Optical Inventory Management- Inventory Turns

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Reorder Kits of Best Sellers

Probably one of the most frustrating and irritating things about running your own business is inventory control. How much do you carry, how do you organize, what to buy, what do the customers want and the most important how to sell and turn merchandise?

After years of teaching inventory management the number #1 thing you must remember about your inventory is to Think Business and the #2 thing is to Think Inventory Turns. Inventory control is not about you, your boredom, what you like or don’t like, what looks on you or doesn’t look good. Inventory Management is about:

  • Buying product that sells through
  • Making a profit on product that sells through
  • Increasing sales per square foot by buying product that sells through
  • Controlling costs by having an inventory management plan- that sell through product is ordered and reordered
  • Implementing an inventory system that tracks trends and results so you make a profit.
  • Inspiring the Customer to make a purchase in store because you have inventory that is based upon facts and trends.
  • Enhancing image and reputation with an exciting frame inventory that is based upon facts and trends.

Note the above keywords- sell through and profit. If you are a frame buyer (a very important position) consider the fact, the buying and selling of frame inventory is crucial to the overall profitability of an optical office. You can look at it this way- if overall inventory turns are at 2x per year, you are probably not going to get a raise- if you can increase inventory turns to 4x per year- ask for a raise.

How do you get to at least a 4 turn per year?

Step 1 Think Business

The buying of eyewear should be based upon facts not emotions. Get rid of these thoughts:

If I don’t like it I can’t sell it

  • There is no doubt, that if you love a frame- you will show it more often. If you show a product, you will sell it. The key is showing and showcasing the product.  Professional buyers buy what the market demand is- not what they like. Do you really think Nordstroms, Lenscrafters and Pearle care what their staff thinks about product?

My customers will only buy what is on their plan

  • Customers-Patients buy what you recommend. Customer buy only on their plan if they are allowed to browse and make purchasing decisions without help. If you point to an area and say ‘those are the frames that are on your plan’ you are right

My customers won’t buy those colors:

  • Here is the kicker- if you don’t put kits of colors in, you have no idea of whether or not the customer is going to buy colors- So of course they don’t buy colors. Nobody is going to order a yellow frame through a catalogue. Color has to be tried on- just like clothes.

I don’t like to reorder- I don’t want my customers to see the same thing-I want my frame boards to be different and want something new.

  • Not an excuse- The average patient purchased a new pair of glasses every 2.3 years. Boards will always change due to styles, discontinued products. The one thing that will make the frame boards look exciting and new is merchandising and showcasing product.

I don’t want to reorder- I can always show what is in the catalogue

  • The minute the customer walks out the door without making a purchase they have a 50% chance of not coming back. You have to grab them now- do not allow them to go online to find the product cheaper, or make an impulse purchase somewhere else.
  • Using a catalogue and ordering in products to show is expensive not only for you, and the patient as well. Time in shipping, call the patient, having them come in (hopefully they do) waiting and hoping they will like the product! Costly and time consuming.

I’m bored with it.

  • So what!- if the product sells through – you are making money- how can you be bored with profits?
  • Never, Never be bored with profits!
  • If the product sells, keep reordering, and reordering and reordering- it pays your salary!

Step 2 Think Inventory Turns

Maximizing profits depends on one key issue, turning merchandise.  The goal is to turn merchandise at least four (4) times per year.  To calculate your turns, divide cost of goods by average monthly inventory and you will get your turns.

Calculate Inventory Turns:

  • Cost of Goods (1 year)  =
  • Average Monthly inventory  =
  • Inventory Turns per year  =

Example: A

  • Purchased                $ 50,000 in one year
  • Average inventory per month    $ 30,000 =    1.6 turns

Example B

  • Purchased                     $100,000 in one year
  • Average/month            $40,000 =    2.5 turns

Example C (Excellent)

  • Purchased $80.000 in one year
  • Average Inventory per month = $20,000 or 4 turns per year.

Getting There- Be Patient-Achieving a 4x turn per year takes time and a focused effort-

  1. Figure out turns per year.
  2. Adjust inventory levels to meet turns  or revamp your sales process to increase sell through of products (best solution)
  3. Replace and reorder in kits any product that has sold through at least 4x.
  4. Showcase slower moving product to sell through and replace with faster moving products
Claire Goldsmith MidPage

5 COMMENTS

  1. Guys,

    Good ideas here. I wanted to add that I got involved with Co-Optics of America (800-556-5555) about 5 years ago. They carry a pile of frame lines and provide amazing flat pricing on complete lab services. Just buy the sample frames and swap out frames that don’t move every month. No shipping costs, essentially no inventory carry costs, and best of all – no “he said, she said” bickering between the frame supplier and lab when problems arise! Keep up the good work and best of luck.

  2. I agree with you Barry- to computerize your inventory, it can tell the turns, the profit per item- best selling colors, unisex, men vs women, material- if you have all of that information available at your fingertips- less waste, less time, saving money and turning merchandise for max profits

  3. Two major issues…Selection and management! It is a simple formula. Select the products you need based on industry trends and sales history – then select the vendors to provide that product. Set levels for each catagory and vendor and maintain to those levels – reordering on a regular basis…evaluate new products periodically. Make an plan and stick with it!

  4. I am on the other side of the equation. I sell frames. I belive I can wax eloquently on this subject for pages, so I will just try and be brief. When shopping for a car, groceries, clothing, etc. , the consumer expects selection of best selling items, and current inventory of those items. One typical style of frame selection/inventory management for an ECP office is to: 1) not reorder best sellers, 2) over inventory shelves with non -best sellers, and 3)allow frame sales reps from many companies” to “control ” the frame buying. The result often is too much inventory, not enough good selection, too much money spent on inventory, and less patient satisfaction. The owner/operator or head buyer has to be involved in setting up a better system, and information is available regarding setting up a competitive retail dispensary with low inventory costs, and better patient/consumer satisfaction. I am available for advice if needed at dave@cvoptical.com

  5. I have found this aspect of managing a lab the most challenging and frustrating by far. Thankfully, we are a small office, so my absolute control over purchasing and selling glasses helps me maintain a fluid knowledge of what’s really been moving and/or collecting dust. I have broken it down to the “apartment” metaphor. I have so many units per vendor, aka real estate being rented. If, within 365 days, I have exchanged over 50% stale, I cut them back, refresh selection, and try again. If it happens again, I speak with the vendor and often part ways. I don’t want to waste their time or mine by constantly returning stale frames. On the other hand, if a brand is hot, I reorder what sold, and add 5 “apartments.” You are literally the landlord of the frame board, so you are ultimately responsible for a) “rent collection,” b) maintenance, and c) curb appeal. Keep your clientele returning by offering a clean, vibrant, pleasant purchasing atmosphere, with a good selection. It has taken me a few years to fine-tune this approach (and it is ever-evolving), but there is a way to find balance between vendor relationships, customer satisfaction, and the bottom line. Just keep it positive!

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