ASSIGNMENT 2 - OPTICAL DISTORTION INC.
ARTI MUNSHI, AISWARYA CHANDRASEKARAN
The ODI Lens had been invented in 1965 by Robert D. Garrison working with Ronald Olson, the owner of a large chicken farm in Oregon. While contact lenses serve mainly to improve human eyesight, the lens developed by ODI was made to partially blind the chickens. Robert Garrison had conceptualized and designed the original product, and he had worked with Olson to test and refine the lenses on Olson’s chicken farm. By late 1966, the two men and a local businessman,
James Arnold formed Optical Distortion, Inc. (ODI).
Chickens are social birds and chicken societies have a definite social structure. A self-selected ranking of chickens begins when chickens are about 8 to 10 weeks of age, which results in a complete peck order by the time the birds reach sexual maturity. According to Mark O. North these birds establish a hierarchical type of social organization (peck order) through fighting and pecking. Debeaking had been the major means of combating Cannibalism for nearly 50 years as it reduced the efficiency of the beak as a weapon. In the debeaking process, the chickens were subjected to considerable trauma resulting in weight loss and retardation of egg production. The
ODI came up with these lenses for chickens in response to the age old debeaking process.
The Poultry Industry Segmentation
Daniel Garrison characterized the chicken farms based on their size – Small, Medium and Large.
1. Small Farms (10,000 or fewer birds): These are generally family operated. They sell their eggs locally through small grocery or milk and egg stores or their own farm.
2. Medium Farms (10,000 – 50,000 birds): A chicken farm of this size is typically operated this size professionally. The farmer-owner would have yearly cashflows of $375,000 to manage and would deal with large corporate suppliers.
3. Large Farms (over 50,000 birds): They are like a small manufacturing firm. The farm could employ 100 or more people and have an annual cash flow of $12 million. Their egg production may be sold through complex negotiated contracts with regional offices of large grocery chains.
The ODI lenses would be a much valuable product than debeaking for Medium and large farms, due to the following reasons:
(i)The mortality rate reduces from 9% in debeaking to 4.5%. This ultimately reduces the cost of replacing a dead bird.(ii)It reduces the trauma which in turn reduces egg production loss.(iii)It also has the potential to reduce the feed cost, which would represent considerable annual savings especially for large flocks.(iv)Reduces wastage of feed through billing.
For a 20,000 bird flock, a farmer could save 156 pounds of feed per day. Therefore, in a year, he could save
$0.224/chicken/year. Hence, for a medium sized farm, a farmer could make the following savings: Flock
Savings on annual feed
Cost of Debeaking Vs. Lens Implantation:
An experienced crew of 3, each earning $2.5/hr could debeak approximately 220 birds/hr. This would amount to a total labor cost of $7.5/ hr. We know that the labor costs are similar for lens implantation for 225 birds.Therefore, cost of debeaking for a 10,000 bird flock would amount to
$340.9 and for lens implantation would amount to $1133.33 (if each lens pair is priced at $0.08).
Note: It is visible that the cost of lens implantation is much higher than the debeaking cost.
However, the savings on feed cost is still higher.
As mentioned earlier, the mortality rate reduces from 9% in debeaking to 4.5% for lens implantation. This reduces the replacement cost for a dead bird. With reference to Exhibit 5, the