So, why all the fuss about going “Lean?” In short, because carrying inventory is costly, and improved dental inventory management helps you reduce dental supply costs.
Inventory carrying costs are the total costs related to buying, storing, and managing inventory. It’s an important number managed carefully by organizations everywhere, and for good reason.
Carrying inventory ties up cash flow, takes up valuable space, and puts you at risk of taking a financial write-off if goods become obsolete (expired, damaged, or rendered unusable due to degradation.) It also makes for more work, as the more you buy, the more you must manage, further increasing your cost of doing business.
Is this really a big deal for dental practices? Well, it’s said that inventory carrying costs can run between 20 and 30% of the total cost of inventory. And remember, we’ve estimated that saving one dollar is equivalent to generating $2.94 in production revenue.
So yes, it’s a highly costly habit that makes for bad business, which is why lean inventory practices are at the core of Japanese methodologies and have long since become the global supply chain standard.
The Five Guiding Principles of Lean Inventory Management
The goal of Lean is to provide a continuous improvement approach to bringing more value to customers (or improving profits) by increasing efficiencies (doing more with less) through the systematic removal of waste. For dental practices, it means improving how you manage dental supply costs.
Although at first glance, not all the principles seem to relate to dental service providers directly, it’s good to understand the underlying ideas so you can adapt and modify them to suit your business. It’s also imperative to understand the big impacts these seemingly small and inconsequential changes can have on your efficiencies.
As we explained in our Intro to Japanese Methodologies, there are many different kinds of waste that eat away at your profitability, and it’s essential to keep them in mind as you set up or look to improve dental inventory practices.
Similar to the other methodologies, Lean also provides five principles to help guide its practitioners. Let’s review.
Identify and understand the value of inventory and the importance of minimizing the amount of dental supplies you carry on hand. Much like an unruly garage, the more you have, the more chaos and costs it brings. This may take a bit of a shift in mindset, as people often quelch their fears of not having “enough” or not being able to locate what they need through over buying (in the Lean world this is referred to as “Just in case” inventory). In the end, this creates more issues than it solves.
Keep it moving.
The goal is to keep your dental supplies inventory moving as effectively as possible. Reducing any wait time and obstacles from the flow of inventory allows you to optimize your inventory levels. Wait times and obstruction of flow can consist of boxes sitting at the door waiting until someone has time to move them to their holding space, having various holding/hiding spots for inventory, or keeping inventory in hard to reach or poorly organized areas.
The 5S Lean principle (sort, straighten, sweep, standardize, sustain) is a great tool to reference when organizing your stock area.
Your dental supplies should be moved from their holding space only when required. This means no separate holding areas or “pre-staging” for use down the line. All your inventory should be held in one place and pulled when required for use.
Be ready to adapt to change. Employees should take a proactive mindset that relates what is happening in your dental business with what it means to your material requirements. Slowing down? Speeding up? See that you may be running short? Don’t wait until you are bitten before you take action.
As your business and practice grows and changes, or as you discover issues you hadn’t foreseen, your process should be reviewed and adapted. Create a culture of continuous improvement and empower employees to take ownership and work to implement better ways of doing things.
And remember the Kaizen philosophy, and focus on setting a gradual adoption of perhaps seemingly small but ultimately impactful improvements.
Lean Inventory and Method
The principles of lean inventory help to create efficiencies. By lowering the cost of doing business, you increase your profitability. And by removing chaos from the management of supplies and creating a controlled process, you bring calm to the day to day workings of your practice and present employees the opportunity to bring you increased value doing the things they do best. Go lean, and free up your cash, and your people so they can do more impactful things for your dental practice.
Contact Method today to learn more and see how our dental procurement software can help you achieve a lean inventory without increasing the burden on your employees.