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 =
- Purchased $ 50,000 in one year
- Average inventory per month $ 30,000 = 1.6 turns
- 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-
- Figure out turns per year.
- Adjust inventory levels to meet turns or revamp your sales process to increase sell through of products (best solution)
- Replace and reorder in kits any product that has sold through at least 4x.
- Showcase slower moving product to sell through and replace with faster moving products