Frames On Display: How Many Do You Need?
When it comes to the frame display area in your dispensary, do you operate under the theory that marketing considerations outweigh inventory costs?
Or, do you try to balance the number of frames on display against the cash you have tied up in inventory?
In my opinion, 3 turns per year on frame inventory is about right for most private practice ODs. To see why I feel that way, let's look at two practices that both dispensed 1,500 new frames in 2008. We will assume they were all on a private pay basis.
Dr. Temple’s practice has an inventory of 500 frames which means he ‘turned’ his inventory 3 times (1,500 ÷ 500 = 3).
Dr. Rimmer has a display of 750 frames which means she turned her inventory only 2 times (1,500 ÷ 750 = 2).
If we assume an average wholesale price of $75 per frame (is that too high or too low?), Dr Temple’s inventory of 500 frames cost him $37,500 (500 X $75).
It's important to recognize that once Dr. Temple pays his supplier for these frames, from a cash standpoint, it is just like taking $75 out of his checking account and tacking it to his wall for four months. Now multiply that by 500.
Yes, frame inventory is a necessary expense. And, you hope to double (or more) your money on that frame. But until it sells and converts back to cash, each frame you buy consumes money that could be spent elsewhere in your practice.
Keep that in mind as we look at Dr. Rimmer’s inventory costs which are $56,250 (750 x $75). That means she has $18,750 more than Dr. Temple tied up in inventory.
For that reason, I think Dr. Rimmer has too much inventory for the amount of frames she dispenses each year.
I am interested to hear if you think the marketing benefits of a bigger frame selection justifies the extra expense.
Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2009 Jerry Hayes, OD. Not to be reproduced without written permission of the author.
Back To Top
My staff and I are discussing
My staff and I are discussing how many frames to keep in stock and how that will affect our bottom line. We have tried many ways mentioned above. All good stuff.
A question for the readers out there. INVENTORY? Has anyone been able to design a frame inventory system that is low maintenance and easy to set-up?
Does anyone have contracts
Does anyone have contracts with their frame reps?
I'm thinking about having my sunglass reps sign a contract. We ended up with some extra sunglass inventory at the end of 2008 that I was not happy with.
I agree with Dr. Hayes. I
I agree with Dr. Hayes. I strive for a turn over at least twice a year and prefer 3 times. I purchased an old practice with an existing dispensary that holds 600 frames on frame boards. This was about 100 frames too many. I addressed the excess inventory in a number of ways:
1. Removed one free standing tower
2. Tracked what frames were selling and how quickly with OfficeMate
3. Covered up "holes" with POP frame graphics from vendors (this works well during slower times of year to keep inventory down without looking bare)
4. Take advantage of year end sales by vendors to pre purchase product for next year at significant savings.
5. Scheduled vendor visits (now 3 times a year not 5) and purchased product based upon what sells and not what the vendor thinks I need.
One tool I use to minimize
One tool I use to minimize carrying too much inventory are JIT programs that ship frames just-in-time to labs, such as DFRx from Essilor.
The frame is shipped overnight to the lab from the frame company - our cost is at our usual account charges, billed from the frame company and the lab charges us $1. This program allows us to:
1. Keep the frame on the board, reselling it multiple times without re-ordering it - no more "holes" on the board.
2. Flatten the hills and valleys of inventory (and cashflow) due to frame purchasing cycles, therefore we can stock less and we "pay as we go."
3. As we do only update the board when new styles come out and old ones need to be returned, we have cut our visits by frames reps 50%.
I agree, and for me it is
I agree, and for me it is hard to get the level down once we have gone over the prescribed amount.
One problem is that in my case, my boards are built for 581 frames. Add to that Maui Jim, Oakley and Silhouette, and bang, you have a lot of money tied up in frames. This lessens your turnover, especially given the fact that Oakley, et al have minimums.
I have been trying my best to hit 2 turns, and that has taken years. It shouldn't be that hard!
I agree with Dr. Hayes with
I agree with Dr. Hayes with regard to frame board management and keeping enough frames on the board for a three time turnaround.
The added expense of a bigger frame selection, in this case $18,750, could be better put to use in external marketing. For example a weekly ad placed in the local newspaper letting patients know about your products and services or web site development or enhancement would go a long way to bring NEW patients into the office.
In my experience, opticians will show and sell the same frame over and over while allowing others to go stale. From a psychological standpoint, this usually is because optometrists and opticians will sell the frame they are wearing, the one that is their favorite or that hot new frame that was just brought into the office.
Leaving that money on the board will hit a smaller target audience and do minimal to bring in new patients. I am sure that most patients can find an appropriate frame just as well with 500 as they can with 750 frames displayed.
Why don't independent ECP's
Why don't independent ECP's consider buying as a distributor (in bulk) or as buying group to buy low to sell high?I know there are certain times of the year labs need to liquidate frame inventory and cash screams.
That is a very good
That is a very good perspective. The marketing aspect of frame selection depends on available cash flow and your brand. A large number of low cost frames could give you the reputation of having the largest selection in town. However, if you are in my situation, cash flow is very important and it seems that patients usually need about 10-20 different choices to be satisfied with selection. The rest is just for show.
I like having a small selection of choice frames mixed with a larger number of less expensive frames to create that ambiance.