Inventory Management 12- How Much Understock Should I Carry?

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This question came up a few months ago about understock. Our first response is how much understock you carry can depend on inventory turn rate, your location, how you do your buying, how often you see reps, turn-around time and the type of product for understock.

For example you might have a larger assortment of understock in safety frames, some insurance programs or other items that are seasonal or speciality You may have a lot of understock in lower priced frames, because you buy in bulk to get the best deal or a lot of readers, because this is an impulse buy and if you don’t have them, you might lose the sale. If you do your own lab work, you might want to stock more frames to offer faster service to your patients. If the office is in a area where you don’t get overnite service, you might want to stock your best sellers in sizes or colors.

On the other hand, if you are trying to bring down your cost of goods (love those accountants) then try to bring down your understock as much as possible.

The other thing, and I have seen this happen, time and time again. Office has no space, so back up stock is stuck in any cabinet and it is FORGOTTEN, until 2 -3 years later someone finds it and wants to return it. . Moral of this story, if you are carrying back up stock, keep in 1 place, track it and pull it out.

Our recommendation is to drop ship frames to your lab so you don’t have any understock, just reorder through your online portal. You will get a better tracking of sell throughs if you do that.  If that is not an option, take your top 2-5 best sellers of  your top 5 suppliers and stock them as understock.

There is no right or wrong answer to this question. It depends on location, goals, patients, service level, cash flow and space.

Claire Goldsmith MidPage