Optical Distortions, Inc. Case Study Essay
Optical Distortions, Inc. Case Study
A contact lens for chickens invented by Optical Distortion, Inc, is probably an amazing tool for farmers to handle their chickens easily. A chicken wearing the ODI lenses has its vision reduced enough to obtain the good behaviors the farmers expected. These good behaviors would significantly reduce cannibalism, which is the main reason for high mortality among chickens. Assuming that a farmer with 20,000 chickens(The target market of ODI lenses is farms which have at least 10,000 birds), he would save 0.21/2*20,000=$2100 per year(Exhibit5)by decreasing allocation for replacing dead birds(the chicken mortality due to cannibalism can be reduced from 9% for debeaked chickens to 4.5% for wearing ODI lenses chickens).
Furthermore, reducing chickens’ vision can also lead less trauma and greater egg production efficiency. Another discovery ODI made has promoted the value of lenses as well. ODI lenses had the potential of reducing a farmer’s feed cost. If the depth of feed in troughs goes down from 2’’ to 1’’, 100 birds would reduce 0.78 pounds(i.e. 24.46 pounds – 23.68 pounds)chicken feed per day. Assuming 20,000 birds remaining the same, the expected value of reducing feed cost would help the farmer save 20,000/100*0.78=156 pounds per day.
Since $158 per ton=158/2205=$0.072 per pound for chicken feed, this would represent considerable saving of 156*0.072*365=$4080 per year. In order to figure out the expected value of the lenses to farmers, we should also calculate the cost of using ODI lenses assuming 20,000 birds. ODI decided to price the lenses on minimum of $0.08 per pair or $20 per box of 250 pairs. Also, farmers would pay 0.14+0.18=$0.32 per box for packing, order processing and shipping cost.
Because a farmer with 20,000 chickens need 20,000/250=80 boxes, the total cost for purchasing ODI lenses is (0.32+20)*80=$1626.(Suppose ODI lenses could be reused for a whole year, and it is unnecessary to figure out insertion cost due to approximately the same labor costs between debeaking and insertion.) It is not difficult to find the change of “cash flow” after accessing to ODI lenses. “cash inflow” is 2100+4080=$6180 per year. “cash outflow” is $1626 per year.