Running lean and mean

San Francisco-One of the most critical-and most overlooked-components of a successful optical retail operation is an effective inventory-management plan.

San Francisco-One of the most critical-and most overlooked-components of a successful optical retail operation is an effective inventory-management plan.

"Effective inventory management," said optician/consultant Carolyn Salvato, "will result in getting the best return on investment possible from optical inventory."

Salvato, who has 27 years' experience as an optician and is currently director of optical consulting for The BSM Consulting Group at its St. Louis offices, identifies inventory obstacles as falling into one or more of the following categories:

There are, she adds, some higher-end vendors that have a no-return policy. "For that reason, it's important to know the demographics of your practice to help you choose the appropriate frames to sell," Salvato said. "You should know if your patients are mostly male or mostly female. What's the average age of your patients? What's their income level?"

She recommends http://www.census.gov/ as a good Web source for income levels by area.

Supply and demand

According to Salvato, a dispensary's inventory should be based primarily on the number of prescriptions the practice writes.

"The most effective way to monitor this is to make duplicate scrips," she said. "Save a copy of every scrip. Have your technicians keep scrips in a tray or box. Then, have the checkout people collect the scrips and turn them in to the dispensary at the end of the day."

With that suggestion in mind, Salvato recommends a formula for effectively calculating an ideal inventory level: Take the number of scrips written, multiply by 60% (the typical capture-rate benchmark), take that result and multiply it by 75% (the typical number of patients who will buy a new frame when they get new lenses), then take the result of that calculation and divide it by three (the turn ratio benchmark).

"What you wind up with is the number of frames an optical dispensary should have on hand," Salvato said. "So for example, if a practice writes 5,000 scrips a year, the total number of frames available at any given time should be 750."

Salvato also said that a typical dispensary should have an inventory of between 400 and 500 frames. "If you have a 500-frame inventory," she said, "you should be able to sell 1,500 frames per year."

Supply chain

The next step toward effective inventory management is to consolidate the number of vendors a practice uses. Salvato said that having as small a number of vendors as possible helps when negotiating maximum discounts.

"For dispensaries with low volume, a buying group may be the most effective way to do this," she said. "A buying group charges a percentage of cost, but negotiates on a much larger scale to allow for greater discounts."