80/20 Rule of Ordering Dental Supplies

I am reminded of my college statistics class when coming up with this title.  For some reason,   I actually liked sitting through that class.  There was an unspoken blueprint to succeed and get an A+.  Follow the methodical steps no matter how long or short the process and the result will eventually reveal itself.  Statistics have applications throughout every industry both on micro and macro levels of a business.  In this instance, we are going to apply the 80/20 rule to dental supplies.  

For the purpose of this setting, we will define the 80/20 rule of dental supplies as...

 - The 20% of the dental supplies that you order, but use 80% of the time. 

In a general practitioner setting, those items consist of:

• Composites
• Bonding
• Cements
• Burs
• Impression Materials
• Anesthetics
• Disposables

Specialists have different product groups that equate to the 20% of most purchased items.  For example, a pediatric office will use a lot of prophy angles, varnishes, sealants, etc.  The needs of an oral surgeon, ortho, endo and perio office will vary greatly in the categories of supplies they purchase. 

At Atlanta Dental Supply, the average amount of line items that a dental office will order is 452.  Let's take 20% of that number which is 90.4.   So if we focus on the 90 items that an office will purchase routinely and with great quantity, we can help reduce costs which leads to lower overhead and higher profitability.   That all sounds great, right?  But how do we achieve lower overhead? 

Lets dive into one category that we listed above - composites.   For example purposes, we will assume that an office may use 8 shades of composite - A1, A2, A3, A3.5, B1, C1, C2, Bleach.  That is 8 of the 90 line items that we now want to focus on.  Every office wants the chance to compete with group practices and the volume discounts that they receive from manufacturers.   Manufacturers will assess the group practice entity by number of locations and volume.  The entity will receive a discount on a category such as restorative.  They may get 40% - 50% off of composites, bonding agents, cements, etc.  Those discounts help make the group practice more profitable.

For the private practitioner, it seems challenging to compete with those discounts.  However,  each manufacturer have specials that help drive the costs down.  Why do manufacturers have specials and not just go ahead and discount the product?  Manufacturers know that only 26% of their specials actually get redeemed.  Thus, their profitability goes up based upon the inaction of their consumer.  Is the system broken?  Maybe, but the goal in this article is to help you beat the system. 

Going back to the composite example, a manufacturer currently has a special of buy 3, get 1 free.   For easy numbers, lets say a refill of shade A2 composite sells for $100.  If we buy 3 (mix and match shades), we get 1 free for a total of 4 refills.  We have just saved 25% off the cost of the composite category.  What you may not know is that there is also, with the same manufacturer, a buy 5, get 2 free which equates to a 28.5% savings.   The same manufacturer also has a buy 10, get 5 free which equates to a 33% savings.   Again, that same manufacturer has a buy 15 refills, get a free curing light.  Some manufacturers have incentives that take the net cost down below what group practices receive. Taking advantage of these specials on these focus items depending on your needs and cash flow can greatly affect your profit and loss statement over the course of your financial year.  

One key ingredient in saving money is utilizing your dental rep and making sure they are working hard to help an office save money.  Most reps will negotiate, facilitate and implement these specials behind the scenes.  At Atlanta Dental, we like to identify key areas of savings to help our customers reduce their costs in such a competitive market.  One such way we identify is a report that is shown below. 

This report shows that the customer received almost $1500 in free product for a 2 1/2 week span of purchases.  

The manufacturer leaves the implementation up to the office.  History (and statistics for that matter) shows that the dental team very rarely faxes in their invoices to receive the free goods, hence the low free good fulfillment rate I mentioned earlier.  Your dental rep is that person that completes the point of purchase to delivery of free product.   

Additionally, your office may use a category of products from one manufacturer.   For example, you may purchase composites, bonding, cements and impression materials from the same manufacturer.  Most likely, that manufacturer has loyalty programs that will help you even further lower your costs.  By utilizing their free goods and their loyalty programs, a dental office can compete and beat the advantages that group practices receive.  

In addition to the manufacturer specials and loyalty programs, a distributor such as Atlanta Dental, has their own loyalty programs that help in all areas of the dental practice.  The areas of savings are through:

• Free Shipping
• Off-invoice merchandise savings
• Service and Technology Technician savings
• Equipment savings
• Handpiece Repair savings
• Much more

However, it's important to have the communicative  relationship with your dental representative that promotes the goals of the practice.   Having quarterly meetings with your dental rep can help keep everyone on the same page.   By utilizing the 80/20 rule as well as creating an efficient dental inventory system, it will be like getting that A+ in statistics class. 

In review, the main points to help you with the 80/20 rule:

• Focus on the 20% of the items that you buy, but use 80% of the time. 
• Utilize manufacturer specials almost every time that you buy them.  
• Utilize the manufacturer loyalty reward programs that exist to help lower your costs 
• Initiate or maintain a communicative role with your dental representative 
• Utilize the distributor loyalty programs that help you save money through rebates, off-invoice discounts, service discounts, free shipping, and much more.  

                  Jacobsigmon@atlantadental.com

Jacob Sigmon is a territory specialist in Savannah, Georgia and serves the coastal Georgia area. He has over 15 years of dental management and has helped set up over 50 practices. Employed by Atlanta Dental Supply, Jacob is a shareholder of the employee owned company. His responsibilities include helping dentists with all aspects of their business as well as helping Atlanta Dental grow stronger for the future. He also started coastalhygiene.com and atlantadentalrep.com.