Simple strategies for successful frame board management

February 21, 2014

At the heart of every optometric dispensary lies the important job of managing the frame board inventory. This task can appear to be challenging at times, but by following some simple strategies, it will lead to success.

At the heart of every optometric dispensary lies the important job of managing the frame board inventory. This task can appear to be challenging at times, but by following some simple strategies, it will lead to success. As with any investment, your view should be from the perspective of keeping a balanced budget with growth and profit in mind.

Most practices start out with a goal of how many frames they plan to display and make an initial investment. After the initial investment, it becomes relatively easy to produce reports to track patterns that will show you exactly what your needs are in specific areas. A smaller dispensary may carry only 500 to 600 frames, while others, particularly if in a higher income demographic, may need as many as 1,000 frames in order to offer a great selection. To determine the ideal number of frames your dispensary should carry, you must understand that setting this number is directly related to your sales volume and your inventory turn ratio.

Crunching the numbers

Profit for your practice is maximized when you can turn the inventory quickly. If you have more frames than you need in inventory, you have tied up working capital dollars that could be best served elsewhere in your practice. The average practice turns inventory 2 to 3 times a year, but a goal of at least 4 times would be more profitable. There is a simple formula to determine your turn ratio: take the annual cost of frame goods sold, divide it by the average monthly inventory, and you will get the number of inventory turns or your turn ratio. Here are some examples to simplify understanding:

• Example 1: Annual frame cost of goods $50,000/Average monthly frame inventory $30,000 =turn ratio of 1.6 turns. (Not ideal)

• Example 2: Annual frame cost of goods $100,000/ Average monthly frame inventory $40,000 = turn ratio of 2.5 turns. (Average)

• Example 3: Annual frame cost of good $80,000/ Average monthly frame inventory $20,000 = turn ratio of 4 turns. (Excellent)

Although turning your inventory 4 times is a noble goal, in these competitive times, you still have to offer an adequate selection of inventory. By understanding sales volume and turns, you can better decide your inventory needs. Budget wise, one could look at the previous year and see the total monthly dollars spent on frame inventory in each particular month or calculate how many frames were sold that month to set a monthly budget allowance. If you go over that budget, offset it the next month. By adding the total dollar amount of your frame vendor statements each month and comparing it to the report of the wholesale dollar amount of frames sold for that month, you can easily identify whether you maintained the desired budget or were under or over budget. 

Examples of tracking your monthly budget:

• Frames sold in January: $10,000; purchases made in January $12,000; over budget $2,000. 

• Frames sold in February: $8,000; purchases $6,000; under budget $2,000.



Identify your market

You can confirm the particulars of gender, vendor, and price point that identify your market. Once you get a feel for your market, begin to set up your dispensary to reach that market. Divide your categories and set numbers for each category and each vendor. Invest in the areas in which you would like growth. Sunglasses would be a good example in spring and summer. Track your trends with frame sales reports. 

Most often, the average frame sale is the mid-point between your highest-end and lowest-end frame retail. You can control your average sale by planning accordingly. If one vendor sells exceedingly well, increase that line or vendor and offset the increase by decreasing or replacing a line that is slow moving. Although you track and adjust your core lines, those areas that do not turn as quickly, such as high-end, children’s frames, readers, sports frames, etc., should still have adequate representation and selection. If you become in-network for local accounts, often you will be provided, free of charge, safety frame kits or consignments, which offset the cost of inventory investments. This is still a viable option in a lot of markets. If available, certainly take advantage when offered. Deal with current merchandise and avoid closeouts unless that is your market.

By limiting the number of vendors in your practice, you can invest better in time management with frame sales reps, offer a larger selection of a particular line in order to capture the “presence” of the line, and ease the monthly statement and billing process, as well. A good representation covers your core product, allowing you to have your niche areas or higher-end selections, and to reserve an area for new merchandise, also. After all, a department store does offer the core, but we always expect to see something new and exciting that represents changing fashion and current trends.

By planning and reordering your inventory, you can easily manage costs and numbers. You keep track of what was sold. Decide whether or not to reorder a particular frame, wait until you have enough pieces to make shipping costs reasonable, and reorder weekly or bi-weekly for each vendor. You should keep under-stock of best sellers, but a good rule of thumb is to limit under-stock to 10% or less of your total inventory numbers. Merchandising can make less appear more, and rearranging your dispensary can make old look new. Most optometric practices sell the frame displayed and order what was sold, maintaining representation of the line, but update styles as they become available. 

Each practice is unique, but by looking at your history, you can set guidelines, adjust in areas as the need arises, and by following these strategies, the process can become quite simple. Stay within your budget, adjust with the trends, keep inventory fresh, work your frame boards with merchandising, make them appealing, cater to your market, and you will be successful with growth and profit. Involve your staff in creating excitement and allow them to be a part of the process, take control of your frame boards, and take your practice in the direction you wish to go.ODT