ID Bracelets Establish Company’s Name in Health-Care Field

See Los Angeles Times’s Article about ID Bracelets.  

Growth: The wristbands bring success to the firm that employs 350 in Pacoima and is ready to market an advanced version containing a microchip.

May 09, 2000 JENNIFER PENDLETON | TIMES STAFF WRITER
 

PACOIMA — When patients check into Providence Holy Cross Medical Center in Mission Hills, the nurses dispense an identification wrist band, a plastic bracelet containing vital information, such as name, patient ID number, medical record number, birth date and physician.

And when kids get their tickets to Legoland in Carlsbad, they also get plastic ID bands–with different colors that let park operators know instantly who’s tall enough to be on what ride.

The venues are wildly different, but the ID bands come from the same source: Precision Dynamics Corp., at 44 years old one of the oldest and largest manufacturing firms in the northeast San Fernando Valley. This maker of ID wrist bands has succeeded in a region that other companies have written off, growing slowly but consistently. Today, Precision has $50 million in annual sales and employs 550 people, 350 at the two-story, 135,000-square-foot headquarters here.

How has Precision done it? By picking its spots.

The company hasn’t made a splash with headline-grabbing new products like some biomedical high-fliers. But Precision has built a solid business by going after profitable niches where it’s achieved leading market positions. It’s adapted to market changes as necessary, and is now boosting its bottom line through acquisition. Through it all, it’s built a corporate culture based on employee empowerment and profit-sharing, an approach that’s paid off with little turnover among the ranks.

“They are low-tech but they are doing very well,” said Ahmed Enany, executive director of the Southern California Biomedical Council. “You don’t necessarily have to be high-tech to make money.”

The fact that Precision is still standing–and succeeding–after a period of massive consolidation in the health-care business is an accomplishment. From 1985 to 1995, times were tough for purveyors of lower technology items hospitals buy in volume.

Precision’s customers–large health-care distributors that sell to hospitals–grew ever-larger, giving them increased leverage in negotiations. Many companies of Precision’s size sold out.

Today, the shake-out is over, according to David Cassak, editor of In Vivo, a Connecticut-based health-care industry journal. “If you’ve survived this long, you’re going to survive,” he said.

Precision is an unlikely success story given its humble beginnings.

Founder Walter Mosher was 22 years old, living with his parents and focused on his engineering studies at UCLA when he started Precision with three investors in 1956.

At the time, Mosher had no business aspirations, and no money. But an acquaintance, the late Arthur Goldhammer, a hospital supply salesman, saw an opportunity.

Hospital ID bracelets of the time were cumbersome, requiring tools to affix to patients. Come up with a better design and you could build a business, Goldhammer thought.

He turned to Mosher. The engineering student came up with what was then an innovation: a single-piece wrist band, no parts, no tools necessary. It sold immediately.

The partners scraped together $2,000 and called the enterprise Precision Dynamics Corp.. The name signified nothing, but the partners liked its highfalutin sound. “It worked nicely to get people to extend credit,” said Mosher, now 66.

In its early years, Precision operated out of a series of low-rent storefronts in Burbank. By the 1970s, Precision needed cash to grow. The founding shareholders sold the business, then at around $2 million in sales, to a division of W.R. Grace.

But Precision’s time as an arm of a giant corporation didn’t last. By July 1981, Mosher and a childhood friend, Robert Kraemer, now executive vice president, had bought the company back in a leveraged buyout. And so began Precision’s current incarnation as a private firm that’s grown sevenfold in the past 20 years.

Getting there hasn’t been easy.

The hospital ID bracelet business was an attractive niche for a small company. Big players in health-care supplies wouldn’t bother with this relatively small, low-tech business with a domestic market estimated at $30 million to $40 million in annual sales.

But then the managed care revolution hit health care. Production and labor costs were rising, but the now large hospital buying groups could assume a take-it-or-leave-it stance in setting terms. Precision’s profit margins fell. (In fact, Precision has been unable to raise prices for its basic ID bands for 20 years.)

What to do? Precision streamlined the manufacturing process and started using new materials to achieve acceptable margins. Precision produces a wide variety of plastic bands for different markets. But it also began producing bands using a flexible paper-like material called Tyvek, which helped shore up its bottom line. Precision’s plastic ID bands sell to hospitals at around 25 cents each; the Tyvek bands can sell for 8 to 10 cents.

Today, the Tyvek bands are in wide use in hospitals around the country, particularly for outpatient admissions, which are booming. (Although hospital admissions are essentially flat, outpatient admissions grew 24% from 1994 to 1998, to 474.1 million, according to the American Hospital Assn.) “Now they can afford to band all the patients,” said Precision’s sales and marketing vice president Nicholas Curtin.

In addition to producing a less expensive wrist band, Precision believes its future could focus on a better one. It’s ready to market a band that not long ago would have seemed like science fiction.

The “Radio Frequency Identification Band,” or so-called smart band, contains a microchip capable of storing vast amounts of information, including digitized photographs. With a special reader, a nurse can check the band without touching a sleeping patient. The technology can also allow the hospital to seamlessly transfer information from its computer systems onto the patient’s band, potentially eliminating human transcription errors.

This smart band is feasible because of dramatic drops in the cost of making silicon chips. “It used to be that you couldn’t consider making it for under $100,” Mosher said. Precision can make it today for less than 50 cents. ‘We’re ready to market it,” he said. Precision hasn’t yet started in-hospital testing, but it hopes to do so soon.

“We think every hospital will eventually use [Radio Frequency Identification Bands],” Curtin said.

Although hospital ID bands are Precision’s largest business, it’s found opportunities for its bands outside health care. The company has a separate division to sell to theme parks, such as Legoland, to producers of air races and concerts, operators of hotels, and even jails and prisons (inmates at Los Angeles County jail, for example, wear ID bands from Precision).

At present, one-quarter of Precision’s wrist band business is in this segment, a relative virgin market compared to health care.

Since wrist bands account for 75% of sales, Precision is trying to lessen its dependence on them, while also giving its customers what they want–a wider selection of goods.

What it can’t generate on its own, Precision may consider buying. Precision is scouting out potential acquisitions, companies in the $2-million to $5-million range that have complementary products or manufacturing technologies. ‘We’re always looking to see what we can buy,” Mosher said. (Precision has made four acquisitions since 1987, accounting for 30% of its current $50-million in sales.)

Curtin said Precision is protecting its future. “You can have the world’s best wrist band, but if you have nothing else, pretty soon they [customers] are going to go to someone else,” he said.

As Precision has grown, it has forged a corporate culture that sets it apart, according to local observers. “They have given many opportunities to employees,” said Cathy Maguire, chairman of the Valley Industry & Commerce Assn.

First, Precision provides high-quality manufacturing jobs, the kind of work a lower-income region like the northeast Valley sorely needs, according to Valley Economic Development Center President Roberto Barragan.

“They [manufacturing jobs] pay better wages and they definitely provide better benefits [than jobs in the service sector],” Barragan said.

In contrast to current employment trends, Precision hasn’t cut costs by using free-lance workers who don’t receive benefits. “We don’t do that,” said Robert Shaub, director of human resources.

Management at Precision takes an old-fashioned, paternalistic approach in view of its employees, 80% of whom are Latino. Executives refer to the staff as family, but here, such comments aren’t the usual corporate bromides. Precision empowers its people by sharing the wealth–with everyone from the men and women who sweep the shop floor to the executive suite.

From Day One, all employees participate in a quarterly profit-sharing plan that typically amounts to five or six weeks of extra pay a year.

Benevolence on Precision’s part? Enlightened self-interest is more like it. “It’s really helped us in this job market now with the premium on people,” Shaub said.

It’s had the intended effect: The average length of service at Precision is 8.1 years, and that includes the lowest-paid personnel on the assembly line. (During a visitor’s recent walk through the shop floor, workers, seemingly without prompting, volunteered their tenure at Precision. “I’ve been here 20 years,” said a beaming Roberto Tarango.)

Mosher hopes that Precision will remain independent for years to come. Yet he and his partner, Kraemer, 65, haven’t yet addressed the future of Precision without them. “I don’t have an answer at the moment,” Mosher said.

The company receives buy-out offers constantly, he said. But the 66-year-old Mosher, well connected in Valley business and political circles, rejects them all. “No way–not as long as I’m around,” he said.

Acquired companies rarely remain unscathed, he said. “It’s a barracuda industry and any company that would buy it [Precision] would dismember it in the first six months,” Mosher said. “I’m not interested in destroying the culture of this company.”