What high availability costs
Availability wins the customer. The speed at which stock turns back into cash is what pays for the next pharmacy. Neither number means anything without the other one beside it.
The cheapest way to fix availability is also the most expensive
Suppose you have accepted the goal: the customer should find what they came for more often here than at the competitor. Everyone knows the quickest route to it — buy more stock and spread it across the pharmacies. Empty shelves become rarer almost immediately.
Which raises the question that decides whether the improvement was worth anything:
How much capital did we pay for that level of service?
High availability on its own does not mean stock is well managed. It tells you how reliably the chain serves demand. It says nothing about the price of that reliability.
Where the money of a growing chain is lying
In a pharmacy, stock looks like assortment. In the financial system it is money that has temporarily stopped being money. While the pack sits on the shelf, that capital cannot be used to open a new pharmacy, widen the range customers actually want, pay suppliers, invest in a warehouse, online or technology, or buy another chain.
The slower goods turn back into cash, the more new capital every next step requires. A company can be profitable on paper and permanently short of cash: the profit is real, but a large part of the money is tied up in thousands of packs scattered across the network.
Days of stock, and why it only means something in pairs
If a chain holds about 35 days of stock, capital travels from goods back to money more slowly than at 20 days. But the comparison is meaningless without the service level beside it. Cutting to ten days and emptying the shelf is not a win. Lifting availability by going to sixty days is not a win either.
Both numbers are easy to improve alone, and improving either one alone damages the business. Pay only for availability and the pharmacies insure themselves with surplus. Pay only for days of stock and the chain starts saving money by losing sales. So the owner’s question is neither “what is our availability?” nor “what is our turnover?” but:
What level of service are we creating, and at what cost in capital?
Can the supplier finance your growth?
Take two illustrative numbers: the supplier has to be paid in 60 days, and the chain holds about 20 days of stock. In a retail model where sales turn back into cash quickly, a significant part of the capital returns to the business before the supplier’s payment falls due. A positive working-capital window opens.
This is not free money. Every new delivery brings its own due date, and the business still has taxes, salaries and other obligations. But the principle matters:
If goods turn back into money materially faster than the supplier has to be paid, speed of turnover becomes a source of financial flexibility. Part of an expansion can be financed by turning stock faster, rather than by raising capital.
In one project, a chain rebuilt the way it managed stock and freed working capital that had been sitting in goods. A few months later the owner rang with an unusual question: there was more money in the account than he knew what to do with.
The answer was practical: open pharmacies. One client of ours started at roughly 70 pharmacies and later grew to around 1,000. No single metric explains growth like that — it took strategy, a team, locations, purchasing, acquisitions and a hundred other decisions. But faster turnover was one of the factors that released the capital and let the growth happen sooner.
Using days of stock to find where the money is stuck
Turnover becomes far more useful when a director stops reading it as one company-wide figure and starts using it to hunt for deviations.
1. The manufacturer or supplier
Suppose several comparable manufacturers sell at similar speed and the chain maintains similar availability on all of them — but one of them systematically requires materially more days of stock to hold that level. Why does this range tie up more capital than a comparable one? Candidates: large minimum quantities, buying for a discount, buying for a promotion, long lead times, volume agreements, a mistaken purchasing policy, or simply receiving more than the network’s real need justifies.
Poor turnover does not prove that a manufacturer pushed stock into the network. It shows you where the question is worth asking.
2. The category manager or buyer
If five managers run their portfolios at roughly 35–38 days and the sixth runs at 50, that is a management deviation. The explanations may be entirely innocent: a different range, a longer lead time, a bigger minimum order, seasonality. Other incentives can also exist: buying for the discount, supplier pressure, private arrangements, a conflict of interest.
The metric proves none of that. But a strong and persistent deviation is a reason to check whether purchasing is being driven by something other than the network’s real need. The point is not suspicion. The point is transparency.
3. The pharmacy
If the chain averages about 35 days and one pharmacy sits at 45–50, there is no need to audit every location. Open that one. Is someone overriding the calculated order by hand? Buying more than needed? Using local suppliers? Ignoring the rules? Running on wrong parameters? Or is the demand structure there genuinely different?
4. From the metric down to the SKU
Turnover has worsened. Do not stop at the average. Go down: where exactly? Which manufacturer, which manager, which pharmacy? Which product lines contributed most? Open the chart for that one SKU, find the large receipt, and ask why it happened. That is the moment a report becomes a diagnostic system.
In one project the owner spent his Sundays looking at unusual purchases in individual pharmacies. If a location had bought five units where the requirement was one, on Monday the person responsible had to explain why.
After a while the transparency alone changed how people bought. Everyone understood that an unusual purchase would not disappear inside the chain’s total turnover. It would stay in the history, and it would be visible.
What the two numbers are really for
Availability and days of stock are not there so that a director has two more figures to look at. Their job is to direct attention.
This is one of the fundamental principles of inventory management: do not treat every problem SKU individually. Use a specific SKU as the way into a systemic cause — which is exactly what a root-cause inventory audit is built to do.
Do not ask only “how do we cut stock?” Ask where capital is lying longer than it should, and why.
The result you are aiming at is not minimum stock. It is high availability at a speed of turnover that releases capital for the next step of growth.
What a director should have in front of them
- Days of stock for the chain, with availability beside it — never one without the other
- Manufacturers holding abnormally large stock for the service they deliver
- Category managers with a persistent deviation from their peers
- Pharmacies that demand more capital than comparable ones
- The SKUs creating most of the excess
- The movement of all of it over time
Related: Availability as a financial number · How to reduce overstock · Inventory Management Audit
The thinking in this article draws on The Evolution of the Pharmaceutical Market, a book by our founder Serzas Gutsaga.
Common questions
What is a good number of days of stock for a pharmacy chain?
Our profit is good but we are always short of cash. Why?
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