Having a plan for controlling costs and improving profitability is a great way to start the New Year.
A new year is an ideal time to establish a rational, cost-effective Buying Plan for the optical dispensary.
First, establish who is responsible to execute your buying plan. There needs to be one primary and one secondary person, to pick up at times of absence and for accountability. The primary person will take the following steps:
- Reassess contact lens buying plans: contact your account representatives for your suppliers, distributors, alliances and/or buying group. Using the previous 1 or 2 months of buying pattern in your practice, ask:
- Are you getting the best price they offer?
- Does your ordering process maximize these pricing plans, including rebate programs?
- If you are using multiple suppliers, would consolidating all purchases through one supplier make more sense?
- Have you evaluated your fitting practices? With the tremendous breadth in choices of CL available, it is important not to get stuck using fitting methods or materials that may be replaced by improved technology.
- Reassess ophthalmic lab and lens suppliers
- Take a sampling of previous orders from a cross section of vision care plans and plug in different lens choices, apply different pricing plans, etc to determine the most cost-effective way to deliver the best care under those plans
- Narrow and improve your frame vendor list
- Ordering more product from fewer vendors gives you better buying power
Budget for dollars and for unit count. Your frame budget should be approximately 35-45% of your gross frame sales. The unit budget is simply the previous month’s (or quarter’s) frame sales, adjusted for expanding or reducing to maintain your ideal frame count.
Ideal frame count: previous 12 month’s frame volume divided by 3, with a minimum 500.
Last 12-month frame sales = 1800
Ideal = 600, frames on hand = 680
Previous month frames sold = 150
You need to reduce inventory by 80 frames, you can do this over a four-month period by reducing your reorder rate by 20 frames per month for 4 months
Frame budget = 150 – 20= 130
We cannot discuss buying, without talking about how to handle current inventory.
Age out inventory that does not perform well by using the following timeline:
- 6 months - Move display, offer to a broader range of patients
- 9 months – Ask vendor for exchange of product
- 1 year – reduce the price by one level so patients and opticians compare the style to a different category of frames
- 1 year, 6 months – offer at half price or free with the purchase of lenses
- 2 years – place into Medicaid selection or donate to charitable organization to use on mission trips
Using this schedule, you will never have old merchandise that becomes loose, misshapen, discolored or out of style.
These principles apply to your consignment assortment as well. If you have a case of 30 frames and sell only from 12 or 13 skus, you are taking up valuable space with less desirable pieces, the result being the appearance of having a poorer selection. The frames that don’t sell will still be handled, tried on, dropped and shuffled so they will eventually become unsalable.
Manage even your Medicaid assortment. Plan an annual donation to a charitable organization to remove excess pieces.
Remove and write off any unsaleable merchandise. Inventory that has not moved in 2 years is, by definition, unsaleable.
Process returns and credits immediately or at least make it a routine weekly task. Do not get in the trap of holding merchandise for a visit from the rep unless you get a concrete, timely commitment from them. In any case there should never be any inventory that is not displayed or acted upon for more than two weeks.
These measures will keep your inventory looking beautiful and new!