A better way to approach optical inventory management.
By Alex Martin, OD
Jan. 24, 2024
One of my mentors, Walt West, OD, once told me…I can show you how to grow a business or slow a business, but I can’t tell you how to keep one stable. To ensure the former, double-digit year-over-year growth is the goal in my two practices.
In the earlier days of my practices, I could find that growth by seeing more patients through efficiencies of diagnostic equipment, increasing staff to increase volume and delegations of duties. When patient capacity per doctor was maximized, I needed to turn to other areas of practice management to retain growth goals.
Moving Beyond Average
Optical revenue averages about 44 percent in independent eyecare practitioner (iECP) offices, doubling any other revenue source in most offices. As the majority percentage of revenue in the practice, improving metrics in the optical represents the most effective method to grow without seeing more patients. Increasing optical capture rate to improve gross revenue per patients is the goal, however, there are many areas inside and outside of the practice to achieve higher capture rates.
The Power of Effective Inventory Management
Effective inventory management is an often overlooked, but critical area, of the practice, that provides a better shopping experience for our patients and improves capture rates for the practice.
Both of my offices employ static frame board management to provide a “One For Show/One To Go” inventory system allowing every patient who enters the office to have access to the entire curated brand collection (frames you chose from a brand), for every brand we carry.
Static frame board inventory management refers to keeping your curated collection on the board at all times. For example, when a patient selects a frame from the board, that frame is left on the board, ordered from the vendor and drop-shipped to our lab or our office (when edging in-house) for job assembly. Of note, I am a member of Vision Source and use their proprietary board management program, Frame Dream, that houses each of my frames at the lab, and the frame and lens are assembled at the lab as soon as we place the order.
For decades, most iECPs have accepted the traditional method (sell off the board) of frame inventory management; purchasing in large volume, selling through inventory and replenishing what has sold when the brand rep returns in 6-8 weeks, with this purchasing habit and cycle repeating for every brand on the board.
If frames were seasonal retail items, and practices were purchasing multiple SKUs of the best sellers, this may be a good strategy. But frames are not a seasonal purchase, like clothing, and diversity in a curated collection of a brand is preferred by our patients/consumers. Correlate this system with the balloon pop game for kids. Once the frame is sold (or balloon is popped) no one can select that frame (or balloon) until it is replaced. As each frame is sold (or balloon is popped) the next patient (or kid) has less inventory (or balloons) to choose from.
Value to Keeping Entire Brand Collection on Board At All Times
When the entire brand curated collection is kept on the board at all times, not only will capture rates increase, turn rates for each brand will increase, inventory cost will lower and staff inventory management time will decrease. Conversely, when traditional inventory management (sell of the board/pop the balloon) is used, SKUs from each brand start to disappear from the board with every sale that is made.
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Best sellers for each brand are typically the first to go. This may cause the patient to move to another brand, make another selection that may not provide purchase satisfaction, or cause the patient not to purchase at all. This pattern of inventory management reduces capture rate, reduces turn rates for the brand, causes fluctuation in cash flow and increases inventory management time for the staff.
A static board also makes it possible to measure and compare performance of each brand, thus making brand portfolio decisions easier.
Results of Adopting Static Board Management
In the first year we adopted static board management, comprehensive turn rates increased from 2.2 X to 3.0 X and capture rate increased from 55 percent to 65 percent, contributing to our double-digit growth that year. Static frame board management obeys the retail principal of demand forecasting, which holds the highest potential savings for any principal of inventory management.
Shipping cost can become a factor with static board management, so try to use vendors that provide free shipping as part of their program, if available. Otherwise, shipping cost should be factored into the retail price of the frame.
Vision Source and PERC have frame board management programs that will allow static frame board inventory management with free shipping as part of the program benefits.
AIMS is an industry inventory software that also provides auto-ordering for frames that are sold.
There are many options to help you implement static frame board management. The important thing is to try one of them and see which works best for your practice.