How To Build The Business Case for Procurement Software

January 23, 2023

Table of Contents

Challenged with increased costs and a labor shortage, DSOs are leveraging the power of procurement to drive bottom-line growth. We take a look at the business case for Digital Spend Management.

Digital procurement has a unique ability to help drive bottom-line growth that has shown to be far more effective than other growth strategies, such as increasing revenue.

At the core of every dental practice is a long list of critical supplies that are required to perform the many services you offer your patients. Whether or not you purchase these supplies is not an option. But how you choose to do so has a very real and direct impact on the daily lives of your employees, their ability to provide optimal care, your production rates, efficiencies, and overall profitability.

For DSOs that are looking to drive growth and increase net profits, incorporating a digital spend management platform enables you to further exploit the inherent opportunities afforded to a DSO— economies of scale while delivering the foundational tools you need to build effective, scalable operations. However, communicating the benefits of an e-procurement platform and making the business case for it isn’t always easy. 

Let’s be honest; procurement hasn’t always been top of mind for the dental industry. However, with the combination of purpose-driven innovation and digital transformation sweeping the industry, that’s quickly changing. Challenged with a labor shortage, an increasingly competitive landscape, and a sometimes volatile supply market, following suit with just about every other industry, those in dentistry are now turning to procurement to mitigate risks, deliver scalability and drive bottom-line growth.

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A well-thought-out business case should provide stakeholders and decision-makers with your decision criteria and full transparency on the rationale behind your final request to invest in your chosen business solution.

It should include an evaluation of the benefits, costs, and risks of alternative options and provide the advantages of your preferred solution. If framed correctly, your business case should act not only as a tool to get your buy-in but as a management tool for monitoring and measuring project delivery and performance.

To ensure a thorough business case for digital spend management, it may be helpful to structure your argument in the following way:

  • The Problem - What business need are you looking to solve?
  • The Options and Risks - What are the possible solutions to the problem?
  • The Benefits - What quantifiable benefits can the company expect?
  • Expected Return on Investment - What will the overall gain be to your organization?
  • Final Recommendation - What needs to be done to make this happen?

The Problem: Driving Bottom Line Growth

Why it’s time to look beyond increasing practice production

Historically, the dental industry has focused on production as the primary driver for improving profitability. The more chair hours a practice books, the more income is generated. Although this does contribute to profits, the percentage of revenue increase that makes it to your bottom line may not be quite what you’d expect. The impact of revenue growth on profitability is far less than any cost savings you can realize. 

Based on average industry overheads, $100 in overhead costs savings has the same impact on profits as creating a $280 increase in production. This equates to an estimated annual savings of $233,000 per year for a mid-sized DSO and $1,170,000 for large DSOs.

That's even more impactful when you consider the benefits can be achieved without fitting additional treatments into an already-full schedule, acquiring new capital assets, expanding your offices, or investing in risky marketing initiatives in an effort to gain new patients.

The Options and Risks: The Journey to Digital Procurement

With the massive impacts of procurement on profits in mind, many DSOs are now focused on finding new opportunities for bottom-line growth by leveraging technology to proactively manage the complete Purchase-to-Payment (P2) cycle.

By bringing a modern, digital-first approach to strategic procurement, DSOs are no longer hindered by a lack of visibility on purchasing data, market dynamics and real-time pricing. Digitization has enabled dental organizations to transition from a transactional, arduous and often neglected and inefficient process for purchasing and managing inventory to one that can execute on strategy and deliver true value.

You can see why e-procurement was one of the hottest topics in the industry in 2022.

However, there are important considerations when it comes to selecting the platform that will be right for your business. 

When evaluating solutions, it is critical to balance the desire for short-term gains with your long-term objectives. The “right” solution should be easy to implement, so you quickly begin to realize benefits, but should also be robust enough to grow with you over time, empowering you to leverage your collective volume with a supplier-friendly digital RFQ process, identify synergies across locations and improve formulary compliance. 

Method offers just that, providing everything you need to optimize your procurement, including both deep and snapshot analytics, a digital Request for Quote (RFQ) process, and an Amazon-like marketplace with a detailed product catalog of 700,000+ dental supplies and access to 2,000+ dental-specific supplier database.

The benefits of a Digital Spend Management Platform

Strong inventory and spend management are essential to an efficient and productive dental practice, allowing you to improve cash flow, mitigate the risks of financial write-offs and decrease your carrying costs (the costs of holding inventory). 

It is the backbone of a well-run operation that empowers you to maximize the very opportunities that come with being a DSO.

DSOs are in the business of providing non-clinical business support and can take advantage of economies of scale and leverage more buying power to lower overhead costs and negotiate better deals for supplies and services. At least, in principle.

Your ability to execute this by providing the right tools and guidance on procurement and inventory practices that ensure smooth operations and the reduction of overhead costs should be considered essential to the DSO business model and a significant competitive advantage.

1. Maximize your buying power, optimize your cost savings and mitigate your supply risks through supplier competition.

The average dental practice spends nearly $225,000 annually on products and services that could be influenced by direct supplier competition. Multiply this by the number of offices under your directive, and that represents significant buying power and leverage. 

So, how do you take full advantage? By garnering perspective on market pricing and acquiring the right tools, more control, and stronger foundational processes to effectively utilize your buying power. This will facilitate the transition from transactional to strategic procurement, designed to meet organizational objectives and optimize outcomes.

Healthy competition makes for a healthy supplier ecosystem.

With a quote process based on your projected annual spend and real-time visibility into market pricing, you can seek the overall best value for your full buying power. As a result, you can form strong supplier partnerships and create a vibrant, motivated supplier eco-system that ensures the security of supply, delivers optimal service, and lowers costs significantly over time.

Available Tools That Help You Optimize and Leverage Buying Power:

  • Deep data analytics allow you to gather the purchasing information you need to estimate usage and quote the items and quantities you expect to purchase.
  • A digital Request for Quote (RFQ) process allows suppliers to compete in a fair process and in a manageable manner with minimal time requirements. Selected quotes can automatically be turned into Purchase Orders and sent directly to the supplier.
  • Spend controls such as limiting supplier selections or catalog items allow you to implement buying policies, enforce formularies and minimize rogue spend so you can synergize SKUs across locations and ensure you fully realize any negotiated cost savings.

2. Improve cash flow and minimize supply risk by implementing efficient and effective inventory procedures and controls.

Often called the five “rights” of procurement, the goal of procurement is to enable you to buy:

  • The “right” quality
  • In the “right” quantity
  • Delivered to the “right” place
  • At the “right” time
  • For the “right” price

Stockouts- for any reason- can lead to costly disruption, putting patient care, your reputation, and your practice at risk. However, holding too much inventory hinders your cash flow and puts you at risk of incurring financial penalties if items become lost, damaged, obsolete, or expired.

Proper inventory management is an effective mitigation tactic, and every practice should be working toward implementing a standard, digitized process for tracking and managing supplies.

Reducing the direct costs associated with inventory begins with the accurate tracking of inbound shipments through the usage of Purchase Orders(POs) and order-tracking tools. A single misrouted or delayed order can have a ripple effect across the practice and put you at risk of not being able to service your patients in case of a critical stockout. Therefore, it’s imperative that all team members have access to information about orders placed and details on shipments.

Additionally, POs are legally binding documents that hold suppliers accountable to agreed-upon order requirements, ensuring you deliver on the five rights of procurement. Finally, a three-way match process (that references the PO to verify invoice data) ensures accurate payments are issued and protects against fraud and error.

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 entire team, including finance, 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 the usage or withdrawal of on-hand items, as this is how you’ll know when it’s time to order and also provides you with accurate usage data and critical information when it comes time to negotiate volume breaks. 

Method’s inventory management system allows you to easily create a digital product catalog of preferred items or formulary, allowing you to track each item, including its precise location and can provide alerts when items fall below their Reorder Point (ROP)l, and it’s time to replenish.

For ultimate efficiency and accuracy for busy practices, Method offers barcode scanning to reduce the effort needed to identify, count, and order 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 and reduce costly human errors.

3. Automate and 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 Now.” Procurement is a complex business process that includes activities such as:

With so many moving parts to the procurement process, and a very long list of technical supplies to manage and discern from, it’s not uncommon to see practices wasting efforts and resources. Add to this a heavy reliance on spreadsheets, faxes, emails, phone calls, and numerous supplier portals to manage the entirety of the process, and the managing of supplies quickly becomes unruly, bringing chaos to your practice, wasting employee time, and leaking profits.

Method finds that for a typical organization, digital transformation can save 30% or more, representing an annual savings of up to $5,000 or higher on the associated labor, over and above the earlier-mentioned savings that can be found through supply cost reductions.

Additionally, practices get the boost that comes from freeing up staff's time to work on other important matters, like scaling initiatives or ensuring quality patient care is provided.

Implement Best Practices that Protect You Against Fraud and Costly Errors

By utilizing technology, you can implement best practices designed to keep your practice safe from fraud and reduce or eliminate costly errors, either on the part of your employees or your suppliers. 

By synergizing your operations, you can identify areas of improvement and establish the protocols to implement change, empowered by a singular digital platform that enables collaboration. Task owners can attach documents, leave comments, and quickly find all information and documentation for a transaction available in one place.

  • Standardize best practices like the three-way-match process, so you can safeguard your dollars, and your offices can run effectively, even with high turnover.
  • Avoid duplicate ordering
  • Segregate duties and eliminate the potential for fraud or theft
  • Implement an order approval process and buying errors or over spend before they impact your business
  • Analytics can help identify opportunities to reduce SKUs and optimize buying power

Expected Return on Investment: you Get Out What You Put In

ROI = Net income / Cost of investment 

Today’s competitive environment makes it challenging for DSOs to grow rapidly while remaining profitabe. At a time when practices are suffering from stagnant reimbursement rates, increased competition for patients, and extremely high overhead, improved spend management offers bigger, faster impacts with very little risk.

Method’s spend management platform delivers a fast ROI, with a low barrier to entry, a user-friendly interface that allows for quick adoption, and an Amazon-like marketplace experience that makes buying smarter and saving money easy.

At Method, our mission is to help you boost productivity across your organization and deliver radically improved financial results fast, through improved spend management. Our customer success team will be with you every step of the procurement journey, dedicated to making your procurement efficient, effective and profitable.

We provide the guidance and education necessary to ensure that your teams can comfortably and confidently maximize our platform's capability, and have designed a 4-step Onboarding Program to guarantee that you will experience immediate and lasting results.

In summary, in return for your investment, Method’s electronic Spend Management Platform can help DSOs:

  • Improve profits with everything you need to leverage collective volumes.
  • Quote multiple suppliers through a digital RFQ process that helps you send, receive, and analyze quotes and quickly award business, all on a single platform.
  • Buy what you want and from whom you want with access to an industry catalog of over 700,000 products and over 2,000+ dental-specific suppliers.
  • Make intelligent, profit-positive buying decisions with real-time pricing and availability and a user-friendly Amazon-like marketplace.
  • Group-wide purchasing controls: Implement and enforce formularies and buying rules and stop rogue spend.
  • Gain tighter budget control: Monitor purchases against budget by location and category and implement an order approval process so you can stay within budget and meet your financial goals.
  • Mitigate your supply chain risks and avoid stockouts.
  • Improve office efficiencies with streamlined workflows that save time and make life easier for your employees (avoid emails, phone calls, faxes, and dealing with multiple supplier platforms).
  • Standardize best practices like the three-way-match process so you can safeguard your dollars and your offices can run effectively, even with high turnover.
  • Monitor performance and purchasing behaviors, identify areas of improvement and establish benchmarks with deep analytics.

Final Recommendation 

Getting Started on the Journey to New Profits

The financial pressures on DSOs are here to stay, and those leading the charge 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 organizations. Digital tools to support this transformation deliver a surprising return on investment (ROI) and can make the dental office a better, high-functioning workplace for all.

Method’s dental-specific Spend Management Platform helps guide and automate best procurement practices, making it easy for your team to use every day.

If you need further help building your business case or have questions about why Method is the “right” platform for you, contact us at any time.

Ready to build a better dental practice?

Method Procurement Technologies gives independent dental practices and DSOs the inventory management and procurement capabilities they need to succeed. With our full, end-to-end solution, ordering dental supplies is straightforward and hassle-free.

Learn how Method Procurement's spend management solutions can improve your bottom line. Get in touch with our team today or request a demo to see it for yourself.