By Michael Cymbor, OD, FAAO
May 31, 2017
Our practice generates over a $1 million annually in contact lens sales. That large a contact lens practice requires strategic thinking, especially in how we manage our contact lens inventory.
We have four locations and nine ODs in our practice in Pennsylvania, and we maintain an inventory of seven different contact lens products. In dollars, we have $50,000-$60,000 invested, at any given time, in contact lens inventory. We expect any individual box from the seven brands we purchase from to sell three to four times a year.
Our main location houses almost all of our contact lens inventory, but we recently began inventorying at one of our branch offices, as well.
There are several keys to profitability here, in purchasing, managing and distributing inventory, and all require adherence to a process and hands-on management.
Use a Distributor: Faster CL Delivery & Sales Overviews
We use a distributor for all of our contact lens inventory purchases. After 14 years of buying directly from contact lens manufacturers, we decided to buy through a distributor six years ago. It is more efficient to buy from a distributor because we are placing all of our orders through one place, one web site, instead of four or five. Also, we utilize direct delivery from distributor to patient, so patients get their contact lenses faster. Most contact lens vendors offer direct delivery, but our distributor ships the contact lenses more quickly, so our patients receive their lenses one-to-two days faster than mailing direct through the manufacturer.
Importantly, we receive regular sales overview reports from our distributor that allow us to better plan our inventory purchases. Contact lens vendors usually provide practices with monthly prescription analysis reports, but the report my distributor sends us encompasses information on all of the brands we sell, all in one report, so I can make my buying decisions based one report instead of flipping through multiple reports.
Each contact lens manufacturer has its own supply chain process, and quirks, which can delay the arrival of orders, and will only give you reports on sales for the products it sells, which makes getting a good overview of your contact lens sales trends challenging. When we purchased directly from manufacturers, we would get the contact lenses our patients ordered no sooner than 3-4 business days, and sometimes it would take up to 5-7 business days. Our distributor allows us to receive our patients’ contact lens orders in as little as two days. To compete with online retailers like 1-800, we needed that two-day turnaround time. We use direct shipping for many patients, but there are still patients who request to pick them up at the office. In those cases, two-day delivery is key.
Reach Turnaround Tipping Point Before Inventorying
For frame inventory, it’s often said that you want each spot on your frame board to turn 3-4 times a year. The same is true of your contact lens inventory. Before deciding to inventory a brand of contact lenses, meaning keeping a stock of boxes of that brand in your office, ask yourself how long it will take you to turn over your typical order, for example, a 200-box order. If the answer is 3-4 months, it makes sense to start inventorying that particular brand. That’s the inventory tipping point.
When we first add a brand of contact lenses to our inventory, we will offer from plano to -6:00D in power. We will then track that inventory, in those powers, for 6-9 months, and if it turns over in our required 3-4 months, we expand the powers of that brand that we inventory from plano to -8.00D. Then, if the inventory in that expanded power range turns over in 3-4 months, we think about inventorying plus powers up to maybe +4.00D.
When you have the turnaround time for it to make financial sense to inventory a brand of contact lenses in your office, it can boost your contact lens sales. The patient has the ability to walk out with their paid-for contact lenses in hand, rather than waiting for their order to arrive, and then paying for it. The contact lens sale isn’t captured until the patient has paid for it, and has it in hand. Before we began to keep an inventory of our most popular brands in our office, we occasionally had patients who would order contact lenses from us, and then get home, shop around online, find the same brand for a cheaper price, and cancel their order.
In helping you capture contact lens orders, keeping an inventory of contact lenses in your office allows you to get better wholesale pricing on the contacts. Sometimes the bulk-purchase deals, meaning, for example, that 200-box order, are as much as $3-$5 a box less expensive than it would be to buy on a per-order, piecemeal basis.
Assign Employee Task of Helping to Manage CL Inventory
We currently have one employee for our whole practice (counting all four locations), whose only job it is to handle the back-end work of online contact lens transactions. We pay her about $16 per hour.
My recommendation is once your annual contact lens sales hit the $500,000 mark, it makes sense to have at least one person on staff focused on facilitating and managing contact lens sales. We are currently evaluating the possibility of adding another staff member. We also are considering if a technology upgrade would be worthwhile to make the online ordering process more automated, without as much work on the back end. Depending on the technology we add, that additional staff person may not be necessary.
You need an employee who is tracking your contact lens sales closely enough that they are able to know, by just looking at your sales numbers for each individual brand, and powers within that brand, whether it makes sense to order more when a contact lens sales rep visits the office.
Secure Important Guarantees from Vendors
It’s important that you buy from companies that will take back, or exchange, boxes of product that are not selling. It’s best to get a guarantee in writing that the companies you buy from will take back, or exchange, contact lens products that are not selling within a specified time frame after purchasing. You also want to make sure you can return, or exchange, products in danger of reaching their expiration date before you can sell them.