Help! My Inventory is Out-of-Whack!
By Tim Slapnicher ABOC
Release Date: 7/1/2012
Expiration Date: 1/30/2017
Upon completion of this course, the participant should be able to:
- Find creative ways to reduce an out-ofcontrol inventory.
- evelop a Frame Matrix using patient demographics.
- mprove vendor relations and create a true partnership, while setting up rules and guidelines with your reps.
- Learn how brand training can help boost sales and how it can create a better patient experience.
- Implement a healthy board management system that works for you, your reps and your practice.
Tim Slapnicher ABOC, CPO is currently the practice coordinator at Rivertown Eye Care in Hastings, Minn., where he lives with his family. He uses his experience of teaching kindergarten to bring a fresh perspective to management in the optical industry.
This course is approved for one (1) hour of CE credit by the American Board of Opticianry (ABO).
Course # SWJM252-1
PHASE OUT INVENTORY CHAOS IN "5"
If you are the owner, manager or buyer of an optical shop, you could have a stomachache by the end of this paragraph. At least I did when I experienced this in real life. We had over 2,000 frames, 31 reps and averaged 0.67 turns per year. That was an investment of $130,000 on our boards and a loss of $7,000 in optical the previous year. Purchased frames would stay in unopened boxes for three to four months before being placed on the boards. We ordered 40 to 70 frames per rep visit, and almost 50 percent of our inventory was high-end luxury product. An average of three to four hours was spent flipping product when reps visited our optical.
I told our doctors that if we figured out how to turn this around, I would probably be able to write and speak about how we did it. And here it is.
HOW IN THE WORLD DID THIS HAPPEN?
That was my first question. I had no idea where to start. There were so many red flags that I did not know how to proceed. We eventually came to the realization that until we could figure out what happened and what we were going to do about it, we would implement an inventory freeze. This is every optician's nightmare—no more exciting, trendy, fashionable frames for the foreseeable future. It was interesting observing our opticians bring patients over to our frameboard. They became great with sales, though they had to fake enthusiasm for product that had been in our optical for over three years. This was rough.
PHASE 1: "TRIM-DOWN"
The frame freeze helped a bit, but it was still very difficult to sell off our frames which were not current and that our opticians were sick of. We had to get creative with clearing out our inventory. Here are some things to try, some more successful than others.
1. Buy-backs: This is when a frame company would take 70 "duds," and we would get 70 new frames at a discount. Although it was an even trade and did not lower our number immediately, current frames are more saleable and will lower inventory more quickly.
2. Free frame as a second pair: Everyone tells you to sell multiple pairs, right? Even though we weren't making a dime on the second frame, we were getting paid for the lenses and patients get into the habit of having more than one pair.
3. Dots galore: Purchase a whole bunch of colorful dots and place them on outdated frames. Red Dot: 50 percent off frame; Yellow Dot: Free frame with purchase of lenses; Blue Dot: $20 sunglasses with a year's supply of contacts
4. Optician incentives: If trying to sell off a frame line, consider giving a $50 incentive if sold at full price. After three months, consider discounting those frames 25 percent off and pay opticians $35 for selling them. Incentivize $20 for a frame that was 50 percent off and a high-five if the frame was 75 to 100 percent off. Regardless, working hard at a frame line can ensure that it gets eliminated.
After two painful years, we had greatly reduced inventory and were ready for new product. We chose to allow this trim down two years—yours may take less time.
PHASE 2: CREATE A PLAN
Our optical brand was damaged. What once was known as an exclusive and trendsetting optical had become a big mess of confusion. We had no identity or direction. Everything had been done randomly and without a plan, and we paid dearly for it. We watched as patient after patient requested their prescription and walked out the door. We needed a plan and a vision to regain our once-elusive optical reputation. Where to start?
1. Ask the basic questions. Which brands and companies should we work with? What frames do our patients like? Who helped us switch out product during our ordeal? Which companies contributed to this mess? Which reps were willing to sacrifice their sales to help us turn around? What are the immediate next steps?
During the question period, ask many of your reps to share their observations on what builds a successful optical. After all, they see many different opticals. How do most businesses control inventory? What lines, besides theirs, do they like? Which are complementary, which conflict and why? What are the secrets to creating an amazing optical experience? You'll get a ton of great input, but realize that needs to be distilled into more guidance and a better plan to save a reputation.
2. Develop a Frame Matrix. Before making any big purchases, consider a Frame Matrix, i.e., what percentage of men's, women's, kid's, sun, plastic, metal, semi-rimless, rimless, etc., are required and which lines excite those that sell them and the demographic of your practice. Remember, patients who request prescriptions to shop elsewhere are telling you that the selection is not exciting.
3. Calculate the total number. To calculate the number of frames required, collect specific numbers on patient demographics: age, gender, style, etc. This is available by mining the data in your practice management system. That will provide a black and white plan on what a frame-board would look like. Before diving in and ordering frames like mad, make sure you are on the same page with your reps.
SAMPLE TOWN'S FRAME MATRIX
Research your town's demographics (www.city-data.com). Here we've created a sample. Sample Town's demographics have a population of about 5,000 people. 54 percent are female, 46 percent are male. The average age for women in this town is 46, and for men, 44. The average income per household is $62,000.
The target for the inventory will be women ages 30 to 65. Frames will be elegant, classic and fun and funky. For men, the target will be young professionals. Frames will be rimless, retro and bold. Sunwear will focus on high-performance lenses and fashionable styles. Frames for children will be traditional with a fun twist.
Based on research of Sample Town's demographics, we will have an inventory of 200 pieces (for perspective, the average optometric office, with revenue of about $700K stocks 750 frames in inventory. Source Keymetrics, mbe-ce.com), which will consist of 40 percent women's, 25 percent men's, 20 percent sun and 15 percent kids. Frame reps will be given a board space number and will provide a mix of plastics, metals, zyl, semi-rimless and rimless with a variety of sizes and colors. Monitor the turns of each frame line on a quarterly schedule. Be flexible enough to slowly add more pieces to high performing lines. Have two to three frame lines on your wish list for underperforming lines or reps. (The following brands are for example only, choose your own preferences.)
Saks 5th Ave
|Marc by Marc Jacobs
PHASE 3: IMPROVE VENDOR RELATIONS AND CREATE A TRUE PARTNERSHIP
Do you trust your reps? While we made many mistakes during the process, we had mixed success with reps. We even found a few that had been and still continued padding orders. Some of them were eager to switch us out of old product, but many weren't. However, it is your responsibility to address those unhealthy patterns. Has this happened to you?
Some reps came in without an appointment, and we felt pressured to buy as we were informed they wouldn't be around for another three months… it was now or never. Some opened their frame trays in front of patients, and staff had to choose between helping the patient and looking at new product. Some reps had favorites on our team, and the others felt left out and unengaged. Gifts were sent to some opticians without full knowledge of doctors or managers. Some frame buying was frequently done offsite at restaurants where gift cards would be exchanged for large orders. The problem is not the reps but that of the office. Develop a set of guidelines and/or expectations for reps, and then train them.
RULES AND GUIDELINES—
It has taken this office some time to nail down, but these guidelines have helped tremendously to move us forward with rep relationships.
- All reps must call or e-mail for an appointment (no surprise visits).
- All reps will set up their own displays with POP and other decorations that go with our décor.
- If reps bring in treats or gifts (shirts, mugs, chocolate, free vouchers, etc.), they must provide enough for the entire team.
- If gift cards or incentives are provided, those are communicated with the owner/ doctor and manager before presenting to the optical team.
- All individual gifts, gift cards, vouchers, etc., are placed in our rep box.
- Sales goals are set together: the number of turns targeted, exchange percentage, etc.
- Visits are scheduled for once per quarter to go over numbers and new releases.
- At least one brand training event is scheduled per year.
- Reps will e-mail a summary of the visit to an agreed list of opticians, manager and owner.
- "Partnership" is defined together to come up with mutual expectations.
- "Board management" expectations are defined together.
PHASE 4: REQUIRE BRAND TRAINING
Want to be able to do the right "frame speak"? It may be the coolest thing we do at our optical. Consider hosting a brand training event about once per quarter. Deliver an open invitation to all of your reps to brainwash staff with all there is to know about their company and frame lines. After all, who knows more about the product than the rep? The optician and staff goal—be able to ooze with the same passion that the rep has for the brand.
When? Pick the night that works best. In this office, Tuesday nights work best for our team. The event is for all members of the team (not just opticians). Consider starting right after work and make sure to have plenty to eat and drink (perhaps a meal catered in, fancy pasta and wine for one of our luxury lines). Other times, it's subs or pizza. Vary the menu—often consistent with the brand's identity. Dessert is a must (aka chocolate) to cap off an evening together.
The goal: Learn the brand inside and out. This helps separate your office from others. With online options, lower prices and more competition, you must create a better patient experience. Patients deserve an education about their investment. What should you know?
Consumers who identify with particular brands and/or designers would want you to know the history of the designer, what inspires them and what they are known for (shoes, handbags, jeans, dresses, frames). Do they have any quirks? What celebrities wear their fashion? For celebrities, see Hall of Frames in 20/20 (2020mag.com). Editor-in-Chief James Spina tells us that "Hall of Frames routinely gets the most online comments since consumers want to know what sun-glass or frame their favorite is wearing." What colors and style are they known for? How often do they release new lines, the current trends and what is coming?
Know the history of the frame company, country of origin and the quality attributes of the lines. How are the frames assembled? How big is their design team? How long is the design to completion process (from initial drawings to production)? Then answer, why is this frame company a great partner for your optical? How are they an extension of your own brand?
Review magazines that feature the brand and ask the reps for copies. Consider purchasing copies for countertops and reception so the brands carried in your office are also seen in the material that patients see in the office. Leave magazines opened to the right pages. Ask reps for presentations that describe the history of the designer and company, how frames are designed and assembled, and other helpful information related to the brand. Ask if those presentations (slide show or video) are available to be shown on that flat screen in reception. Require the rep to do a little quiz at the end of the presentation to test key facts. It's helpful if a rep hands out small prizes to team members that get correct answers—it reinforces the facts.
Then as a team, develop a list of two to three phrases or facts to remember to share with patients. Be able to connect the frame to stories about the history of the company, current fashion trends, quirks about the designer or fashion intricacies found on each frame. That allows patients (and staff) to experience fashion in a different way. The brand becomes more tangible—patients can feel it. Share the quality of the frame… this is what you get when you wear this frame. It becomes an experience that can't be duplicated online or down the road. It is experienced only at your optical.
Be able to look at any frame in the collection and understand why certain colors or materials were used. Know the history of the brand and the company.
PHASE 5: MAKE BOARD MANAGEMENT WORK FOR EVERYONE
When I tell other managers and opticians that we are using a board management inventory system, their reactions are usually negative. I don't necessarily blame them. Here is how we set up our system, and why it works for us.
Working with our Frame Matrix, we determine how many board spaces a particular line will get. If we allow 20 pieces for a line, we decide how many plastics, semi-rimless, metal, etc., that our patient demographic will support. Before we bring the frames in, we set up an appointment for a brand training session; we want to really understand the line inside and out.
When we open an order with a frame company, our reps choose the frames that go on our frameboard. We don't flip product with our opening order. They understand their frames better than anyone. They know what sells in our region. They are also accountable for this first order. If none of them sell, it's not going to work. They have to put frames on our board that will best represent their company.
Typically, when we have 20 pieces from a frame line, there are usually eight pieces that turn on a regular basis. These are the cash cows, and we either keep them in back stock or reorder immediately. Some opticals may not even sell these off the board. Then there are about seven pieces that we categorize as "wait and see." These have the potential to make great turns, but they often don't take off like we would imagine. The last five pieces are ones that didn't work out. When our rep gets new releases, we will add five new releases (we flip these) and remove the five duds. This cycle is continuous and works well for our team.
As part of board management, consider allowing reps to decorate their space. They often bring POP and other accessories that make their line stand out. Ask them to consider the current themes of your optical and the season of year as they dive in. Give them control and they usually make it look spectacular. If it needs your touch, tweak some of the POP placement or add some of your own décor to their space. We appreciate their efforts, but we want it to match our flow and culture.
Always have two to three reps waiting in line for underperforming reps and lines. Some reps make it clear that they don't have time to decorate our office, come in to do brand training, help with a Frame Matrix or visit as often as we might feel necessary. Don't stress about it. It's a suggestion that their line won't be a good fit. Meeting reps and sharing guidelines means there are no surprises. It's either a good fit or it isn't. Similarly, if a line doesn't turn, and if it's not what patients are demanding, phase it out. Never have such an emotional connection to reps that it doesn't allow a good business decision. Care about your reps and work at a healthy partnership, but make sure patients are taken care of first.
WHERE WE ARE NOW
I can't bring myself to use the word "conclusion," as the process is always changing. This current model has helped tremendously. Although it's not yet where we want it to be, we have improved our average turn from 0.67 to well over two. We have about 1,000 frames on our board with a total investment under $80,000. We place frame orders ( five to 12 pieces) three times per week. Product mix looks much better after giving more control over to our nine rep partners. Our opticians are giving our patients a much more meaningful experience with their newfound knowledge and enthusiasm for our brands. There's way less stress with reps, as the expectations and guidelines have given all a better understanding of goals. We will continue to be flexible with what works and what doesn't, but we will not be flexible with our focus of becoming an exclusive optical again. How about you?