Dental Inventory Control Brain Droppings
“You keep using that word. I do not think it means what you think it means.” The Princess Bride
“A dollar saved is a quarter earned.” Oscar Levant
It’s been quite a while since I’ve put hand to keyboard to compose an article for my blog. I’m embarrassed to even look up when it last was. However, I comfort myself in the idea that my thoughts must have been dearly missed.
I’m well aware that Inventory Control doesn’t appeal to many as a subject of first choice to spend time ruminating. However, it’s my stock in trade, so please bear with me.
First, I’ll discuss the quote from The Princess Bride.
I’ve been in the dental industry for over 43 years. In that time running in and out of dental practices more times than I care to think of, it seems to me that, when a dental practice is referring to Inventory Control, it doesn’t mean what they think it means.
What most think it means:
- Not running out of product.
- Getting the best price possible.
There. Job done. Now, let’s get on with something “important”.
Like it or not, Inventory Control is much, much more than this (keep in mind that your supply purchases should be no more than 6% of your gross. That’s a big part of your overhead.) First of all, think about what entities need to control their inventory: General Motors & the local mechanic, Armour Meats & the rancher; Safeway & the home pantry; a network of hospitals & the physician practicing in a small town; the dental school clinic & the solo practitioner; etcetera.
I can tell you a couple of concepts that the larger entities are interested in, and you should be, too:
Fixed and Variable costs.
- Fixed costs are the same no matter the output: lease payment, salaries, equipment, insurance, etc. These stay the same no matter the output. For example, your lease payment on your office is not based on how many patients you see a month.
- Variable costs are governed by output. The more patients you treat, the more dental supplies, for example, you’re going to need.
Your fixed costs are pretty much something you don’t control on a day-to-day basis. You do, however, have a great deal of control over variable costs. Yet, in my considerable experience, dental practices look upon Price of supplies as the only variable requiring consideration.
Let me tell you what true “Inventory Control” teaches us about variable cost. Variable cost actually comprehends three different variables:
- Price. This is the easiest variable to track and control because it is always a discrete number and can be reported.
- Opportunity Cost. “Once you’ve spent your money, it’s out of play. It’s, for all intents and purposes, gone.”
Here is an example from life in general. You buy yourself a brand-new car. It’s everything you’ve ever wanted: make, color, features, etc. You have always seen yourself driving this automobile. Maybe you even have a photo of it on your desk, just to keep you motivated.
You drive your nice, shiny new prize home and pull into your driveway. You get out and walk around the car smiling and patting yourself on the back. You go into the house and get the wife and kids and you’re all admiring it and just getting ready to get in and take it for a spin when your next-door neighbor, Irv, pulls into his driveway in what appears to be the same exact car.
“Son of a gun!”, says Irv, “Look at us!” You look at his car and he looks at yours and darned if they aren’t exactly the same.
There’s just one difference, his has 12,000 miles on it, so he paid $20,000 less than you did for yours. Depending on how you feel about 0 miles vs. 12,000, as much as $20,000 is your opportunity cost, because you could have had it for that, but now it’s yours and you can’t take it back.
In the case of inventory control, over-stock and duplicate product account for opportunity cost. With true “Inventory Control”, you should never have more than 1 month’s supply on hand, and you should never run out.
- Hidden Cost. “Time is money”
Any time a staff member needs to unnecessarily deal with inventory, multiply the time spent by their salary. “How many boxes of gloves do we need?” Walk into the back storage area and start counting. “Get me a report on how much we spent on implants this month.” Go and find what and how much you purchased from whom.
Surprise! The composite you only use for certain cases is expired.
Surprise! We’re out of “x”. Quick, call the rep we buy “x” from and see if he can’t get it to us today. “Sorry, doctor, the best they can do is to overnight it and they’ll have to charge us $19 extra for shipping.” Well, Mrs. Jones is just going to have to be reappointed.
“Did we ever get credit for that bad batch of composite we returned, when was it? May? June?” Check with accounts payable and have them check the statements to see if we received credit.
You remember three months ago when supplier “Z” had a 6+1 on rubber dam clamps. Did we ever get the free goods? Can you call the rep and ask her to check that out for us?
And, remember what Oscar Levant said, “A dollar saved is a quarter earned.” Every hour you spend going the rounds online, or through catalogues, or on the phone looking for the best price better be more than offset by that great price you’ve found. Because why? Because time is money.
I have no dog in the supply cost fight, so I have nothing to gain by telling you this: settle on a primary supplier and a secondary supplier. Then, determine who you will use by them providing you a list of what they’ll charge you, or what blanket discount they’ll give you. From my observations I can practically guarantee you that you’re not getting significant savings by shopping every order.
Now, if you’re like my dear departed mother and get your groceries by looking at all the ads on Wednesday, making a list of what to get where, then spend hours driving around town burning gas to get the best prices, you probably won’t get this. When someone purchases our system, we get a 12-month purchase history from them, which we convert to s spreadsheet and upload to our inventory control system. I keep a database of products and prices fore all the major suppliers so that I can just plug the customers’ info in and use that for their upload data. I can tell you that the cost savings from customer to customer over time is insignificant, unless you want to spend your practice’s valuable time cherry-picking prices.
So, in summary (finally, huh?), an inventory control system provides you with a way to control price, opportunity cost, and hidden costs. With a proper system, you will never be over-stocked, run out, have to dispose of expired product, or find that you’re duplicating efforts and goods.
Our dental practice inventory control system is called “Grasshopper Mouse”. It’s the only complete system developed by dental professionals for dental practices. It can be found at https://www.ghmouse.com