Dental Supplies Procurement & Technology: A Game Changer for Your Practice

As a dental CPA firm, we keep our ear to the ground to identify best business practices that can help improve the profitability and efficiency of dental practices. One significant area where technology is making a major impact is dental supplies procurement.

Dental supplies account for a substantial portion of a dental practice’s expenses. In fact, it’s often one of the largest line items on the profit and loss (P&L) statement. With the rise of procurement software platforms, like Method, managing and reducing supply costs has become easier and more efficient than ever.

Method helps dentists save money by optimizing procurement processes and managing inventory in a way that aligns with overall practice goals. This blog explores the key metrics and best practices that can help your practice save money, improve efficiency, and enhance patient care.

KPI: Overall Supply Spend as Percentage of Revenue

How much you’re spending on dental supplies is a relative number. The real insight comes from understanding how your procurement costs align with your revenue and collections.

For instance, a practice bringing in $2 million annually might see $100,000 in supply costs and panic. However, that same number could signal overspending for a practice collecting only half that amount. Your supply costs should maintain a consistent relationship with your revenue, typically falling between 4-6% of collections.

When this ratio starts to drift, it could indicate underlying issues such as price creep from suppliers, inefficient ordering practices, or missed opportunities for bulk discounts. By tracking this metric monthly, you can quickly spot trends and take corrective action before small issues become major problems.

KPI: Private Label Utilization Rate

Here’s a surprising fact for many practice owners: leading dental service organizations (DSOs) maintain a private label utilization rate between 30-40%.

The question often arises: aren’t premium products simply better?

In many cases, the so-called private label products deliver comparable quality at 30-50% lower costs than their branded counterparts. Many of these private label products are manufactured by the same companies producing the branded versions, but without the premium price associated with name recognition.

For example, mixing tips that cost $60 from a major brand could be available as a private label item for just $25. If your practice isn’t hitting at least 30% private label utilization, you’re likely leaving money on the table.

Inventory Management: A Direct Path to Profitability

Effective inventory management directly impacts your practice’s bottom line. In fact, studies show that dental practices can tie up as much as 30% of their annual revenue in inventory.

Ordering too much or too little can waste capital that could otherwise be invested back into the practice, whether in technology, staff training, or marketing efforts. But the benefits don’t end with cost savings; efficient inventory management also leads to improved productivity. How much time do you and your staff spend hunting down supplies, placing emergency orders, or dealing with stockouts? By streamlining inventory, that time can be redirected to patient care, resulting in a more efficient practice, happier patients, and a team that can focus on providing the best dental care possible.

Overcoming Poor Demand Prediction

A major blunder in inventory management is failing to accurately forecast supply needs. Many practices rely on gut feelings or last-minute checks, leading to either overstocking (which ties up capital) or understocking (leading to stockouts).

The solution lies in your data. Modern inventory management systems can analyze historical usage patterns, seasonal trends, and upcoming appointments to predict supply needs with exceptional accuracy. By utilizing your own production trends, you can optimize ordering and ensure you always have the right supplies on hand without unnecessary excess.

Upgrading from Manual Management Systems

If you’re still managing your inventory using spreadsheets or pen and paper records, it’s time to upgrade. Manual systems are not only time-consuming but prone to errors. It’s like trying to perform a root canal with a hand drill.

The fix is simple: invest in a digital inventory management system. These advanced solutions automate many processes, from tracking usage to generating purchase orders. They offer real-time visibility into stock levels, send alerts when it’s time to reorder, and even integrate with your practice management software, allowing for a smoother, more efficient workflow.

Centralizing Inventory Storage

Storing supplies in multiple locations throughout your practice may seem like a matter of necessity, but it can lead to confusion, overstocking, and even lost items. The best practice is to centralize your inventory storage as much as possible.

Designate a primary stockroom for the bulk of your supplies, and if you must keep some items in treatment rooms for immediate access, treat these as mini-stockrooms with their own par levels and regular restocking schedules. A centralized approach gives you a clearer picture of your overall inventory, making it easier to manage.

Leveraging Data for Smarter Decisions

Regularly generating and reviewing data on your inventory levels can uncover valuable insights that will optimize your supply chain and budget. Keep track of usage trends, spending by category, and supplier performance. Many modern inventory systems can generate these reports automatically and provide actionable insights, helping you make more informed decisions about ordering, negotiating better deals with suppliers, and identifying areas for cost savings.

Assigning Responsibility for Inventory Management

In many practices, inventory management is a shared responsibility, which often means it’s no one’s primary focus. This can lead to oversights, inconsistencies, and lack of accountability. To improve the situation, designate a primary inventory manager who is responsible for overseeing the process, ensuring consistency, and being the go-to person for inventory-related questions. In smaller practices, this might be the office manager, while larger practices might require a dedicated inventory coordinator.

A Brighter Future

Effective inventory management is essential for dental practices. As practices grow, managing inventory can become more complex, but these challenges also present an opportunity to optimize your operations.

By selecting the right dental procurement platform with built-in inventory management capabilities, such as Method, you can transform inventory management from a time-consuming chore into a key driver of your practice’s success. Method integrates seamlessly with your workflow, helping you streamline inventory processes, reduce errors, and free up valuable time for patient care.

Credit: Method
For more information about how Method can help streamline your procurement and inventory management, visit their website at Method.