Pharmacy U

Help! How do I calculate the real ROI of a pharmacy investment?


When considering any new purchase or costly change to your pharmacy it is important to create a return on investment analysis (ROI).

By Wayne Caverly

Usually the company proposing its equipment or services provides the ROI, and while there is no problem with this arrangement, you need to know and agree with all the built-in assumptions. Also, you must ensure the results promised in the ROI are actually attainable in the real world.

The usual ROI takes the form of ‘time is money’. This is the easiest ROI to produce and is therefore the fallback for most salespeople. Unfortunately, the time-is-money ROI is flawed.
For example, if I can save you one hour of a pharmacist’s time per day, it’s worth the cost of one hour of the pharmacist’s time. But if that one-hour savings comes in small snippets of time throughout an eight-hour shift, can you really do anything of value with the time saved?

Even if we assume the hour saved comes in three blocks of 20-minutes each, unless you send the pharmacist home for those three x 20-minute blocks, or redeploy to other tasks, you cannot really say that the time saved results in cost savings.

Another issue is whether the place within the workflow where the time is saved will be eliminated during a later place in the workflow. Example: if you fill 30 per cent more prescriptions per hour but don’t have the capacity to verify the extra items, the value of gaining efficiency in filling may be eliminated in checking.

In one experiment performed years ago by a U.S. pharmacy school and a major U.S. chain, a new circular design was proposed that would save the pharmacy significantly by making the flow within the dispensary more efficient (less walking to fill prescriptions). Time and motion studies were conducted before the physical changes and then repeated a few months later. The result: no significant increase in productivity (no increase in Rx/hour). How could that be?

Imagine you have an employee who is working eight hours a day and getting all of the work done (but no more) in those eight hours. If you add another 30 minutes’ worth of work but only pay for eight hours, I guarantee the employee will get all the work done in the paid-for eight hours. The person might rush some tasks a little, and perhaps make more mistakes, but the jobs will get done.
Now take that same employee and remove a 30-minute task from the workload. I suggest it will take eight hours to do the 7.5 hours of work. In a reverse of the above scenario, your employee will probably take a little more time at certain tasks, and may make fewer mistakes, but the tasks will fill that person’s workday.

Hence the redesign project: There can be no denying that if you reduce an employee’s walking distance from 1 km/day to 0.5 km/day, he or she “could” do more work. However, if your staffer walks at a slower pace, spends a little more time on certain tasks, and makes fewer errors, that time can easily disappear. This does not mean there was no value to the redesign. On the contrary, a less-stressed staffer and a reduction in errors are both very valuable returns on investment. They are simply difficult to quantify and therefore are considered “soft” ROIs.

The time-is-money ROI can work, but the time saved must be able to be turned into reductions in labour.

Wayne Caverly is president of the Caverly Consulting Group. He is also an internationally recognized speaker and published author with more than 40 articles on pharmacy automation and design who has contributed to two pharmacy textbooks. He has more than 25 years’ experience automating, designing, and reengineering community pharmacies.