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Orthotic lab production costs

Discussion in 'Biomechanics, Sports and Foot orthoses' started by JoelD, Oct 3, 2013.

  1. JoelD

    JoelD Member

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    Assuming economies of scale and all the equipment and employees are in place, what does it cost for a lab to produce a single custom foot orthotic shell with no posting, modifications or cover in the United States? I am sure there is a difference between traditional plaster/vacuum and scanning/milling.

    I am primarily interested in Polypropylene and EVA, but if you have the numbers for other materials, it would be interesting to see those cost differences too. I do not know if firmness (EVA) or thickness (polypropylene) of the devices would affect the cost much.


  2. Lab Guy

    Lab Guy Well-Known Member

    I am not that busy but I can easily mill out 48 pairs in a day (mills out 4 pairs every 30 minutes).
    One employee scans the cast and enters the data. I have another employee that works the mill. It takes about 4-5 hours to scan and enter the data. Both employees do other tasks during the day.

    It costs me about $10 in material and milling expenses for one pair of milled orthotics that have a 4/4 rearfoot post, Kirby skive, fascia groove, or any other design feature.
    So if you made 48 pairs, that is $480 in expenses plus two employees.

    I use the system made by Oretek.com which I found on Podiatry Arena. Its about $13,000 for the CNC Router, 3D laser scanner, software, two computers and complete training included. Software updates free. You pay a royalty for $2.00 for every pair of functionals. Its a one man operation but I have had no problems for the past 3 years.

    Good luck,

  3. Phil Wells

    Phil Wells Active Member

    Unfortunately it is not as simple as unit cost alone.
    Factors such as ROI (Return on Investment), depreciation, cost per minute overheads can really vary from lab to lab.
    Other factors are also very important in the mid to long term. Things like reduced reliance on man power with CAD/CAM are often offset by material wastage and initial investments.

    The biggest saving with CAD/CAM is the time and repeats order savings. Also the ability to accept digital impressions can be very important and be a value adding component to the customer. Scalability is also easier with CAD/CAM - just do split shifts or buy another machine to significantly increase output.

    Hope this helps

  4. JoelD

    JoelD Member

    Hello Phil and Steven. Thank you for your replies.

    I should have given a little more background information in my post, but I did not want to get wordy.What I am trying to do is determine some baseline costs and other statistics. Nothing complicated. The numbers are more to give me an up to date understanding of the current orthotic business as I have been retired for a while. My interest is to start working with existing labs, not going into competition with them. In order to better work with labs I need to understand the current economic environment and difficulties the labs are facing. I felt getting a feel for basic production costs is a good place to start. As producing the product is the heart of the business.

    Phil, I completely understand what you are saying concerning operating a business, with your input being much appreciated.

    Steven your numbers are helpful, about $12 per pair including costs and royalties. May I ask what your cost per pair are if you include labor and management costs?


  5. Lab Guy

    Lab Guy Well-Known Member

    Ball park, it costs about $40.00 to make a pair of orthotics with top covers and any special accommodations they order. We pay high salaries but nobody leaves unless they are fired. It is hard to find reliable and dedicated people. There are labs that can do it far cheaper.

    Labs make their own shells, they do not outsource the work as that is what they do. If your in business, you do everything you possibly can do unless it makes financial sense to outsource.

    What are you going to do differently to stand out?

  6. JoelD

    JoelD Member

    Hi Steven,

    Thanks for the information.

    “What are you going to do differently to stand out?”

    I will answer below.

    Many small businesses are eager for extra work and to expand their business. The question is how to go about doing it within the limited resources the business has. One way, not the only way, is by using the services of an independent sales representative. The concept is simple; the sales rep takes a percentage of the additional business he or she generates for the lab. The lab in return gets a sales person or sales force that they do not need to pay unless sales are actually made. The lab doesn’t need to pay taxes, insurance, expenses or anything else on the rep. The lab doesn’t need to worry if the rep will show up for work or not, give pay raises, provide paid vacation and other such stuff. The rep does the marketing and leg work without cost to the lab, typically an expensive proposition, and the lab only pays the rep for what the rep actually produces in sales. A good independent sales representative is highly sought after in many industries. Ineffective independent sales reps are obviously a waste of time.

    New products could be brought to the marketplace. There is no question there are opportunities in the areas of technology and innovation. As an example, in our conversation you spoke of spending time scanning impressions. If your time to complete this task was reduce by 50 or 75% would you upgrade your scanner? I suspect you would at a reasonable price. Would companies providing scanners incorporate the newer technology? I suspect they would too.

    The first example above is that of increasing lab revenue by out sourcing sales and marketing. This is a standardized/traditional approach in many industries. The nice part is a small local lab can have sales representatives in each major market of the country giving it national exposure for a percentage of each pair of orthotics produced. Few small local companies could pay for such exposure out of pocket. Independent sales reps can make it workable.

    The second example is of decreasing lab costs and increasing efficiency through innovation.

    Simply put, both of the above examples solve a problem.

    So to answer your question, I am looking for problems to solve.

    Orthotic labs solve foot problems, accountants solve tax problems. The fact is there are many opportunities in every business area for those who look. After all, there are no shortages of problems.
  7. How much money can a poor sales representative, a sales representative which is effectively a "loose cannon", lose for a lab? How much potential damage could be made to a lab's reputation by putting their trust in such a person?:morning: Steven, you're a good bloke. You don't need this, fella.
  8. Lab Guy

    Lab Guy Well-Known Member

    Joel, I think you should do much more homework or better still, figure out other problems to solve that would be more financially rewarding.

  9. JoelD

    JoelD Member

    Hi Steven,

    The use of an independent sales rep was not the best example and would apply more to those labs selling retail. I mentioned this as an example because you helped me out and I thought it may be of use to you.

    I got distracted shortly after your last post in this thread and did not properly acknowledge you for helping me out. I just wanted to say thank you as your input was very helpful to me. And you are correct, I need to do much more research, but your input provided a good starting point for me.

    Thanks Again,

  10. dem1/4

    dem1/4 Welcome New Poster

    Hi to all..
    i am working with icb orthotics mainly for 8 years now and
    i have in my mind to expand my business as you did , with a fabrication lab . I am not as busy as you (i work in a small place with 100,000 residence) and this makes it difficult for me.. but i think a lab which is able to fabricate also flip flops is better idea..do you know who can we do that ? is there anyone might help?
  11. Jeff Root

    Jeff Root Well-Known Member

    I don't know how you can produce a pair of custom orthotic for $40 per pair. It takes two plus hours of labor to produce a pair of polypropylene orthoses with extrinsic rearfoot posts and top covers. Labor alone for the employee at $15 per hour would be $30, plus payroll taxes. Labor alone would be nearly $40. In addition there are other expenses such as health insurance, rent, materials, utilities, property and liability insurance, supplies, tools and equipment, depreciation, R&D, sales and marketing, freight (many labs provide "free shipping" which can cost $20 or more per pair), and the owner's salary must also be factored into the equation. Based on my own experience and from talking to other lab owners, I believe that you are seriously understating the cost to produce orthoses. The real profit margin on orthoses is very small and which is why it has become a volume based industry.

    Economies of scale do come into play as well as the nature of each individual business. There are labs that work out of a garage and those that occupy tens of thousands of square feet of commercial space. The economics of these businesses are quite different. I just spent $8000 for parts and service on one CNC mill. Think how many pairs of orthoses it takes to pay for that after you deduct most of the costs stated above. If you can make orthoses for $40 a pair then I need to sub all my manufacturing out to you!
  12. Lab Guy

    Lab Guy Well-Known Member

    "If you can make orthoses for $40 a pair then I need to sub all my manufacturing out to you!"

    Hi Jeff,

    Hope all is well with you.

    For $16, I will ship you a pair of milled Polypropylene orthotics with an extrinsic or intrinsic rear foot post. You can add any design feature you wish to the shell at no extra cost. Price includes free shipping by priority mail (2 days) and will remake up to 5 percent of the shells free (If you do 100 pairs/month, will redo 5 pairs if you want to change the design). Lab Turn around time is one to two days before they are shipped.

    You would use Oretek software that would be provided for you and scan the casts, design it based on your clients prescription and email the file to our server. You would apply the top cover and apply any necessary accommodations.


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