Reducing shipping costs to propel better patient service and profitability.
By Chad Fleming, OD, FAAO
Sept. 6, 2023
Shipping expenses, both business-t0-business and business-to-consumer, can cut significantly into your net profits. Here is the approach we took that allowed us to reduce shipping costs to under $100 per month for five locations, equaling a total cost savings of around $1,000 monthly.
Increase Cost of CL Boxes By $1 & Ship to Patients for Free Without Increasing Expenses
Free shipping has become an expected norm. Consumers’ experience with Amazon Prime has resulted in businesses needing to provide free shipping or people question the cost. It is important, however, to be able to offer this to patients without increasing your shipping costs.
We did an analysis a couple of years ago on our contact-lens pricing and shipping charges and realized if we increased our per-box price by one dollar across the board we could ship to all patients for free. This has been a game-changer, freeing our staff from processing contact lenses coming into the office, contacting patients and then servicing patients coming into the office to pick them up. I don’t have the staff bandwidth to be able to do that, so we have to automate as many processes as possible. Direct shipping to patients is one of the ways we automate processes.
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Use Consignment Model in Which You Don’t Inventory Frames
The most impactful decision for us in reducing shipping expenses was getting away from the old model of frame buying. Instead we utilize a consignment model that keeps frames on the board all the time and drop-ships orders to the lab, ensuring we are not the ones paying for the shipping.
We used to spend about $300 per location per month moving frames back and forth between vendors or office and lab. This is a high cost when you consider how minimal profits are with managed vision care. Reducing shipping costs by using a consignment model in which you are not inventorying frames can make a big difference to your bottom line.
Optimize Shipping Advantages from Group Purchasing Organization
Ninety percent of our frames are packaged in one box from the vendor with other practices. They’re a part of our group purchasing organization (GPO). The vendors pick up the shipping costs since all frames are going in one box. This reduces costs significantly, allowing us to reduce our shipping costs to easily under $100 per month per office for our five locations.
Ask About Ophthalmic Lab Shipping Charges
When negotiating with your ophthalmic lens lab, be aware of their shipping charges. You may have negotiated better pricing for the lenses, but the profitability of that better pricing will get eaten up by added shipping and handling charges.
We participate in a program done by Partners in Profit, “The Optical Advantage,” in which all frames of its members are shipped from the vendor to the lab. This process allows for shipping to be covered by the vendors.
The frames displayed in our office are frame demos by the ophthalmic frame vendor, so we don’t utilize the old way of shipping frames all around with the traditional frame rep. We don’t work with the local frame reps. The group is treated like a corporate account while the independent practices that are members remain independent.
Closely Evaluate & Reevaluate Vendor Shipping Costs
Every couple of years evaluate which vendor expenses have increased and which have remained the same. Companies will not increase pricing because they want to be able to say that pricing has stayed the same. However, they will increase shipping and handling costs and other charges so they can retain their profits. Being aware of this is the key to keeping your costs down.