Finances

Frame Inventory ROI: Track and Measure Proven Worth

By Eric M. White, OD

Maximizing revenues from your optical dispensary requires tracking and measuring the performance of each frame line–then fine-tuning the mix. Here’s how.

Practitioner Profile

Eric M. White, OD

Complete Family Vision Care

San Diego, Calif.

Southern California College of Optometry
Class of 1986

Annual Revenues

Just under $1.6 million

Annual Examinations

2,080

One Doctor works four days per week, seeing 10 comprehensive exams per day.

Revenues from dispensary: 60 percent

Revenues from frame sales: 40 percent

Specialties

Contact lenses, clinical investigation and co-management.

The optical side of the practice offers the greatest profit center in most practices–but only if you effectively manage your frame inventory. It is essential to have a great frame inventory plan in place to maximize your profits and prevent misplaced or lost frames. Sixty percent of my practice’s profit comes from sales in our optical shop, so to maximize revenues I realized my staff and I needed a system in place to prevent unwise inventory investment.

Use Math Rather than Instinct

Your gut can be helpful in telling you what frame brands your patients will like, but listening to it is just the first step of inventory management. That instinct must be followed up with measurement and calculation of proven profit. Years ago I saw a frame line at Vision Expo that I really liked. I invested in the line and not one frame ever sold! I ended up heavily discounting the frames to get rid of them.

Our Inventory Management Formula to Set Pricing

We multiply sunwear 2x and ophthalmic frames 3x to set pricing. For example, if a sun frame cost me with tax and shipping $49.95, we price it at $100, and if an ophthalmic frame cost that same amount we price it at $150.

Determine How Long to Keep Frame

We have a three-month rotation. If the frame hasn’t moved in three months, we have the rep take it back. We are on full board management, meaning we make a point of having our frame board fully stocked at all times, so we know we always have the best frames available to our patients.

Use Frame Reps for Guidance

We are on a frame board management schedule where a rep from each frame company comes in every three months to rotate the frames. The optician overseeing this process will go through the inventory the day before and pull the frames to be exchanged. We determine with the frame rep how many frames per line we want to invest in.

Work with Reps to Provide Right Pricing Mix

Value: $100

Mid-price: $150-$250

Luxury: $250+

Keep Optical Professional Looking

We work very closely with our reps, but we do not do a lot of point of sale displays. We want the office to stay professional looking without a lot of posters and other display advertising.

Carefully Track All Inventory Purchases

It sounds obvious, but you mustmeticulously track the inventory you invest in. We use an Excel spreadsheet to inventory all frames and then mark off when each piece of inventory is sold. We have frame tags on each frame. When the frame is sold, the tag goes into a clear plastic bag by the frame company we purchased the frame from. At the end of each day, we collect these tags and record what was sold on our spreadsheet.

Our optician maintains the spreadsheet, listing new frames and taking out old frames. She marks what frames sold and when. This way she can quickly see how long a frame is on the board. She has grown so adept at these tasks that it only takes her about three hours per week to do it.

Make Use of Buying Group

In addition to carefully tracking and discontinuing frames that are not performing well, take advantage of any optometric alliances or buying groups you belong to. Primary Eyecare Network (PEN,) our buying group, is instrumental in helping us buy frames at a lowered cost with its volume-based discount. For example, we recently were able to get 5 percent off a purchase of a frame line. They also help us categorize the frames we purchase, giving us guidance on which frames would be considered luxury, mid-price, and value–which helps us provide the right mix of frame prices to our patients.

Related ROB Articles:

Vendor Agreements: Understand Terms, Adjust Practice Policies

Frame Board Profitability Requires Hands-On Management

Three Steps to Frame Board Profitability

Eric M. White, OD, is the owner of Complete Family Vision Care in San Diego, Calif. To contact him: Emwhiteod@aol.com.

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