CONTACT LENS INVENTORY
The Impact of Contact Lens Inventory on Contact Lens Business
How to maintain your contact lens inventory to optimally improve sales and profitability while minimizing your cost of goods.
By Polly Hendricks, OD
The debate rages on among eyecare practitioners as to whether to stock contact lenses in the office, order them from the distributors, or direct ship them to patients. After 20 years of practicing in my three high-volume contact lens practices, I’ve found what I believe to be the best system for stocking our select lenses of choice and growing our contact lens sales while lowering our contact lens expenses at the same time. I will detail my strategy for maximizing inventory, which translates directly to sales, and for minimizing the cost of goods.
The Pros and Cons of Maintaining an Inventory
But first, let’s consider the pros and cons. Most practitioners would agree that their reasons for not stocking lenses are cash flow (“Why let a product sit on the shelf?”) and space (“My office is small, and I never have the lens powers that I need.”) issues.
At the same time, most of us would agree that patients tend to buy their year’s supply if the boxes are ready at the front desk at checkout. Your staff members all know the benefits to their time of immediately supplying patients with all of their boxes; this avoids time spent six months later ordering more lenses or, even worse, releasing the prescription to online sales. In the past, if we had to order lenses, some patients went home and shopped online, then called to cancel the order with our office. We are now able to price our lenses more competitively, so this may not be as much of an issue as it was in the past.
Managing the Disadvantages
Following are some of our strategies for overcoming the cons discussed.
“I don’t have the space.” Select a lens of choice. We stock our sphere of choice and one brand of daily disposable lenses.
“Stocking lenses adversely affects my cash flow.” While there is an initial outlay of cash, you can time your purchase during the month and ask your distributor for a 30- or 60-day billing on all purchases of more than 100 boxes of lenses. Many times, you will then be purchasing additional boxes in that quarter at a lower price.
“I still run low on the powers that I need.” Assign a staff member to order boxes that have sold twice a week to maintain the current level of inventory. If you find powers that aren’t being utilized, trade them for powers that you need.
“My staff doesn’t pull from stock.” I can’t stress enough how important it is to have the entire office on the same page regarding the inventory. Make sure your staff understands the importance of the inventory and how to use it. I firmly believe that leadership is key in this and in any successful business.
Benefits of Stocking Lenses for Your Practice
When you learn how to effectively maintain a contact lens inventory, both your practice and your patients reap the rewards.
More Annual Supply Sales Not only does this keep more of your patients’ contact lens revenue in your practice, reducing your loss of sales to online contact lens vendors, but we have all experienced that patients who buy annual supplies are much more likely to return for an examination at 12 months. When patients purchase their first six-month supply from you, they may not return at their scheduled 12-month interval if they purchase their remaining lenses online.
One-Stop Service and Shopping Take every opportunity to show patients that you are their full scope location for all of their eyecare and product needs.
Patient Convenience = Increased Satisfaction Think of the many times that your patients who are college students have waited until the Saturday before they are returning to school in the fall or at the end of their winter break to have their annual examination. We have had many students take their Rx and say that they will purchase their lenses in their college town. Having the boxes on hand can help make the sale. If you don’t have a particular patient’s lenses in stock, offer to direct ship to the student’s address.
Payroll Savings We estimate that the time spent for each patient who calls to reorder contact lenses during the year can take approximately 30 minutes of staff time. This could have been completely avoided by selling a full year’s supply at the examination. For example, if we see 1,500 contact lens patients per year and sell an annual supply to 60% (900) of those individuals, then, at best, approximately one-half of the remaining 40% (300 patients) return to us to reorder more lenses. With an hourly rate of $15 per patient reordering lenses, the payroll cost would be $2,250.
Lower Cost of Goods You can earn increased profitability per box due to inventory special pricing. If you sell 4,000 boxes per year and save just $1.50 per box, you can save $6,000 per year on just one product. In addition, you will often also qualify for a growth rebate from the company.
Strategy for Stocking Inventory
Now that I hopefully have you thinking that keeping in-office stock is a good business move, let’s discuss what to stock, how many, and how to purchase contact lenses to optimally improve sales and per-box profitability at the same time.
Your contact lens representatives should be your business partners. Make sure that you have good representatives, and meet with them monthly. I prefer to meet with my distributor representative to review my business report. This allows me to see the trends in what we are prescribing. My representative knows all of the company’s current pricing on inventory and can tell me how many boxes we are using per month of any given lens.
Select a “lens of choice.” This requires a buy-in from all of the staff members and practitioners. Choose a high-quality lens that isn’t going to cost chair time as it pertains to patient problems. We chose a lens that offers newer technology, comfort, health, and vision, and we trained the staff on why that lens is the best choice for the majority of our patients. Once everyone believes in that choice, it is very easy to fully stock that product. After my first six months of having an office lens of choice, our sales went up 18% while our contact lens bill was down 10%!
It benefits your profitability to choose a lens from a company that has much growth potential in your practice. This allows you to collect significant quarterly rebates based on growth. Another advantage is your patients’ positive reaction to a new product; this gets the staff excited and talking to patients about it. We’ve put many dropouts back into contact lenses thanks to the excitement of the conversation in pretest. We’ve also had many patients refer friends and family who want a better contact lens experience.
Create a culture in which staff and practitioners embrace change and new technology. Let staff members try new products. Again, be a strong leader. Make your whole team aware of why this product benefits your patients and your business success. I have a good friend who read every book on leadership that she could find when she opened her practice. I asked her about that passion for leadership. I’ll never forget her answer: “People can’t follow if you don’t lead.”
Create an in-office patient experience in which patients look forward to hearing about the latest technology at their next visit. Then they expect that even though they are doing “fine” with their current lenses, you will inform and educate them when something better is available.
Know how many boxes to stock. Your initial purchase needs to be sufficient enough to lock in your pricing on your lens of choice. We try to keep eight boxes per power of monthly and one-day replacement lenses. If you are choosing a two-week replacement lens, more stock is required. Try to keep two one-year supplies of popular powers on hand at all times. We stock very few –0.50D and –0.75D powers, then eight boxes per power from –1.00D to –6.00D (especially –2.00D to –4.75D). We also keep two boxes of –6.50D to –8.00D. Patients in high powers are impressed when you have some boxes to give them.
Provide a script to staff members on sales of annual supplies. With the lens in stock, once we finalize a patient’s prescription and while the practitioner looks at the lenses and finishes with the patient, the staff is trained to bring the boxes to the cash desk and to have the total price ready when the practitioner brings the patient up front. Staff members quickly become comfortable with saying “Your portion today for your examination and your contact lenses is $___.” Any manufacturer’s rebate, if applicable, is also given at this time. This speeds up the payment process, and we have very little resistance to cost.
This business strategy has brought our team of practitioners and staff closer, and I truly believe that we provide better care when we are all on the same page. Our patients know that we believe in what we prescribe. They continue to visit our office for the convenience and level of service that we provide. CLS
Dr. Hendricks is currently in private practice in Clarksville, IN. Before opening her practice, she spent 10 years on the clinical faculty at Indiana University. Dr. Hendricks served for 10 years on the Indiana Medicaid Advisory Committee, and she is a past president of the Indiana Optometric Association. She has received travel funding as well as lecture or authorship honoraria from Valeant Pharmaceuticals.