Purchasing the right dental products, in the right quantity, at the right time, and for a fair price, that’s the goal. Buy too late, or too little, and you risk running out, buy too soon or too much, and you’re tying up valuable cash and adding unnecessary costs. However, much like the story of Goldilocks and the Three Bears, getting it “just right” takes a little work.
It’s important to note that exactly how you calculate what is “just right” for your dental practice is a business decision. You must understand your risks and potential impact on your business, and balance it with your desire for improved cash flow and cost savings. Using those weighted values, we suggest stakeholders set policies on the formulas to be used.
Let’s get you the information you need so you can get where you want to go.
The Basics of Dental Supply Purchasing Models
Just in Time (JIT)
JIT is the Lean’s world “just right,” aiming to get deliveries in the last possible moment without risking an outage. You would achieve JIT by using tools such as reorder point/ reorder quantity or Kanban.
The length of time, typically in days, between the placement of an order and delivery. Note that suppliers should be quoting their lead times on RFQs, but if you don’t have them, just ask.
Just as it sounds, safety stock is an additional quantity of an item you keep “just in case.” It’s your buffer, safeguarding you from running out due to the unforeseen such as late delivery, inaccurate inventory levels, or increased usage. It should be calculated separately for every item as each product may have varying usage volumes and supplier lead times.
Reorder Point (ROP)
ROP is a pre-determined inventory level where if the total on hand plus on order falls under the set-point, it triggers a replenishment order.
Reorder Quantity (ROQ)
ROQ is the set order quantity for placing replenishment orders.
How to Determine Safety Stock for Dental Supplies
Safety stock is your safety net, and only you can figure out just how big you can afford for it to be. Use a common-sense approach. Know your sales rep is in town and will bring you some in his car if need be? Carry less. If the item is a low-value item, but imperative to operations and has a long lead time, go heavy.
Here are some things you should consider when setting the safety stock level for dental supplies:
- Average daily usage
- Average lead time
- Inventory carrying costs
- Your ability to react in case of an issue
- Impacts of a stockout
- Consistency of usage
- The historical delivery performance of the supplier
It’s important to note that the above two options are given mainly for items with large swings in daily consumption rates. For items where your usage is fairly stable, it will make little difference which you choose.
To calculate your reorder point, you want to figure out how much you are going to use before the order delivers (average daily usage x lead time in days) and then add your safety stock.
Again, this formula is not a hard and fast rule here. What you decide to set your ROQ at can vary depending on a couple of determining factors. The primary considerations should be the consistency of your usage (the more stable, the less risk), lead times, and any price advantages of purchasing specific quantities. Keep in mind that any potential cost savings should be weighed with the cost of carrying inventory.
For example, if you could save 25% for buying an extra 3-5 days worth of inventory, this is likely very worth doing. However, if you’ll be saving 5% and the quantity will last you a year, maybe not so much.
Dental Procurement Demand Signals
In dental procurement, demand signals tell a buyer when to buy. They can be either physically visual or electronic, available on a report. Based on your current inventory levels, open purchase orders, and preset ROP and ROQ, Method’s order report will provide a list of items and quantities needing to be purchased.
If you’re doing your due diligence and maintaining the necessary processes, knowing what to order is as easy as that. However, at Method, we believe in keeping it real, and we understand adopting new practices and making improvements doesn’t happen overnight. Depending on resources and organizational maturity, a physical demand signal that requires less system maintenance may be better suited to some dental practices. In which case, Kanban may be the “just right” solution for you.
Yes, we could give you a one size fits all solution. However, ultimately, it would limit your outcomes. Knowing where you are as an organization and setting realistic goals is imperative to gaining adoption and seeing gains. Remember the Kaizen philosophy, and focus on establishing a gradual adoption of small but impactful improvements.
And of course, as your dental practice grows and changes, what is “just right” will as well. Dental procurement and inventory policies and procedures should be reviewed periodically or along with any significant business changes.
Improve Your Dental Inventory Management With Method
Whether you’re a dentist or a dental assistant who manages the inventory on top of everything else you need to do, sometimes wearing so many hats can get exhausting. That’s why we created a cloud based software to help you manage your inventory, receive your dental supplies, and pay your vendors all in one place! Contact us today to set up a demo to see how it can revolutionize the way your purchase your dental supplies.
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