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Increasing Dental Supply Costs and How to Combat Them

May 16, 2022

Even overly busy dentists have heard about the supply chain issues plaguing ports and shelves worldwide. The long list of disruptions caused by not only the global pandemic but acts of God and man-made disasters such as the Evergreen being stuck in the Suez Canal continue to ripple through supply chains.

Since the onset of the global pandemic, manufacturers have struggled to adjust to extreme changes in demand, lost production time, and decreased efficiencies due to COVID-related shutdowns or labor shortages, the unavailability of raw materials, and logistical challenges. All of which have led to price increases making their way through almost every industry.

Ocean freight alone has soared greatly for all trade routes. In August of 2021, freight rates had increased 466% over the previous year.

And things have yet to alleviate. According to Freightos.com, importers have yet to see any significant improvement in shipping conditions thanks to continued disrupted schedules and port congestion, combined with omicron slowdowns and Lunar New Year. Transpacific ocean rates specifically remain 8-9X higher than the pre-pandemic norm.

So, what does this all mean for the dental industry?

Dental Supply Price Increases and What to Do About Them

From cellphones and cars to washers and dryers, there’s little that remains unaffected. Unfortunately, the dental industry has been far from immune. Although PPE demand has somewhat stabilized, the country continues its “economic transformation.” According to the New York State Dental Association, supply costs for dental practices have increased an average of 2-3%.

Pre-pandemic practices would spend an average of 5.5-6% on revenue on dental costs. Post-pandemic, however, spending is now up to 8-9% of revenue. Due to continuing shortages of critical supplies, inflation could remain high far into 2022.

Manufacturers that historically only implemented increases once or twice a year are now instituting multiple increases with 2-4 increases rolled out throughout the year. And not only are they increasing more often, but the increases are higher. Pre-pandemic, the average was 3%. Increases now are coming through as high as 6-7%.

Price increases typically remain aligned with the Consumer Price Index (CPI), which reports: The annual inflation rate in the US accelerated to 7.5% in January of 2022, the highest since February of 1982, as soaring energy costs, labor shortages, and supply disruptions coupled with strong demand weigh. Excluding volatile energy and food categories, the CPI rose 6%, the most since August of 1982. Additional to the rate of inflation measured by CPI, suppliers will often add their own margin increases, further exacerbating the situation for dental practice owners and their dwindling profits.

So, what can you do about it?

How to Better Control The Cost of Dental Procurement

Although you can’t control what’s happening, you can put a procurement process in place that helps you lower the overall cost of procuring your dental supplies. Here are a few action items so you can take control of your supply expenses:

1. Create a competitive process.

a.) Shop before you buy. Prices can vary significantly from supplier to supplier. Therefore, significant cost savings can come quickly by simply shopping for the best possible price. However, this can be nearly impossible without digitization, given the vast landscape of suppliers, your long list of requirements, and cumbersome processes based on emails, phone calls, and faxes.

Method’s digital procurement platform delivers pricing and availability in a detailed product catalog of over 700,000+ dental supplies across a 2000+ dental-specific supplier database to your fingertips—making it easy for you and your staff to make the best buying decisions for your practice.

b.) Negotiate better pricing. Although their market pricing is readily available online, most suppliers will offer price reductions for those that ask. A digital Request for Quote (RFQ) process allows you to be proactive in lowering your costs, asking suppliers to offer you their best possible price for your list of requirements.

c.) Control and leverage your spend. By focusing on ordering from 2-3 suppliers, you can better leverage your buying power and create a competitive environment where suppliers fight for your business by lowering their costs and ensuring top service.

2. Improve procurement efficiencies.

Streamlined digital processes can help you save on soft costs. Soft costs (such as labor) are harder to measure but still impact your profits. A digital procurement platform can help you increase efficiencies, making it faster and easier for your team to order the supplies they need, save you money, and then quickly move on to doing what they do best, taking care of your patients.

3. Ensure you get what you ordered at the price you agreed to.

You may be surprised to realize the amount of shipping and invoicing errors that could be costing your practice money. By digitizing the entirety of the procurement lifecycle—from identification of needs to payment of invoice and record-keeping—and implementing the three-way match process, you can safeguard your dollars and pay what you committed to for what you received.

4. Stock up.

Traditionally, we suggest more of a Just-in-Time (JIT) inventory process that eases your cash flow. However, when prices are likely to continue to escalate, it may be an excellent time to stock up and save yourself some dollars by locking in that price before they do.

But do so carefully. We suggest purchasing no more than six months’ worth of any supply. But whatever you decide, keep in mind your typical usage and product shelf life. You don’t want to end up having to take a financial hit on any expired product. And remember to use the First-In-First-Out (FIFO) method, so employees use your oldest stock first.

5. Use Dental-Specific Inventory Management Software

Wherever you are in your procurement processes, Method can help you quickly implement some new strategies to reduce your supply costs and ease life for your employees, making for a smoother, more efficiently run practice focused on providing top patient care.

Our simple, flexible pricing ensures you get the features you need and none you don’t, delivering a quick ROI. And our client success team is ready to stand with you every step of the way, working with you to launch your procurement transformation and helping you reach your goals.

Ready to save on supply costs and start scaling—profitably? Get in touch for a personalized demo today.

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