Owning and operating a dental practice is no easy task. Practices continue to face mounting financial pressures from all sides, and the folks managing these offices must continue to seek solutions that positively impact their finances. The conventional wisdom suggests that increasing production is key to driving financial success. What’s often surprising, however, is that by following a few simple techniques, dental practices can increase their profits without putting more time in at the office.
Beyond Increasing Production
According to the recent Levin Group practice survey, the average practice carries an overhead of 64.5%. At this level, a typical dentist saving $100 on overhead costs creates the same profits as a $280 increase in production. That’s even more impactful when you consider the benefits can be had without fitting additional treatments into an already-full schedule.
With that in mind, dentists are finding new opportunities for bottom-line growth by proactively managing the complete procurement cycle. They’re bringing a modern, digital-first approach to a process that is often neglected and ineffective. At Method, our experience has shown that these techniques can deliver between $12,000 and $30,000 or more to an average practice’s bottom line.
Here are three ways your dental practice can generate new profits through a streamlined procurement process.
1. Maximize your buying power through supplier competition.
According to Method research, the average dental practice spends nearly $225,000 on products and services that could be influenced through direct supplier competition. That represents significant buying power and leverage. So, why isn’t everybody taking full advantage? The truth is that many practices simply have no perspective on market pricing. Instead, they default to buying from their existing suppliers.
Rather than blindly relying on the same providers and their usual pricing, you can instead implement regular competition in which multiple suppliers provide quotes. With a quote process based on your projected annual spend, you can seek the overall best value for your full buying power. As a result, you can form strong supplier partnerships and lower costs significantly over time.
It is important to avoid simply asking a supplier to “match pricing” from another supplier. A proper Request for Quote (RFQ) process allows suppliers to truly compete in a fair process without being fixated on a beating a specific competitor or price.
2. Implement efficient inventory procedures and controls.
Strong inventory management is essential to a productive dental practice. Office managers need to ensure that the right materials are on hand at the exact time they’re needed. When items are out of stock, expired, or delayed, patients and providers both experience true and costly disruption. In short, any successful practice needs a standard, digitized process for tracking and managing their supplies.
Reducing the direct costs associated with inventory begins with accurate tracking of inbound shipments. A single misrouted or delayed order can have a ripple effect across the practice. Therefore, it’s critical that all team members have access to information about orders placed and their shipments.
In a dental setting, all supplies should be inspected, counted, and recorded upon arrival. This doesn’t need to be time-consuming, but it does need to be done consistently. Electronic systems that keep detailed records make this efficient for your team and provide an audit trail of exactly what happened, when, and the actions taken.
A smart inventory process also includes a disciplined approach to recording consumption or withdrawal of on-hand items. Here’s where a little planning can go a long way. Carefully choose a tool that works for your physical space and team. This might be bins, tags, or some other organized approach. Additionally, consider inventory management systems that can track the precise location of each item and provide alerts when items fall below a defined level.
For the ultimate in efficiency and accuracy for busy practices, consider leveraging barcode scanning to reduce the effort needed in identifying and counting products. With the advent of the FDA’s Unique Device Identification (UDI) regulations, more and more manufacturers are including unique barcodes on supplies. Integrating barcode scanning with a digital inventory management system can rapidly provide the best possible end-to-end process to coordinate your team.
3. Reduce the effort needed to run the procurement process.
Anyone involved in dental procurement can tell you it’s not as simple as clicking “Buy it now.” Procurement is a complete business process that includes activities such as:
- Tracking inventory and needs
- Identifying qualified and competitive suppliers
- Planning and approving spending
- Placing orders with suppliers
- Tracking orders and shipments
- Receiving, inspecting, and storing supplies
- Settling invoices and paying suppliers
With so many moving parts to the procurement process, it’s not uncommon to see practices wasting efforts and resources. Method finds a typical organization can save 30% or more on the associated labor through a digital transformation. Accordingly, this can represent an annual savings of up to $5,000 or higher in a typical dental practice. Additionally, practices get the boost that comes from freeing up staff’s time to work on more important matters.
Getting Started on the Journey to New Profits
The financial pressures on dental practices are here to stay, and offices are finding they must innovate to drive new areas of opportunity. Lowering overhead through an improved procurement process is an untapped source of new profits for many dental offices. Digital tools to support this transformation deliver a surprising return on investment (ROI) and can make the office a better, high-functioning workplace
To take the first steps, review your processes and choose 2-3 key areas for improvement. Compute the potential financial impact of a procurement transformation project, and then align and empower your team to determine the necessary changes. Consider technology tools that guide and automate best procurement practices, making it easy for your team to use every day.