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Thread: The low cost of warranty work.."I beg to diffa"..

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    Master OptiBoarder optical24/7's Avatar
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    The low cost of warranty work.."I beg to diffa"..

    Another thread got me to calculating the cost of warr. replacements. Your costs may vary, but I don't see it as being much different unless your rent and employees work for a lot less...

    Rent and electric......$4500 per month = $4.50 per 10 mins.
    Shipping to location....$2.00
    Shipping back to co....$2.00
    Employee @$15 per hr. = $2.50 per 10 mins.
    In house lens edging...$2.50 per lens
    Interest on capital "loan" to supplier waiting for credit @4% MM rate....33 cents per month per $100.

    Using the above criteria to figure costs....

    10 mins. time with intial visit of patient with complaint/problem...4.50 rent, 2.50 employee.

    10 mins. pulling org. invoice, re-ordering, copying invoice, package and ship product back...4.50 rent, 2.50 employee, 2.00 postage

    New invoice shipping cost for replacement ....2.00

    Equiptment cost to replace 2 lenses....5.00

    10 mins. replacing lens or frame and dealing with patient upon their return to office...4.50 rent, 2.50 employee.

    Interest lost on capital...(many times you have to pay for the replacement one month, only to see your credit appear a month later. You essentially loaned your capital out to the lab or frame co. until they credit) $100 = .33 cents per month.

    The above totals come out to $30.33. If it is frame only subtract the $5.00 lens process cost drops it to $25.33. If you do 2 warr. replacements a week that adds up to $3154.32 per year on lenses, $2634.32 on frames. Keep in mind there are other costs I didn't list to a practice like insurance.

    Warr. work is a fact of life in optical. It's gonna happen. But these figures are out of net, not gross. We should not give this service away. Either incorporate it into initial pricing or charge for it when it comes up. Warranty work is not cheap!

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    Great post!

    I have been screaming for years about the fallacy of *no charge* and *free* replacements.

    They cost us all=BIGTIME!

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    Ophthalmic Optician OptiBoard Gold Supporter
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    Quote Originally Posted by Fezz View Post
    Great post!
    They cost us all=BIGTIME!
    They do cost us, but we put much of that cost towards our advertising budget. You can't discount the amount of referals your waranty work brings in (if we do it right).

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    Do you think it cost the labs nothing to do progressive refits or scratch warranty? The lens manufactures promote these warranty's, but lots of them have started to make the labs buy the lenses.

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    Master OptiBoarder optical24/7's Avatar
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    Gem, labs have similar costs to my org. post. It ain't cheap for the lab either.

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    Optical Clairvoyant OptiBoard Bronze Supporter Andrew Weiss's Avatar
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    I'd say most of us roll the cost of warrantee work into our markup. Remember that the next time a patient asks you why the frames/lenses cost so much.:hammer:

    I do think it's ok to charge a nominal "restocking" fee (or whatever else you want to name it) to cover the shipping (BTW, most of the frame suppliers we use now charge at least $6.50 for overnight).

    This is one of those threads I hope consumers read; it may give them some additional insight into the economics of our profession.
    Andrew

    "One must remember that at the end of the road, there is a path" --- Fortune Cookie

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    those are all fixed costs

    you pay that rent, electricity, salary, and potential interest to company already :drop:

    Yep, that is right. The only thing on that list you pay for is shipping, and in that case you only pay to return it. Even so, you collect a few during the month and send them back all at once just before credits are sent. Leaving your cost at $2.00 a month :drop:

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    Excellent post and point of view. I do not intend to start charging for these things in my own practice but I can appreciate your point of view.
    We all have days when it seems like all we do is free services, but then in retail sometimes a good hour in the day from the good will we generated by dispensing free services makes it all worth while.

    Chip

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    Master OptiBoarder karen's Avatar
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    Quote Originally Posted by gemstone View Post
    Do you think it cost the labs nothing to do progressive refits or scratch warranty? The lens manufactures promote these warranty's, but lots of them have started to make the labs buy the lenses.
    The lens manufacturers just give us a small percentage off the top to cover these redo's so if the Doc has a bad month redo wise we take a bigger hit, hopefully the following month the Doc has less redo's and it kind of averages out.

    It cost us all a bunch except the patient. Hope they appreciate it.
    Let the refining and improving of your own life keep you so busy that you have little time to criticize others. -H. Jackson Brown Jr.

    If the only tool you have is a hammer you will approach every problem as though it were a nail

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    Quote Originally Posted by karen View Post
    The lens manufacturers just give us a small percentage off the top to cover these redo's so if the Doc has a bad month redo wise we take a bigger hit, hopefully the following month the Doc has less redo's and it kind of averages out.

    It cost us all a bunch except the patient. Hope they appreciate it.
    6% but they soon raised their prices 6%. Effectively doing away with their responsibility.

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    Most product warranties require the consumer to send the product directly to the manufacturer. The consumer pays for the shipping and handling. I see nothing wrong with charging a handeling fee to the consumer, when I have to return a warrantied frame to the manufactuer.
    How do you ship a frame with a signature receipt for $2.00?

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    Master OptiBoarder rep's Avatar
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    You forgot to include..................................

    Quote Originally Posted by optical24/7 View Post
    Another thread got me to calculating the cost of warr. replacements. Your costs may vary, but I don't see it as being much different unless your rent and employees work for a lot less...

    Rent and electric......$4500 per month = $4.50 per 10 mins.
    Shipping to location....$2.00
    Shipping back to co....$2.00
    Employee @$15 per hr. = $2.50 per 10 mins.
    In house lens edging...$2.50 per lens
    Interest on capital "loan" to supplier waiting for credit @4% MM rate....33 cents per month per $100.

    Using the above criteria to figure costs....

    10 mins. time with intial visit of patient with complaint/problem...4.50 rent, 2.50 employee.

    10 mins. pulling org. invoice, re-ordering, copying invoice, package and ship product back...4.50 rent, 2.50 employee, 2.00 postage

    New invoice shipping cost for replacement ....2.00

    Equiptment cost to replace 2 lenses....5.00

    10 mins. replacing lens or frame and dealing with patient upon their return to office...4.50 rent, 2.50 employee.

    Interest lost on capital...(many times you have to pay for the replacement one month, only to see your credit appear a month later. You essentially loaned your capital out to the lab or frame co. until they credit) $100 = .33 cents per month.

    The above totals come out to $30.33. If it is frame only subtract the $5.00 lens process cost drops it to $25.33. If you do 2 warr. replacements a week that adds up to $3154.32 per year on lenses, $2634.32 on frames. Keep in mind there are other costs I didn't list to a practice like insurance.

    Warr. work is a fact of life in optical. It's gonna happen. But these figures are out of net, not gross. We should not give this service away. Either incorporate it into initial pricing or charge for it when it comes up. Warranty work is not cheap!
    Lost discount from the company you returned the product to
    Restocking fees if applicable
    Postage is more than 2.00 usually

    VCA did a study and it came out to average $15 for every frame.

    Rep

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    Optical Clairvoyant OptiBoard Bronze Supporter Andrew Weiss's Avatar
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    Quote Originally Posted by rep View Post
    Lost discount from the company you returned the product to
    Restocking fees if applicable
    Postage is more than 2.00 usually

    VCA did a study and it came out to average $15 for every frame.

    Rep
    Thanks for the information. The study bears out my hunch.
    Andrew

    "One must remember that at the end of the road, there is a path" --- Fortune Cookie

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    Best post ever. Good job.

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    Master OptiBoarder karen's Avatar
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    Quote Originally Posted by CME4SPECS View Post
    Most product warranties require the consumer to send the product directly to the manufacturer. The consumer pays for the shipping and handling. I see nothing wrong with charging a handeling fee to the consumer, when I have to return a warrantied frame to the manufactuer.
    How do you ship a frame with a signature receipt for $2.00?
    I have accounts that charge a fee to their patients to do this, basically to cover the shipping.
    Let the refining and improving of your own life keep you so busy that you have little time to criticize others. -H. Jackson Brown Jr.

    If the only tool you have is a hammer you will approach every problem as though it were a nail

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    Master OptiBoarder Snitgirl's Avatar
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    Wave

    Quote Originally Posted by CME4SPECS View Post
    Most product warranties require the consumer to send the product directly to the manufacturer. The consumer pays for the shipping and handling. I see nothing wrong with charging a handeling fee to the consumer, when I have to return a warrantied frame to the manufactuer.
    How do you ship a frame with a signature receipt for $2.00?
    What I've done is when I have to ship product back and say I sent it via UPS or whatever, I send them the invoice for the UPS shipment along with a letter stating to reimburse me for the shipping. The credit (depending on what time of the month they receive the letter and invoice) is shown on the next monthly statement that comes in. :D

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    Quote Originally Posted by For-Life View Post
    those are all fixed costs

    you pay that rent, electricity, salary, and potential interest to company already :drop:

    Yep, that is right. The only thing on that list you pay for is shipping, and in that case you only pay to return it. Even so, you collect a few during the month and send them back all at once just before credits are sent. Leaving your cost at $2.00 a month :drop:
    Time is money my friend. Especially when you are the one paying salaries.

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    I've been debating charging for warranty processing for a few months now. I'd like patients to understand that such a charge reduces the prices of new products and rewards those who are more careful in the way they handle their eye wear.

    Wrapping the whole issue in the light of higher fuel costs seems a sensible justification for initiating such a charge.

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    Quote Originally Posted by MarcE View Post
    Time is money my friend. Especially when you are the one paying salaries.
    okay, so lets say you pay one employee $30k a year. Explain to me how their salary goes up by doing warranty work?

    I will argue that warranty work lowers your costs. How? It is a great quality management aspect, because you get to see the problems early and stop against them. So your cost of losing clients drops, as you will be selling them a superior product. Maybe that is what you guys mean about costs, your rent and salary costs go up, because you are doing more business and have to go to a larger location with new staff.

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    Just ocurred to me. The biggest cost is the future lost sale. Guy comes in after 23 months to get lenses replaced under your generous 2-yr warranty. He takes good care of this pair of lenses because he knows he can't get them replaced again. Gets 4 MORE yrs use out of one pair. AND tells all his friends how to do it. Look at all the "wonderful" patients he recruited for you.

    I really need to do something about those warranty jobs.

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    Quote Originally Posted by For-Life View Post
    okay, so lets say you pay one employee $30k a year. Explain to me how their salary goes up by doing warranty work?

    I will argue that warranty work lowers your costs. How? It is a great quality management aspect, because you get to see the problems early and stop against them. So your cost of losing clients drops, as you will be selling them a superior product. Maybe that is what you guys mean about costs, your rent and salary costs go up, because you are doing more business and have to go to a larger location with new staff.
    You make a good point about quality management, seeing problems, etc. And I won't disagree that you need to see that warranty work in order to retain an unsatisfied patient.
    To answer the first question. If an employee spends 10 minutes on a warranty job, that is 10 minutes that wasn't spent doing something else. Like filing insurance, selling a 2nd pair, dusting shelves, tightening a loose doorknob. The list of things that need to be done at my office is so long, that I hire some outside help just for projects. It's like a part-time employee.

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    I'm glad to see posts like this where the bottom line is discussed, and I have a couple of comments.
    First, the notion that patients will purposely scratch lenses or break a frame right before the warranty expires, thus having free glasses forever. I'm sure this happens, but I ask...Does anyone here complain about food in a chain restaurant even when they loved the meal and service, just to get something free? Sure, some people do, but wouldn't you be offended if you did have bad food and service and the manager demanded a "re-cooking" fee because you might be a lying crook? Any businessperson that assumes a significant number of customers are dishonest should go into a no-human-contact line of work.
    Second, as others have said, there's no reason at all to deny a warranty replacement when the vendor actually offers it--which in my case is 99% of frames for a year and 100% of lenses for a year (and many lenses, two).
    Having said that, replacing broken frames does not generate great word-of-mouth. When the friends of the patient recall the conversation, they'll remember that "Optician X's" frame broke after three months, not that you cheerfully replaced it.
    Billing a customer for two bucks shipping? Not only does that look cheap and petty, it would make me question what your time is worth.
    I considered all sorts of schemes and settled on one year frame and lenses, small scratches in the periphery (as determined by an optician, me), excluded--and no changing frames based on style/color.
    Wal-Mart offers 90 days, which though horrid is better I think than charging someone. Most customers aren't out to rob you, and those insane markups we charge cover warranty unless you're just selling other crap.
    But yes, I hate warranty replacements, too. Hurts me right in the wallet.

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    We add $7.00 to the price of all of our frames to cover shipping and return costs. We do give a one year warranty on our frames (a few have two year) and a one or two year warranty on the lenses.

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    Quote Originally Posted by Happylady View Post
    We add $7.00 to the price of all of our frames to cover shipping and return costs. We do give a one year warranty on our frames (a few have two year) and a one or two year warranty on the lenses.
    Very sensible and fair. The two year warranty on certain lenses is great--builds confidence and helps sell premium lenses/coatings.
    :cheers:

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