A Review of Inventory Management Basics

Over the last 35+ years, the question has come up over and over about inventory management. For managers, owners and buyers it is important to implement an organized eyewear inventory system. Looking at,  your frames can be 45-80% of your profitability (and liability) ergo a systemic approach to Inventory is crucial.

There are several choices that you have

1.) Hire and pay a great ‘Inventory Manager’. This is a person who understands the demographics of your market, buys what is selling, knows merchandising, has a clear direction of the office goals and understands profitability.

2.) Put in a software system like The Edge, which tracks inventory, turns and profitability and productively.

3.) Hire a consultant such as Nikki DiBacco and Jay Binkowitz that can physically coach your staff (manager) and set your inventory up based upon your goals. (See post Should you hire a Consultant)

The rules of inventory management for any retail company have not changed. Over the years we have put together a series of posts that guide you through the process of inventory inventory, how to set up a system and the profitability.

Step 1– Understand Retail Math: This is a basic step (which you also get via The Edge) These Retail formulas (which you probably have to do for taxes) are the basics in profitability.

Step 2  Get Rid of Dead Stock – Whenever I do an inventory consulting, I always start with dead

stock.. I have staff ‘dot’ the go away frames. You need fresh inventory and a fresh look. You will be surprised at many open slots you will have on the boards for new products.

 Step 3 Increase Turns by Conversion Rate:  Before you even start with with new products, you want to work on increasing the conversion rate which is the point of exam to eyewear. This will help increase turnover and profitability. It will also help determine how much product you need to stock. According to the ROB report the Eyewear Capture Rate of independent ECPs is 67%

Step 4 Increase Turns via Lifestyle Dispensing: Lifestyle dispensing is an old term, but I like it. Working on Second and Third pair sales (dismal in the US) will increase turns and profitability. This will help determine your inventory mix via Computer Glasses, Sunglasses, 1/2 eyes and fashion.

Step 5 How many frames to carry? Hopefully you are working on getting rid of dead stock, putting systems in place with increasing turnover and now via tracking you can determine how many frame lines to carry.

Step 6 Determine Average Transaction  If your highest price frame is $120, your average transaction is probably pretty low. Do you want it to increase? If so, you have several options, put in higher price eyewear or sell multiple pairs. Both will determine what type of inventory to put in.

Step 7 Your Inventory Mix  First, your inventory mix will be changing over time. As you evolve and tracking turns, the mix will change. What to carry? Accessories, Sunglasses, computer glasses, high end, low end, mix price, kids, mens, women, plastic, metal, unisex.

Step 8 Increasing Transactions And Inventory Mix

Step 9 Dealing With Reps– Over the years these questions have come up to us via email. We addressed them in the below posts.

Step 10 How much Understock should I carry? Should you reorder off the board, carry back up stock? Your questions answered here.

Step 10 How often to buy? How often do you see your reps?

Step 11: Minimum Orders– Another question that came up via email. We answered it here.

You may more questions, from adding in vendors, eliminating vendors, optical lenses, accessories, ordering in frames not from inventory. Please let us know if you do, and we will do a post.

The important thing to remember: Setting up a system takes time, be patient. Benchmark and Track, it becomes easier over time. You can read some Benchmarking Stats at Best Practices of Spectacle Lens Management  from MBA University.


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