Evaluation Tools for Investment in Free-form Technology

Free-form lens surfacing technology is growing rapidly and creating new investment opportunities for your business. Though this technology is relatively new and very technical, the tools you use for determining if the equipment and process is right for your lab are the same as you would use for determining if any investment is appropriate for your company.

In past editions, Dollars & Sense has explained which tools to use for investment decision making and how to implement them, but some bear repeating. We’ll refer to past Dollars & Sense articles so that you can review more comprehensive discussions of the topics.

Step One — Use the budget you’ve already created for your business to develop an alternative budget that includes the investment in free-form equipment and the expected change in sales, expenses, mix, etc. from the introduction of the technology. Make sure to create flexible budgets to demonstrate variances that can range between ideal and worst case scenario. ( See Sept, 2008).

Step Two — Once you are comfortable that the budgets are sound, compare the flexible investment budgets to your budget without the investment. Is the expected cash flow with the investment higher than the cash flow without it?

Step Three — If the cash flow is higher, determine the payback on the investment by forecasting the expected incremental cash flows. Using expected incremental cash flows will yield how long it will take before your investment is “in the money” meaning the point where your net cash flow from the investment has paid for the investment. ( See May, 2009).

Step Four — Use discounted cash flow analysis to determine if the investment’s return matches the lab’s investment return criteria by netting the expected cash outflows against the discounted cash inflows over time (net present value or NPV). The discount rate is the rate of return that you require from an investment. A positive NPV indicates that the investment should be made. A negative NPV indicates you may need to put the plans on hold. ( See May, 2009).

Once the analysis work is complete, you should have a good picture as to the possibilities of investing in free-form technology, as well as a thorough sense of the risks involved. The next issue will provide some insight from lab owners who have already made the investment in free-form technology in their own labs. —Jason A. Meyer, Managing Director, HPC Puckett & Company.

Based in San Diego, Calif., HPC Puckett & Company specializes in mergers and acquisitions of wholesale optical laboratories. You can send comments or questions about this article or any other Dollars & Sense articles to Jason A. Meyer at jam@hpcpuckett.com.

This is the second in a series of Dollars & Sense columns about investing in free-form technology.

DVI Hosts Users’ Workshop

Digital lens processing, workflow management, and handling subcontracted orders were some of the subjects Digital Vision, Inc. (DVI) and its customers explored during a recent two-day workshop. More than 120 DVI customers from the U.S., Canada, Mexico and Europe attended the session February 18-19 at the Embassy Suites in downtown Portland.

DVI conducts user workshops every 18 months to connect with customers, determine software goals and receive feedback, as well as to enable excellent networking opportunities for the attendees. These workshops over the years have been instrumental in defining critical improvements to DVI’s award-winning Vision system for optical labs.

At the February workshop, roundtable discussions within small groups of users with DVI staff were focused on lab management matters and Vision software enhancements, then shared with the entire group. DVI kicked off the workshop by hosting customers in a bowling competition.

Pictured at the DVI meeting, top to bottom, are Daniel Ellis (DVI) presenting to the group; Gordon Keane (DVI) and John Sutherlin (Sutherlin Optical) discussing ideas during the roundtable session; Michelle Brown and Joe Piermantier (Walman Optical) chatting during a break; Stan Arrigotti (DVI) and Bob Pommier (Expert Optics) sharing ideas during the roundtable session.

Optical Synergies-Premier Vision Hosts Conference

The Optical Synergies-Premier Vision buying group hosted its annual conference in Naples, Fla. from February 10 to February 13. The event, which featured educational presentations and vendor exhibits, drew 120 attendees. Keynote speaker Tim Fortner, Transitions focused his presentation on “Surviving and Thriving in the New Economy."  Mitch Small of Essilor reviewed the current state of “the digital economy” and Jon Jacobs, president of the Optical Laboratories Association addressed the membership on how the OLA continues to serve the needs of the wholesale optical community.

Optical Synergies group manager Chris Landers commented, “Our group continues on its path to support our members in maintaining their independence, and by providing a forum for the free exchange of information and ideas. We also endeavor to support our suppliers by offering them a proactive conduit to our members, thereby consolidating their financial and marketing resources”. 

Seen at the Optical Synergies meeting, top to bottom, are group manager Chris Landers welcoming labs and vendors; Transitions Optical’s Tim Fortner delivering his keynote presentation and OLA president Jon Jacobs reviewing OLA agenda with the group.

Bill Heffner, FEA Industries

The first thing you’ll note about Bill Heffner, (pictured right, with his son Bill, who also is a software expert at FEA Industries) owner of FEA Industries, is that he does things his way. The next thing you’ll notice is that he does those things extremely well.

Heffner’s early interest in computers provided his wholesale optical lab in Morton, Pa. with two key advantages:

1. A comfort level with automation

2. An ability to write custom software that enables smooth operations

“We are totally automated, which saves us on labor costs and greatly reduces errors. We even have automated our customer service function,” Heffner said.

The starting point for customers is a website Heffner created that takes orders (self-editing software notes if a number is out of range) and enables the customer to track a job, ask to be notified when the job is mailed, look up invoices, and access co-op points.

“We put out 1,500 jobs a day with only four customer service people who aren’t just order-takers. They are problem-solvers who provide true customer service,” Heffner said.

Thanks to the website, orders are taken 24 hours a day. When the plant opens at 5 a.m., several hundred orders are queued up for processing in the fully automated lab.

FEA’s investment in automation has paid off in labor savings. Fewer people are needed to operate equipment (62 people turn out a volume that normally would require 90 workers), and they don’t need a skilled background.

“To a large degree, they are machine tenders. We take them right off the street and train them. We have three people on the staff who trouble-shoot any problems,” Heffner noted.

Labor cost savings and automated efficiencies add up to price savings for customers, which keeps FEA busy even in tough times, Heffner said: “Our prices are low, but the quality doesn’t suffer. The customer gets service, too.” — Judith Lee

LabTalk Spotlight

Giving Back
By Christie Walker

Being in the optical industry means you are acutely aware of the importance of vision. But unfortunately, this is not an obvious problem to many people outside the industry. With 400 to 700 million people walking around with uncorrected vision problems, you’d think someone would be doing something. Well, somebody is. For one optical lab owner, the road to making a difference started at a Vision Council presentation on Giving Back and ended in Cuauhtemoc City, Mexico.

Mike Francesconi, of Katz & Klein, Sacramento, Calif., plus four ODs and five techs fit 920 patients with glasses — from people in their late 80s to small children — in only two days. A typical day started at 7:30 am and went until 6 pm with a half hour for lunch and no breaks.

“We saw a high number of cataract patients, pterygiums, and other patients with a variety of eye disorders including a high percentage of diabetic patients, patients that had Lasik surgery that was unsuccessful and children that couldn’t see the chalk board in school,” explained Francesconi, pictured here helping Mexican patients.

This was the first time Francesconi had participated in a project of this nature. One of Katz & Klein’s customers had been going to Mexico and fitting glasses on a regular basis. When Mike told him how impressed he was by this work, the customer offered to bring him along on the next trip. The organization, Lions in Sight, of California and Nevada, were organizing the trip so to qualify to go, Mike had to become a member of the Lions Club. The trip took place from August 19 to 22in 2010 with two full working days on the 20th and 21st.

To find out more about Giving Back, log onto labtalkonline.com