Treasury Pharmacy

Executive Summary

Treasury Pharmacy is situated in the Melbourne Business District and provides prescription fulfilment, retail health products, film processing, and lottery products.  The business currently employs four full-time staff.

In order to meet an increasing demand for electronic payment and processing facilities, Managing Director, Stephen Hibbert implemented an inventory system that automated the process from point-of-sale through to submission of stock orders.  This provided the business with a simpler and more efficient means of ordering stock, paying suppliers and managing GST compliance issues.

Treasury Pharmacy utilises a point-of-sale system whereby the barcode of a sold item is scanned, automatically updating the inventory management system and adjusting stock levels accordingly.  The system contains a reporting function in which reports can be generated that detail sales, stock levels, obsolete items and prescriptions details.  Reports of this type are particularly useful in providing management with insight as to product demand and purchasing trends. 

In 2001, Treasury Pharmacy achieved a net operating benefit from e-commerce of $51,150.  Contributing factors included additional business gained from customer appreciation of electronic facilities and consistent availability of required items.  Cost savings totalled $27,750 and were mainly associated with reduced stock obsolescence, staff requirements and administrative errors.

The Business

Treasury Pharmacy is situated in the Melbourne Business District and provides prescription fulfilment, retail health products, film processing, and lottery products.  The business has been operating for 34 years and caters to the needs of local office workers and clients of city-based medical and dental practitioners.

Treasury Pharmacy currently employs four full-time staff.

Getting Started

Managing Director, Stephen Hibbert, recognised an increasing demand from customers and suppliers for electronic payment and processing facilities.  Suppliers in particular, were eager to implement an electronic ordering system.  With the assistance of software companies and the company accountant, Stephen incrementally implemented an inventory system which automated the process from point-of-sale through to submission of stock orders.

Real Time Stock Control

Real time stock control enhances inventory management, contributing to lowering inventory levels and incidences of obsolete stock whilst still enabling customer demand to be met.

Treasury Pharmacy utilises a point of sale system whereby the barcode of a sold item is scanned, which automatically updates the inventory management system and adjusts stock levels accordingly.  The system contains a reporting function in which reports can be generated that detail sales, stock levels, obsolete items, prescriptions and GST compliance details.  Reports of this type are particularly useful in providing management with insight as to product demand and purchasing trends. 

Furthermore, the system allows purchase requests to be sent automatically to suppliers.  The web-enabled system provides fast notice of stock availability, transmission of invoices and provision of relevant barcodes to be entered into Treasury Pharmacy's own system.

Current E-commerce Strategy

Whilst the real-time inventory management system is a key aspect of Treasury Pharmacy's online system, other business processes have also been web-enabled.  Communications with suppliers are increasingly conducted via email, while staff often use the Internet to conduct online market research.

Revenue and Costs

* Note: Capital Expenditure was amortised over a four year period

Financial Analysis

In 2001, Treasury Pharmacy generated an overall operating benefit from e-commerce of $51,150.  Gross profit from e-commerce amounted to $40,000 and was the result of customer preference for electronic payment facilities and the business's reliable supply of stock.  Additional revenue was also generated from tourists and office workers having found the business through its website.

Treasury Pharmacy achieved total cost savings of $27,750 from implementing the e-commerce system.  The increased use of email has improved communications efficiency for staff, particularly in correspondence with suppliers ($18,750).  The automated inventory management system has streamlined the stock ordering process.  This has reduced stock obsolescence ($5,000), the incidence of administration errors ($2,000) and staff time required to fulfil the ordering function ($2,000).

Treasury Pharmacy spent $40,000 in establishing the online system.  A significant investment was made in infrastructure required to support the real-time inventory management system including the purchase of three computers ($15,000), general software ($3,000), pharmaceutical software ($5,000) and installation of bar-coding equipment ($6,000).  Training of staff to ensure correct and full utilisation of reporting and ordering functions was valued at $6,500.

In 2001, ongoing costs totalled $16,600.  These expenses were associated with supporting the inventory system and included system maintenance ($3,600), dial-up modem fees ($2,500) and staff time required for systems administration ($500).  In addition, capital expenditure was amortised over a four-year period ($10,000).

Non-financial Benefits

The e-commerce system has been successful in achieving its initial goal of improved customer satisfaction.  Customers appreciate the convenience of electronic payment facilities and consistent stock availability.

For suppliers, the automated inventory management system has streamlined the purchasing process such that the delivery of orders is now a simpler, more efficient process.  From Treasury Pharmacy's perspective, the system provides greater visibility across the supply chain as customer demand can be easily reconciled with stock availability levels at the supplier end.  Additionally, staff and customer satisfaction is heightened by the reduction in administrative errors and the subsequent effect on stock delivery cycles.

Challenges

Treasury Pharmacy found the software supplier to be disappointing in regards to reliability, customer service and suitability of the software product. It was often difficult finding time to implement the e-commerce strategy around the day to day business operations, which was compounded by the unavailability of IT specialists after business hours.  This issue was partially overcome using the assistance of a relative skilled in IT and through persistence in learning system functionalities. 

Future

Treasury Pharmacy intend to expand their existing use of Internet technologies to further improve service delivery.  It is envisaged that an email facility will be established whereby customers can email requests to the pharmacy and the goods will be ready for delivery/pickup at a specified time.