October 4, 2024
It goes without saying that exceptional patient care and clinical excellence are paramount for successful dental practices.
But as savvy practice owners and managers know, that’s only part of the story.
Supporting those endeavors are streamlined back office activities such as procurement. In fact, strategic supplier management can significantly impact the bottom line and overall efficiency of their operations.
Enter the multi-supplier approach – a powerful strategy that can revolutionize your dental practice's procurement process.
Adopting a multi-supplier approach involves working with multiple vendors to source your dental supplies and equipment. Rather than relying on a single supplier for all your needs, you source certain product types from certain vendors selectively based on what works best for your practice (which we’ll get into in a moment).
This strategy creates a competitive environment that can lead to better pricing, improved service quality, and increased flexibility for your practice.
Many dental practices hesitate to adopt this approach. There’s often fear that this shift might complicate their procurement process or strain supplier relationships. However, when implemented correctly, the multi-supplier approach can do the opposite. That means streamlined operations and stronger, more mutually beneficial partnerships with your vendors.
To truly appreciate the value of the multi-supplier approach, it's important to understand the potential drawbacks of relying on a single supplier, known as single-sourcing.
One of the most significant risks of single-sourcing is gradual price increases over time, often referred to as "price creep." When a supplier knows they're your sole source, they may slowly raise prices, knowing you have no immediate alternative. These incremental increases might seem small at first but can significantly impact your bottom line over time.
Single-sourcing can lead to complacency on the part of the supplier. Without competition, they may have less incentive to innovate, improve their service, or offer competitive pricing. This "comfort zone" effect can result in stagnation in product quality and service levels.
Relying on a single supplier leaves your practice vulnerable to any issues that particular supplier might face. If they experience stock shortages, financial difficulties, or service disruptions, your practice could be left scrambling to find alternatives, potentially impacting patient care and practice operations.
Working with multiple suppliers offers a powerful solution to the pitfalls of single-sourcing.
By engaging multiple vendors, dental practices create a competitive environment that naturally motivates them to offer their best prices and services. This competition drives better pricing across the board, as suppliers vie for a larger share of your business through special discounts, bulk pricing, or other incentives.
The knowledge that they're competing against other vendors often pushes suppliers to improve their own service quality. You might push suppliers to offer faster delivery times, better customer support, or more flexible terms.
That may happen over time but in the near term the biggest benefit is cost savings. Different suppliers often specialize in or have better pricing for certain types of dental supplies or equipment. By strategically splitting your purchases among these vendors, you can optimize your spending across all categories.
For instance, you might find that Supplier A offers the best prices on disposables, while Supplier B excels in dental equipment. This approach allows you to leverage each supplier's strengths and ensure you're getting the best value for every item you purchase.
Furthermore, maintaining relationships with multiple vendors provides valuable flexibility in your procurement process. You can take advantage of various promotions and discounts offered by different suppliers, shifting your purchasing to capitalize on special offers for products you regularly use. This adaptability not only helps you save money but also ensures you have backup options in case of stock shortages or other supply chain issues. If one supplier is out of a critical item, you can quickly turn to another to fill the gap, minimizing disruptions to your practice operations.
While these benefits are excellent for any dental practice, it's crucial to strike the right balance. Working with too many suppliers can create logistical challenges, increase administrative workload, and potentially dilute the benefits of supplier competition.
For most dental practices, the sweet spot is typically 2-3 suppliers. This number allows for healthy competition while keeping the management process manageable. Larger practices or Dental Service Organizations (DSOs) might work with up to 4 suppliers to accommodate their more complex needs.
When determining the optimal number of suppliers for your practice, consider factors such as:
Looking to get started implementing a multi-supplier strategy? Here's a step-by-step guide to help you implement it effectively:
Start by analyzing your current purchasing patterns. Identify your top spending categories, frequently ordered items, and any pain points in your current process.
Research and create a list of potential suppliers that can meet your needs. Look for vendors with strong reputations in the dental industry, competitive pricing, and a track record of reliable service.
Create a set of criteria to evaluate potential suppliers.
This might include factors such as:
Develop a standardized process for soliciting and evaluating bids from potential suppliers. This ensures fairness and allows for easy comparison of offers.
Once you've selected your suppliers, negotiate contracts that clearly outline expectations, pricing, and terms. Develop an onboarding process to integrate new suppliers into your procurement workflow smoothly.
You should revisit your arrangements with each of your suppliers every quarter. There are always new products, better products, and less expensive products coming to market, so your approved product list (or formulary) should be continuously evaluated and optimized.
While the multi-supplier approach offers numerous benefits, it's not without its challenges. Here are some common issues and strategies to address them:
Some suppliers may understandably resist the move to a multi-supplier model, fearing a loss of business. Be transparent about your goals and emphasize that this approach can lead to more focused, mutually beneficial relationships.
Working with multiple suppliers can potentially lead to variations in product quality. Mitigate this by clearly communicating your quality standards and regularly talking with your team about product performance.
Initially, managing multiple suppliers may increase administrative tasks. Invest in a solid procurement platform for dental practices which can minimize this burden over time.
If your practice has been sticking with a single supplier up until this point, implementing a multi-supplier approach is definitely a major shift.
Making this change requires careful planning and ongoing management but the potential benefits far outweigh the challenges.
With the right approach and tools, even small to mid-sized practices can leverage the power of multi-supplier procurement to save money and position your practice for long-term success and growth.
