What exactly is a strategic procurement, and why would your dental practice need it?
Where transactional procurement focuses on the now, strategic procurement takes a more intelligent approach to how you purchase your dental supplies for greater financial long-term advantage.
Transactional procurement—buying only what you need at the moment and jumping on short-term sales and supplier rebates to find cost savings—leads to overbuying, extra costs, and higher risks. You can’t avoid having to buy dental supplies; you need them to service your patients and run your dental practice. But how you go about it has a direct impact on your profitability.
Let’s take a look at how through strategic digital procurement, you can leverage your purchasing volumes and technology for deeper cost savings.
Ready to buy smark and save money? Read on to find out how.
The Goals of Strategic Procurement
Unlike transactional procurement—which essentially is the buying of supplies and services with little to no strategy, internal processes, or thought given to who you buy from, how much you buy, and what you should be paying— strategic procurement aims to reduce risks and minimize costs for the long term.
Strategic procurement will take into consideration things like supplier relationships, budget, market dynamics, and company goals.
Although the goals of strategic procurement should be designed to align with your company goals and business process maturity level, they may include:
- Supplier selection, including preferred suppliers and alternative suppliers
- Sourcing higher quality or new supplies that may help you improve your service levels
- Supplier relationship management
- Mitigating supply chain risks, including financial and availability of supply risks
- Leveraging your purchasing volumes to benefit from economies of scale and reduce costs
- Identify further opportunities for cost savings or purchasing synergies
- Streamlining the purchasing process to increase your office efficiencies, so your employees can spend more time taking care of patients and increasing revenue
- Eliminating opportunities for fraud and overpayments
- Ensure you buy what you need, when you need it, not much sooner and definitely not later.
The 6 Steps for Developing a Procurement Strategy
Learning to do more with less is a great way to fight the impacts of the current talent shortage. And by decreasing your overhead through strategic procurement, you can improve profits now and in the long term. Remember, unlike revenue, every penny you save goes straight to your bottom line. A spend management solution made specifically for the dental industry can help you achieve both; do more with less, and do it better, making smarter buying decisions with increased market visibility and streamlined workflows.
Below we help you on your way by walking you through the 6 steps of developing a procurement strategy that will help you meet your objectives. We start with what may perhaps seem obvious—analyzing your needs—move on to the less obvious, including setting your procurement guidelines—and end with continuous improvement. Because if you want your profits to continue to improve, your business must as well.
1. Analyze Your Needs and Current Spending
What do you buy? How often? From who? In what quantity and at what price?
Many dental practitioners are rudimentary in their business processes and do not issue purchase orders when purchasing supplies or services or track purchases through a spreadsheet. This lack of discipline and supportive technologies means suppliers don’t have the visibility to answer these imperative questions.
With the right spend management platform, you can leverage technology to help you easily create a product catalog and start tracking your purchasing and spending habits. Trust us—the data will come to good use, allowing you to leverage your volumes for better than market pricing.
2. Research the Supply Market
Before you decide where and how to spend, it’s important to get a lay of the land and understand what suppliers can meet your different needs. What other suppliers sell the products you buy, and at what price? Which suppliers are consistently lower priced? Are there certain items you’re significantly overpaying on? Are there private label options you should be considering?
Although this is possible by logging into supplier portals and checking prices and availability of one item and one supplier at a time or requesting pricing through sales reps, it is hugely time-consuming and, quite frankly, in today’s environment where people are in short supply, not likely to happen.
Luckily, there’s a better way.
With a detailed product catalog of over 850,000+ dental supplies and access to a 2,000+ dental-specific supplier database, a procurement platform like Method Technologies brings the market to your fingertips. An Amazon-like shopping environment allows you to quickly and easily compare pricing from authorized dealers, including standard internet pricing as well as any of your negotiated, group, or DSO pricing.
Keep in mind that market conditions frequently change. Therefore, we suggest you make sure sure the information you rely on is current and frequently updated. Method offers the real-time visibility you need to gain a thorough understanding of the supply market for strategic, insights-driven decision-making.
3. Determine Your Goals
So, you’ve identified what you need and completed a have gained a good understanding of the supply market. Now it’s time to set your goals.
Perhaps you’ve realized you’re significantly overpaying for certain dental supplies and your first objective is to buy from the lowest-priced suppliers. Or maybe you have a long-standing partnership you hold trust in but feel it’s time to onboard a second and maybe a third supplier to create a more competitive environment. You could be ready to implement a formulary and need a digital solution to help you implement and govern it.
Before you determine and prioritize your goals by the level of importance, you must think through where your biggest issues lay and what is most critical to your company, its long-term viability, and your bottom line. Find you’ve been running out of supplies and putting your production rates and service levels at risk? Then perhaps you need to focus on inventory management and ensure you’re aligned with suppliers with proven track records of on-time delivery.
Goals should be well-defined, quantifiable, and measured, following the SMART principles:
Specific – Set clear goals.
Measurable – Define how you will measure success.
Assignable – Assign someone to be responsible for each goal.
Realistic – Make sure goals are both practical and achievable.
Time-related – Each goal should have a set timeline, with checkpoints and end dates.
4. Put Procurement Guidelines in Place
With your goals in place now, you’re ready to establish rules and implement best practices and standard procedures that will get you where you want to go. Although this will look different for every practice depending on your objectives and current ways of working, ideally, your procurement guidelines should be used by every person involved in the procurement process and should be adapted to your needs.
Here are a few things you may want to consider:
- Establish buying rules that align with your procurement strategy
- Institute a formulary
- Implement an order approval process that helps you govern adherence to formularies or buying rules and ensure you stay under budget
- Create a trial process for approving new supplies
- Enact inventory management procedures
- Initiate your first Request for Quote (RFQ)
5. Use the Right Procurement Software
Technology plays a critical role in implementing your strategic procurement strategy, making what previously seemed impossible possible. But better procurement is a journey, and your business is growing, and the solution you choose needs to be capable of growing with you.
Dental practitioners and DSOs should look for a digital solution that covers areas such as RFQs, inventory management, spend control, budget monitoring, and data analytics and partner with solution providers who are ready to hold their hand and help them every step of the way.
The right solution should help you gain full visibility over your procurement process, optimize your vendor selection process and help you more effectively manage your inventory and monitor your performance.
6. Improve, Continuously
As we’ve already stated, strategic procurement is a journey, and it’s important to understand it’s one that may involve a long series of small steps.
A core principle of the Toyota Production System, Kaizen (roughly translated to “continuous improvement.”) is based on the principle that small but significant improvements that involve all employees and build a company culture of continuous improvement lead to big changes.
Want to learn more about continuous improvement? Our Fundamentals of Continuous Improvement series covers Lean Six Sigma for Dental Practices, Keeping it Simple with Kanban, and Lean Inventory Management for Dental Practices.
The Keys to Procurement Success
Learning to extract value from your procurement process can help you unearth competitive advantage and allow you to fight off some of the cost increases eroding your margins. Maturing your procurement practices and transitioning from transactional to strategic procurement involves more than leveraging your volumes.
When you’re practice is ready, there is more value waiting to be extracted through:
Supplier Relationship Management (SRM)
SRM is one of the largest differentiators between transactional purchasing and strategic procurement and is your most valuable tool for extracting value from your supply chain.
It’s about nurturing relationships and collaborating with preferred and strategic suppliers to build mutually beneficial long-term partnerships that fuel organizational growth and is the key to procurement success. Setting objectives, monitoring performance, and ensuring supplier progression are all part of a solid SRM program focused on continuous improvement.
Gather more tips on how to do SRM right in The Do’s and Don’ts of Dental Procurement Supplier Relationship Management.
Supply Chain Risk Management
Elon Musk put it best when he said, “The Supply Chain stuff is really tricky.”
The dental supply supply chain is indeed a tricky one. Disruption, whether it be extreme pricing volatility, labor issues, logistical bottlenecks, or a shortage of supply, can happen at any time. Post-pandemic, understanding your supply chain and how you can mitigate the risks that lay within it is crucial for safeguarding your continuity of business and profitability.
Risk Management is a vital part of strategic procurement, often informing your supplier selection and driving your procurement strategy. To find out more about the dental supply chain and the mistakes you should be avoiding, check out How Does the Dental Supply Chain Work?
Those looking to optimize the procurement process and drive profitability have started to leverage procurement analytics. The right spend data can empower improved spend management, helping you gain tighter control of your purchases and avoiding costly mistakes so you can buy smart and save money while freeing up cash flow for healthier profits.
Procurement analytics can enable you to
- Monitor spending against plan
- Negotiate and realize cost savings through controlled spend management
- Increase your budget accuracy
- Create and govern adherence to formularies
- Identify improvement opportunities
- Track improvements to your bottom line
If you’re a multi-practice DSO, analytics can help you visualize trends across locations, departments, categories, and even at the product level, so you can find synergies and anomalies that may represent opportunities for improvements.
Implenting procurement best practices can help you reduce the potential for fraud, ensure you pay no more than you should for your supplies, and boost your EBITDA. Implementing proper purchasing controls is an important part of the journey to strategic procurement, and with the right spend management solution, it may all be much easier than you imagine.
Strategic procurement is about more than finding cost savings. It’s about doing things in a rational, thought out method that betters your practice and makes life easier for the very employees who spend their working hours committed to its success.
Improving your efficiencies and your profits with digital strategic procurement secures you savings and preserves your long-term viability, so you can get on with putting a smile on your patients’ faces for many years to come.
Ready to check out what Method can do for you? Call us to arrange a personalized demo.
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