Achieving financial success in your practice is never guaranteed. There are many excellent practitioners who have failed in communities where seemingly less knowledgeable or less capable competitors have flourished. Why is it so?
There’s often a fine line that separates success from failure, and a few key factors often make the difference.
The two most important factors that practice owners must consider are: ‘How can I control my cost of goods (COGS)’, and ‘How can I provide a level of customer service that will keep my patients from going elsewhere’?
The high cost of consumer advertising makes it difficult to compete with large corporate optical companies, but that does not mean that you cannot be successful in a head-to-head competition. If you carefully analyse the competition, you will often find that they are often marketing only two things: quick turnaround and low price. In order to compete, you need to bridge the gap between yourself and your competitors.
The quantum leap in technology that has occurred on the lab side of the optical business in the past few years has been truly remarkable
In their desire to provide better service, improve profit margins, and operate more efficiently, many practices have considered adding an optical finishing laboratory. The integration of a finishing lab may provide you with the means to both control costs and improve service to your patients. You can provide patients with the same dependable quality of care and make it less likely that they will take their prescriptions with them when their eye test is completed.
Over the past several years there have been a remarkable number of new lens materials, lens designs, and lens treatments made available to the ophthalmic consumer. These innovative lens products offer improved peripheral vision, provided lighter weight, reduced reflectance, and improved durability, to name a few benefits. An interesting by-product of this trend has been a tendency for practitioners to offer these products at prices that represent lower mark-ups. As a result, the cost of goods in the average practice, as a percentage of sales, is rising.
One motivation then for installing an in-house laboratory would be to gain some control over these costs.
Controlling Quality and Costs
It is quite evident that the quality of finished eyewear varies widely throughout the ophthalmic marketplace. Many practitioners have had patients walk in with eyeglasses that were purchased elsewhere and were radically incorrect. Hence, this may fuel your desire to produce a superior product, thereby offering your patients a better value for their eyeglass purchasing dollars. Utilising state-of-the art finishing equipment right in your office just might be the best way to control the quality.
Practices that have in-house laboratories have a strategic advantage over those that do not as you can offer some of your patients the option of getting glasses quickly, in some cases within an hour or so. Since consumers are often motivated to buy when they can receive the purchase immediately, on-site manufacturing can be a significant weapon in the practitioner’s arsenal.
Many practices without in-house laboratories provide eyeglasses to their patients, “within a week to 10 days”. This lead-time is often determined by the complexity of a production cycle that includes order entry, manufacturing, delivery, fabrication and quality assurance before the product can be dispensed to the patient. By having an in-house laboratory, at the minimum, the order entry and delivery functions of the process can be eliminated, thereby reducing the overall turnaround time.
Practices that do not have in-house laboratories operate at a competitive disadvantage to those that do. Astute practice owners should have a strong desire to improve the overall health of your business by strengthening your strategic position.
Operating a full-service finishing laboratory requires a different set of skills than operating either a medical practice or retail business. The laboratory focuses primarily on two things: quantity and quality of output. The quantity of output obviously pertains to the number of eyeglass units that can be produced within a particular period of time, for example, the number of jobs processed per hour or day.
Since as the old saying goes “time is money”, there is a tendency on the part of many practitioners to focus on how quickly work can be produced within the accepted A.N.S.I. standards, when operating an in-house laboratory.
Installing an in-house laboratory provides you with total control of the quality of the finished product and the selection of quality equipment provides you with a relatively simple means of, not only meeting, but also exceeding those industry standards.
One of the interesting facts about the in-house laboratory is that, in itself, it does not generate a profit; in fact they are characterised as cost centres. Cost centres are facilities that use profits, not generate them.
For this reason there is a general tendency to minimise expenditures on and within these facilities, thereby limiting the drain on profits as much as possible. This at least partly explains why it is not uncommon to find in-house laboratories located in back rooms, and occasionally off-site.
There is a danger in merely looking at in-house laboratories as cost centres and the inherent cost-cutting efforts that accompany that designation. Too much emphasis on profit retention can leave a laboratory with inexperienced help and outdated equipment, which brings to mind the old adage about being “penny wise and pound foolish”.
Perhaps a better way of viewing an in-house laboratory is as a profit enhancer. This does not mean that the laboratory will begin to generate profits, but rather that it will allow other areas of your business to do so by reducing cost of goods and providing a high level of service.
The services that the well-designed in-house finishing lab can provide include: edging, grooving, pin bevelling edge-polishing and drilling. Outside laboratories charge for these services. Their charges are based on: labour cost, cost of materials, machinery and maintenance costs, overhead, and some margin for profit.
In a simplified way one could say that your costs will be similar and that you are attempting to retain the profit that is currently being paid to the laboratory. How much revenue can you bring to the profit line by incorporating these services into your practice? Calculating the savings or increased profits will depend on the types of orders that you process on a day-to-day basis, and the capabilities of your lab.
In some cases the savings will reflect only the edging charges you are currently paying to process each job, in others it will include savings from tinting the lenses yourself, or from edge treatments such as polishing and bevelling. As a general guideline, you should be able to save from AUD$10 to AUD$14 per job if you install a finishing laboratory.
A lab processing 10 orders per day would therefore produce a savings of AUD$100 to AUD$140 per day or AUD$600 to AUD$840 per week depending on your operating days and hours. That translates conservatively into AUD$35,000 to AUD$40,000 per year. Specific calculations of the savings you may obtain can be provided by many equipment suppliers themselves. There are some equipment manufacturers that will assist you in analysing your current lab bills to determine the amount that you could save by integrating a finishing lab.
Of course, for comparative purposes keep in mind that costs vary from lab to lab and may vary regionally as well. The manufacturer may also be able to provide you with an analysis of how these savings can be used to justify the initial investment, how depreciation of the equipment will affect your tax situation, and may also help you to decide whether leasing your lab equipment is a good option.
Modern Edging Systems
The quantum leap in technology that has occurred on the lab side of the optical business in the past few years has been truly remarkable. Gone are the days that each step of the fabrication process required a separate piece of equipment that occupied valuable bench space in the optical laboratory.
Some of the remarkable new computerised edging systems are now capable of providing you with a means of recognising lens types, laying out a lens for finishing, automatic blocking, precision edging of a lens to a variety of edge designs, pin bevelling and edge polishing all with a single unit.
The sophisticated design elements have made it easier for you to perform all of these mandatory processes while minimising the errors that used to result from manually performing each step separately. In order to fully explain the features and benefits of some of the modern edgers one must understand the individual components available and the role they play in fabricating a top-quality pair of eyeglasses.
For many years, edging devices required the use of patterns and sizing mechanisms to create a lens of the proper shape, size and circumference. Success depended on a number of variables that often led to minor (or sometimes major) sizing and shape errors.
The pattern itself was often a factor in the errors due to situations where the pattern was inaccurately made; the dispenser made their own pattern, or induced an error such as calculating edger set size incorrectly. Older models of edgers were capable of following a pattern to establish a shape, but were incapable of following the curve of the eyewire or the curves of the two surfaces of the lenses they were cutting.
The first important factor you should consider is the tracing device that is a part of the edging system. Modern tracers should be capable of high-precision binocular tracing for full frames of all materials and styles as well as for both nylon rimless and other rimless styles.
Working in three dimensions, the tracer should be able to capture the profile, angle and bevel shape. It is also important to consider only those machines that are capable of handling half-eyes and frames that have small ‘B’ dimensions. The availability of edge mapping software may allow the operator to avoid problems of bevel miss-match and should optimise the lens size to precisely fit in frames where the bevel and frame groove do not match.
Some edgers have an additional bar-code feature that allows you to store shapes and recall them as needed. This is particularly helpful with patient-supplied frames and styles that are big sellers.
Another step in the fabricating process that has been simplified is lens blocking, which was previously done with a separate blocking device. Modern systems may be capable of providing a combined lens layout (centring) and automatic blocking functions.
Today’s edgers are generally available with blocks of several different sizes to facilitate the edging of any lens regardless of its dimensions.
The Keys to Success
Making a decision to integrate a finishing lab into your practice or even to replace the existing equipment you have is clearly not an easy one. For many practitioners the investment in modern patternless finishing equipment may be the single largest budget line item for the entire year. It certainly is a decision that should be an informed one.
In order to make a decision of this magnitude, it is important to carefully consider what your real needs are, to research the capabilities of the equipment that is available and to figure out a way to insure that your investment allows you to fully satisfy those needs.
Next month we bring you part two of this article explaining what to look for in an edging system.
Geoff Marett has 37 years experience in the optical industry and began his career working as an optical mechanic for Sola Optical. He has worked at Gerber Coburn for the last 23 years, as the Director of Technical Services and Sales Engineering and now, Director of Sales.