FRAMEBUYER / INVENTORY MANAGEMENT

The 10/4 List

On the road to creating a master frame inventory management plan

BY BESS OGDEN

With 40% to 60% of the typical optometric practice’s revenue coming from optical sales, we can all agree it makes sense to have a solid plan in place for managing frames, lenses, and contact lens inventory. Nevertheless, we still discover during our consulting process that many practice owners are driving without a map, especially when it comes to frame inventory management. Let’s start there.

Here are our Top 10 Best Practices for managing inventory, and the Top 4 questions we receive regarding the process:

TOP 10 BEST PRACTICES TO IMPLEMENT NOW

1 Re-order on a weekly basis, rather than as reps come in (unless you are in a very small town or have a very high-end boutique). This will even out your frame costs. Simply save the tags of sold frames by vendor (use a bead box or other craft organizer).

Set aside time each week to re-order these frames, unless they’ve been tagged to be discontinued. You can also use your computerized inventory tracking system to assist with this re-order process.

2 Do quarterly frame inventory reports and meetings with owners and frame buyers in the office.

3 Make sure the entire staff understands their parts in the process! They must understand how to properly remove frames from the inventory software during the sales and the appropriate billing process or you will have an accounting mess on your hands.

4 Do a physical inventory AT LEAST once a year (typically at end of the year in December).

5 Have one very detail-oriented optician be responsible for entering new frames into inventory. Have at least one other person trained as his or her backup.

6 Meet each frame rep once a year for a strategic planning session about their lines.

Talk about upcoming marketing campaigns, any changes to your current lines, in-office merchandising ideas, etc.

7 Survey patients regularly about your frame selection.

8 Have a tight credit tracking system in place. Some software will allow you to enter invoices, pending credits, and credits as they are processed. Otherwise, you can create a simple paper tracking system.

9 Set up board management: each line gets a certain number of board spaces and dollar value.

10 Have the sales reps with whom you work sign a contract outlining their responsibilities.

TOP 4 QUESTIONS TO CONSIDER

? HOW MANY FRAMES?

In general, plan to stock 100 inventory frames per $100,000 in annual receipts, with a minimum of 400 and a maximum of 800. This doesn’t include sunglasses, specialty eyewear such as safety frames, OTC readers, or Medicaid frames. Sunglasses should be an additional 10% of your inventory (40 to 80 minimum) or more, depending upon your practice.

Understock should never exceed about one week’s worth of frame sales. If you sell 10 frames per day on average, your understock would be about 50 pieces (to fill holes on the board until more inventory is added).

? COMPUTERIZED OR MANUAL?

We highly recommend utilizing the frame inventory management module in your practice management software, even though you can, in theory, track frame sales manually.

Benefits of a computerized frame inventory:

Accurate sales reports



Accurate frame counts



Ability to monitor and manage frame mix



Efficient physical inventory process



Accurate inventory value (for tax purposes but also to prevent inventory value “creep” over time)



Easy re-ordering process



Easy pricing/re-pricing



Efficient communication with reps



Deter internal theft and spot external theft

? WHAT MIX OR PRICE POINTS AND STYLES?

To determine your number of frames: Projected annual receipts/$100,000=number of ophthalmic frames (minimum 400, maximum 800), add 15% suns (60 minimum to 120).

? WHAT SHOULD MY BUDGET BE?

Your total frame purchases on a monthly basis should be between 8% to 12% of your average monthly receipts. You can set up an initial budget target by simply dividing your frame cost of goods from the previous year by 12 (unless you are way over or understocked!). Let’s say you are a $1 million practice and you spent $80,000 on frames last year. Your budget would be $6,667 per month.

Bess Ogden is a senior consultant with Williams Group, based in Lincoln, NE.