Organize Your Dental Inventory To Lower Costs

Your overhead is rising and lower insurance reimbursements are changing the dental market and the first knee-jerk reaction is to find cheaper prices for supplies, right?    So, your next step is to get on the internet to find supply pricing that fits your budget.   However, doing so can lead you into the shadows of gray market materials and actually increase your processes which raise your hidden costs.  Some hidden costs can include paying multiple vendors, lost efficiency in ordering processes which are elevated when staff turns over, and lost buying power through a vendor that also takes care of your maintenance, equipment and overall needs. 

Recently, I met with a dental assistant who replaced someone who had been there for 20 years.   Her job was to continue the ordering processes as the person she replaced.  Supplies were tagged and hidden in drawers in all locations throughout the office.  Now,  I am not saying this is a bad system, but is it most efficient for the office?  It mostly worked for the previous team member because the system was hers and everyone had to go through her to make it work.  Unfortunately, the team member who is now tasked with ordering is uncovering years and years of inefficiency.  So...where does this office go from here?  

There are many levels of solutions that require answers to these questions below:  

• How do we create a system that is easy transferable and understandable?
• How do we create a transparent inventory system that is easy to tell what needs to be ordered? 
• How do we create lower overhead costs and create better efficiency?
• How do we make ordering easy with all of the other tasks that need to be completed to meet OSHA standards in turning a room around and keeping the schedule on time? 
• How much do we want to spend to create the ideal inventory system?  

Let's look at examples.   

Unorganized Chaos!  

This example shows little to no organization.  Most likely, the one person that is tasked with ordering is both placing and grabbing from the spot where only they know the location of that item.  Others that are having to locate an item most likely are fumbling and wasting time trying to locate an item they need quickly.  

Clean and Organized, yet Transparent?

In this example, there is more organization.   There is a place with labels that contain a barcode.  The person ordering would scan the barcode of the item that they wanted to order.  Once all items are scanned, they are transferred into an ordering software, such as Breeze by Atlanta Dental.  All items, with a click of a button, are then sent into shipment which the office receives the next day.   This typically utilizes current cabinet or closet space with almost no cost.   The only drawback to this efficiency is that it is somewhat difficult to see if there are items actually in the bins.  

  Clean, Efficient and Lower Overhead

Imagine a sterilization center so clean that you want to show off to your patients so they know your sterilization methods.  When patients see the efforts that you put into their safety, they end up telling their friends which help with internal referrals.  This inventory system uses the same barcode system in the previous picture.  However, they also utilize a more central space with clear tip-out bins that help make ordering clear and concise. 

Earlier, the example of the assistant who was given the task of taking over the ordering from the team member who had her own system for 20 years was interviewed to reveal the progress after making these simple changes.   Before, they were ordering from 12 different vendors.  They had no centralized storage and stuffed items in drawers throughout the office.   Together, we created:

•  a centralized storage area to quickly identify items that need to be ordered
• reduced the number of vendors which increased the buying power of that office with the select few trusted companies 
• implemented a barcode system that made ordering quick and easy giving this office a system that is easily transferable in case the ordering duty was passed along to another team member
• implemented the 80/20 rule of ordering (click here for the 80/20 rule of ordering). 

I urge you to read the 80/20 rule of ordering to help lower costs.  When meeting with offices and listening to their challenges, efficiency is a constant theme.  Why is efficiency so important?  It's a loose term that is thrown around, but rarely defined (or executed for that matter) to accomplish a greater good.  Efficiency is defined by Wikipedia as:

"Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without waste. In more mathematical or scientific terms, it is a measure of the extent to which input is well used for an intended task or function (output). It often specifically comprises the capability of a specific application of effort to produce a specific outcome with a minimum amount or quantity of waste, expense, or unnecessary effort. Efficiency, of course, refers to very different inputs and outputs in different fields and industries."

Now that we have defined efficiency, lets explore how we can apply it to the dental office.   An office typically contains doctors, dental assistants, hygienists, office managers, front office team members, etc.   The doctor, whom is typically the owner, has to perform the direct service to the consumer (patient) as well as manage a team with different experiences and backgrounds.   This  amalgam (yes..pun intended) of the dental team is the input of production.  Meaning, the collective efforts of their work is the input and the output is measured by relationships, monetary production, profitability, and overall practice ambiance.   When turnover happens (a team member resigns or is fired), typically that person that replaces that team member is thrown into the fire and is in a sink or swim mentality.  Often, the onboarding of training is the habitual processes of what the practice has always done to get that team member quickly up to speed. 

By making these simple, yet effective changes, a dental office can recognize substantial dental supply savings which will help in the new normal of lower insurance reimbursements.  The adage - "Don't believe everything you read on the internet" can hold very true in the world of dental supplies.  If your dental office needs some supply revamping, your trusted dental supply rep has the ability to save your office money and create an efficient ordering system. 

            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.

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.