Practices of every size can struggle with bringing variable expenses under control. With the optimal cost of dental drugs and supplies averaging 6 to 8 percent of collections, focused purchasing can have a significant impact on practice efficiency and net operating income.
When seeking to control supply costs, there are four key areas of opportunity: managing inventory, improving purchasing habits, renegotiating pricing and adding suppliers. And maximizing these opportunities requires a “SMART” approach: goals that are specific, measurable, achievable and time-bound.
- Manage inventory by establishing minimum and maximum supply levels and creating an order sheet. In addition, put one person in charge of ordering and reserve time to allow him or her to do so without distraction.
- Improve purchasing habits through consistency. Place orders every two weeks and require a doctor’s approval for special orders to limit exceptions.
- Add a second supplier to improve cost, choice and convenience. There’s no reason to pay more for the same products. Through The Dentists Supply Company, many CDA members are now shopping tdsc.com as a primary or secondary supplier, and the site is delivering 20 percent average savings1 plus free shipping.
- Conduct a quarterly review to track progress and spending habits. Solicit team feedback, share clear expectations and adjust processes in support of goals.
Three different California practices put these same four operational changes in place, and each saw a remarkable difference in supply cost control:
Case study: CDA-member practice in Orange County
Although the practice saw $1,047,095 in collections in 2015, supply costs were at a high 9.6 percent of collections, totaling more than $100,000 that year. By taking a SMART approach to operational changes, costs came down to 7.7 percent in 2016, saving more than $15,000. By 2017, supply costs were reduced to 5.9 percent. The result? A $32,000 reduction in supply costs between 2015 and 2017.
Case study: CDA-member practice in the Central Valley
With just one practitioner and two part-time hygienists, this practice saw $759,484 in collections in 2016. However, supply costs were at 9.3 percent of collections, totaling more than $70,000 that year. By making the same recommended operational changes, costs came down to 6.3 percent in 2017, resulting in more than $26,000 in savings year-over-year.
Case study: CDA-member practice in the Bay Area
This busy practice saw $1,655,875 in collections in 2015; again, supply costs were high. At 9.5 percent of collections, supplies alone totaled more than $150,000 that year. But SMART cost-control efforts reduced supplies to 6.6 percent by 2017, saving more than $38,000 over two years. At the same time, collections continued to grow.
Michael Wilgus, director of sales and business development at The Dentists Supply Company, notes that practices should analyze historical data, including supplies and other variable expenses, to evaluate performance and plan for the future. “Understanding and managing your practice operations more effectively will create improved focus and clarity in decision-making,” Wilgus says.
1 Price comparisons are made to the manufacturer’s list price. Actual tdsc.com savings will vary on a product-by-product basis.