 80% of outputs come from 20% of inputs. The items in the A category are the most highly converting product grades.

Product B items generate 15% of your revenue and account for 30% of your physical stock. Remember to recheck the grading, as some may move to Grade A or C. SKUs (Stock Keeping Units) in Category B are less critical than Grade A but more valuable than Grade C stock. The products in Grade B require moderate control of inventory. Items in Grade B, though less critical than Grade A products, still play a crucial role in achieving your overall pharmacy business revenue goals. Use an inventory system that keeps monitoring the products to ensure you correctly categorize the SKUs (Stock Keeping Units) for optimal revenue.

Products belonging to Grade C are the least valuable to your pharmacy's revenue and sales. They account for 5% of your margins, and usually, the volume is highest in terms of physical SKUs. The items can take up 50% of items on the shelves. You can use them for sales, for example, give BOGO (Buy One Get One) offers. You want to get rid of these items as fast as you can. These are the slow-moving or dead stock. They are the least critical, and though their missing may lead to a negative customer experience, you run the risk of them expiring on you.

You can partner with organizations specializing in liquidating short-expiry or slow-moving stock to minimize the risk of losing cash through expiries. Choose pharmacy inventory systems that automatically grade products to help keep the trends in check. You could request deposits from clients looking to purchase Grade C products to minimize the risk of losing money through dead or slow-moving stock. Always have Grade A products in stock. You can use the JIT (Just In Time) method to stock up on Grade B products.
Back to blog