In early 2020, when Personal Protective Equipment (PPE) first became scarce due to sudden worldwide spikes in demand, healthcare providers quickly learned the impacts supply chains could have on their practice and ability to provide patient care.
Over two years later, the dental industry continues to battle increasing costs for critical supplies.
Supply chain professionals often refer to the "bullwhip effect," a term coined to explain how small fluctuations in demand can send ripples throughout the supply chain, leading to large distortions in demand further up the supply chain. Essentially, what are small issues downstream quickly snowball into much bigger issues the further upstream you go.
In this article, we'll let you know what you can do to ensure this "bullwhip effect" doesn't take a slash out of your production rates or your margins. You'll also learn how to handle procurement challenges and how procurement software can help you keep things moving and safeguard your practice.
But first, let's take a look at where we are.
Originally, the massive shift in purchasing behaviors and suddenly inaccurate forecasts compounded by stymied production made acquiring supplies difficult. In 2020 shipping delays and order backlogs became common. Now, it's pent-up demand, production bottlenecks, climate-related risks, and the ongoing Russia-Ukraine conflict at the root of continued supply chain issues.
The shortage of raw materials and components has begun to take a life of its own as the bullwhip effect makes its way through global supply chains. Although the U.S. has, in large part, moved on from pandemic-related disruptions, the supply chains it relies on are located in countries such as China that continue to be largely impacted by Covid-19.
The dental industry is no exception. Moving into 2023, dental practices face significant challenges as they are forced to combat price increases, find efficiencies, mitigate their supply chain risks and protect their profits and practice.
Although there's no going back to pre-covid times, and we must continue to adjust to the "new normal," fortunately, thanks to industry and technological advancements, the future is bright for dental organizations.
Now that patients and offices are back and offering more service models such as online appointments, practice owners and leaders can get back to meeting revenue and, more importantly, profit goals.
In a New York State Dental Association (NYSDA) article, Burke Spielmann, general manager at Henry Schein, explained that although demand for PPE has stabilized, the cost of supplies remains high, with the average spend on dental supplies jumping from 5.5% to 6.0% of revenue to 8.0% to 9.0%.
It's the basic laws of supply and demand, the same bottlenecks and overbuying that are delaying your goods are also escalating pricing. And demand is expected to continue to rise. According to new market research by Meticulous Research, due to the rising incidences of dental diseases, the increasing demand for cosmetic dental procedures, the increasing awareness of oral hygiene, and the growing medical tourism for dental treatments, the dental consumables market will be worth $67.6 Billion by 2029.
Although it's impossible to predict just how long supply chain disruptions are likely to continue. Looking ahead, as global supply chains continue to be stretched thin, it seems the only thing certain is that we should expect uncertainty.
They say necessity is the mother of invention. Faced with a labor shortage, an increasingly competitive landscape, and, as we've mentioned, rising supply costs, dental organizations have been growing in sophistication, leveraging new technologies to enable more mature procurement processes.
The modern dental practice is now focused on its profit and loss statement, aware that an effectively run dental practice with a healthy EBITDA is worth much more than one with a lot of revenue but not much actual profit.
For growing dental organizations, the future is digital, allowing for scaleable best practices that optimize cash flow while amplifying profit margins. Today, leading procurement platforms empower DSOs to leverage their collective volumes, control spending, and more accurately predict requirements so they can meet financial objectives.
In times of uncertainty, digitally enabled efficient procurement processes allow leaders to create a more agile and diverse supply chain where healthy competition thrives and risks are mitigated.
Traditionally, when procuring dental supplies, dental practitioners relied primarily on large distributors. However, new procurement platforms are changing the game, making it easier to compare pricing and stock availability across various vendors. The entire procurement cycle, from the identification of needs right through to paying the invoice, is now more efficient, helping organizations to do more with less.
Additionally, more mature dental organizations now have the visibility, insights, and control to implement strategic procurement for long-term cost and business advantages.
CIPS suggests you reduce the bullwhip effect by leveraging technology and sharing knowledge with suppliers.
If supply chain partners can determine the root cause of the bullwhip effect, you may be able to avoid it. Incorporating technology can help facilitate internal and external communication on risk areas and root causes. Critically, in case of a supply issue, it can also help you decrease your response time, allowing you to quickly find alternative sources and have supplies delivered before it impacts your practice.
CIPS further suggests you can reduce the bullwhip effect by:
We'll dig more into how automation can help with the above later. In the meantime, here are a few other things you can do to get a handle on your procurement challenges.
Fulfillment centers are experiencing high levels of demand. By streamlining your ordering, you can help to alleviate the pressures while reducing your own overhead. Customers often order many times per week or even per day, overloading vendors, their employees, and their supply chains unnecessarily.
Due to poor inventory management and procurement practices, practices often wait until they run out of an item before they reorder. However, it's important to remember no matter how little the order, it must still run through every step of the procurement cycle (identifying the need, selecting the supplier, placing the order, receiving the product, and paying the invoice). Every step takes time out of your employees' day and adds labor costs to your overhead.
Additionally, you're likely incurring extra fees for expediting deliveries. Instead, by better managing your inventory, accumulating orders, and ordering in more financially beneficial quantities, you can reduce costs, make life easier for your employees, and help unclog your vendor's order pipeline while you're at it.
Dentists and hygienists can be picky about the specific brands and products they like to use. On the other hand, best practice is to create and stick to a strict formulary. Although you want to control and limit the number of different products your organization buys, you also want to mitigate your risks and have approved alternatives from varying suppliers.
If your practice uses a formulary, consider creating a second alternative one. This will give your employees the flexibility they need to avoid stockouts in case of a supply shortage or delivery issue while still allowing you to control supply spend and minimize rogue purchases.
When choosing alternative products and sources, the more you know about your supply chain, the better you can strategize and choose sources that will help you mitigate your risks. For instance, approving the same brand-specific item to be purchased from two different dealers doesn't help you if the manufacturer is experiencing an issue. In this case, you would be better off approving a similar product from another brand.
Although you always want to be cautious of holding too much inventory as it impedes your cash flow, comes with carrying costs, and puts you at risk of financial write-offs due to expired, lost, or damaged stock, now is not the time to run super lean inventories.
We need to be clear that this doesn't mean you simply buy lots of everything. Remember, a well-run dental practice with a healthy EBITDA (which is impacted by your purchasing behaviors) is a valuable one.
Instead, we suggest you carefully and strategically analyze where it makes sense to increase your safety stocks. Think about the items you use on a daily basis that have minimal to no risk of expiring, like masks. Perhaps instead of ordering every week or two weeks, you can hold a month's worth of inventory. In the case of logistical issues or extended lead times, this will give you more time to source supply while introducing minimal risk.
When demand outweighs supply, vendors must choose which customers are going to get the goods and which they need to disappoint. So it's no surprise that vendors will choose to remain loyal to the customers who have remained loyal to them. A distributor loyalty program may be a good option, as members will likely be taken care of first when things hit the fan.
This doesn't mean, however, that you should put all your eggs in one basket. For the reasons we've mentioned, in 2023 and likely beyond, having alternative sources helps you mitigate your supply chain risks. The healthy competition also gives you more negotiating power and helps keep your suppliers diligent.
That being said, you don't want to spread your purchases out too thin. When selecting suppliers, remember the value loyalty brings and balance that with the pennies you may save purchasing elsewhere, as those pennies may cost you plenty more in the long run.
Dental practices require supplies to run. From PPE to crowns and composites, the list of supplies needed to provide optimal patient care is a long and technical one. The goal for any dental organization should be to buy these items in the right quantity, at the right time, and, of course, at the right price.
However, supply chain issues, price creep, incorrect invoicing, and overbuying are just some of the challenges that practices must first overcome. This is why, to ensure your practice sees continued growth, you must aspire to more elevated procurement practices that enable you to control supply costs.
The dental industry is a competitive market where efficient and effective supply chain management that drives out costs and supports growth can become a significant competitive advantage, and procurement software is the key.
In order to scale, an organization requires standard, repeatable processes that optimize outcomes. Method's spend management platform was designed to deliver, providing dental organizations with a scaleable, easy-to-implement solution with a low barrier to entry and a quick Return on Investment (ROI).
Streamlined e-procurement empowers DSOs with complete visibility and spend control across locations, allowing you to:
Method was designed to optimize the entirety of the end-to-end procurement cycle, from identification of requirements, price shopping, requesting and analyzing quotes, selecting suppliers, entering order requests, approving orders, and receiving shipments to paying and verifying invoices.
Designed by people in the industry for the industry, Method was built to be flexible. So no matter how rudimentary your current purchasing process may be or how big you want to scale, Method can help you shop a little smarter today and slowly refine your processes as you go.
One thing is for certain, procuring the supplies necessary, efficiently and effectively, must remain a top priority for DSOs and single office practitioners throughout 2023 and, likely, beyond.
Offering a superior user experience Method's full, end-to-end inventory and order management platform, ordering dental supplies is straightforward and hassle-free. In addition, our customer success team helps ensure quick implementation, high adoption rates, and continued usage across your organization, making for fast returns.
Rest assured, however, Method stays with you along the way. Acting as a true partner as you grow, Method will assist you along your procurement journey, helping to guide your transformation as you improve your practice and your profits.
If you're ready to begin your journey procurement that mitigates your supply risks,
Contact us to find out more or arrange for a personalized demo.
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.
