How to Save 20–30% on Dental Supplies: Cost Reduction Strategies for Practices

How to Save 20–30% on Dental Supplies: Cost Reduction Strategies for Practices

Executive summary

Most dental offices treat supply purchases as a type of "fixed" (non-variable) cost. They are not. As reported by industry professionals, in most cases, dental supply and lab services account for about 5–7 percent of total gross revenue, with consultants and published benchmarks indicating that excessive spending is typically caused by "price creep," fragmentation among multiple vendors, ordering excess product quantities, and poor visibility into existing stock levels. Simply stated, if your costs for supplies increase at a greater rate than your ability to generate additional revenue through increased production, you will experience margin loss.

Typically, a reasonable goal for saving money on supplies is not going to be achieved through an initial large-scale change to a single new supplier. Rather, it is likely to come from making a series of small incremental improvements; comparing prices paid to each of your suppliers currently; planning more strategic purchases of high usage items; reducing the number of items stocked (SKU reduction); testing lower priced alternatives within less critical areas of your business; streamlining or consolidating the frequency of orders placed; and improving your internal inventory management control processes.

Many times, these types of changes can collectively create savings of approximately 20-30 percent per year in most office locations where there has been a clear understanding of their starting point and the necessary discipline applied to execute the identified process improvements.

At a glance savings view

Figure 1. Illustrative midpoint of common savings opportunities by optimization area.

Figure 2. Benchmark framing: if supply spend runs around 4–6% of collections, the dollar opportunity becomes easier to quantify for a practice’s revenue size.

What the benchmark data suggests

Recent data from dental benchmarks shows that many practices have an average overhead of 60-65% of what they collect. In addition, most practices find that their laboratory and supply expenses represent about 6-8 percent of all collected gross revenue. Consultants also argue that when managed properly, supply expense (as a percentage) should be around 4-6 percent of all collections; therefore, it represents a better target or "rule" to manage against as opposed to being a single number.

Since each practice has its unique patient demographics, procedures and laboratory usage levels, the optimal ratio will likely vary. However, there seems to be a common theme among these variables: if the ratio increases without an increase in productivity and revenue, then the practice needs to take a look at how purchases are made and waste.

This is important since cost reductions through purchasing/supply efficiency can often result in improved profit margins before a practice's top-line grows. It can do this with less effort compared to other methods of growing the top-line. For example, reducing unnecessary/avoidable supply expenses by just one point could help improve profitability while still keeping the same amount of chair time and staff, etc., so that the practice does not need to invest additional money into marketing efforts or hire additional personnel. Therefore, efficient practices typically evaluate their fees, costs and purchasing cycles on a regular basis as opposed to relying on the fact that their supply expenses will always remain healthy.


Optimization areas in detail

Optimization area

Typical savings range

Why it matters

Vendor comparison

5–10%

Long-tenured vendor relationships often hide price creep. Line-item benchmarking on top SKUs frequently surfaces immediate savings.

Bulk purchasing

5–8%

Best for fast-turn essentials like gloves, masks, sterilization products, and routine disposables. The goal is lower unit cost without tying up cash in slow-moving stock.

Product standardization

3–7%

Reducing needless brand and SKU variation increases order volume per item and simplifies inventory control.

Generic substitution

5–10%

Selective switching in non-critical categories can reduce spend materially when product performance remains acceptable.

Shipping optimization

2–5%

Consolidated ordering and fewer small rush shipments remove hidden logistics costs.

Inventory tracking

10–15%

Improved visibility reduces over-ordering, expiration, shrinkage, and ‘just in case’ purchases.


1. Vendor comparison and price transparency

Practices don't often overpay because one invoice is outrageous. They rarely do because nobody has compared routine SKU pricing in a while. Suppliers that were once competitive may not remain so today.

Promotions come and go, private-label options change, and category leaders rotate. An easy way to begin is with a quick side-by-side of the top ten to twenty most frequently ordered items. This normally will reveal if there are issues with the practice's overall pricing (broad) or just a few outlier categories. 

2. Bulk purchasing with discipline

Bulk purchases will only be beneficial to a practice if the velocity (usage rate) also increases with that purchase. Fast turn items such as gloves, face masks, disinfectant sprays/solutions, suction tips and other fast moving products typically have good potential for bulk purchasing. Specialty items which may move slowly do not.

The true operational questions associated with this type of product are "Will we use all of this product before it reaches its shelf life, expiration date or creates an inventory storage problem?" In order to effectively utilize bulk purchasing strategies along with historical data of how much of each item was used, and/or establishing an appropriate reorder threshold along with proper inventory control/storing procedures, practices can reduce their effective cost per unit of product without creating waste by overstocking.

3. Product standardization

Standardizing equipment (SKU) can help slow down spending inflation. Clinicians will often purchase multiple different types of almost identical disposable items for their own convenience or from a variety of vendors that each have their own preferences. Substituting one item for another on an occasional basis also eliminates your ability to negotiate with suppliers due to your lack of "purchasing power."

While standardization may seem like you are telling clinicians they cannot choose how they want to do things clinically by using the exact same piece of equipment that works for everyone else; in reality this allows for some flexibility in terms of which category they fall under. In doing so, we gain operational as well as cost advantages.

The benefits include the fact that we make it easier to stock our shelves, maintain lower par levels, train staff in less time, and avoid last minute purchases. For many clinics, this is the least painful method to achieve savings since it changes the process prior to changing who they buy from.

4. Generic and lower-cost substitutions

While certain premium product categories are truly important, many practices continue to simply choose premium options for all categories in which a lower cost alternative can function equally well.

Controlled testing is always the most effective method to determine what will be optimal. Begin with non-essential consumable items; test staff's willingness to accept them and assess their quality (or lack thereof) prior to expanding.

5. Shipping and ordering workflow

When small, repetitive purchases are made, you will lose the savings from your negotiated pricing at the individual-item level. Reactive purchasing by a team eliminates opportunities to achieve free shipping thresholds, adds costs associated with expedited shipping and requires administrative time to process repetitive transactions.

Most dental offices have found that consolidating their purchase cadences (e.g., weekly or every other week) to improve cash flow and visibility. Shipping cost optimization may be boring, however, it is among the easiest ways to decrease supply costs while maintaining no impact on clinical quality.

6. Inventory visibility and waste reduction

Inventory is the place that transforms theoretical into real world results. Even though a company has negotiated very low cost from its suppliers they can still over spend on inventory purchases.

Obsolete items in their warehouse, redundant back-up product and "just-in-case" buying practices all indicate a lack of product visibility. While even a simple process (i.e., top SKUs, re-order points and a periodic review/physical inventory of high usage categories) will help eliminate waste by changing behavior; this is likely the most important area for leverage as it changes both how a company buys and behaves. Therefore many consultants tell clients to monitor if the companies' procurement costs are growing faster than its manufacturing costs.

Final Thoughts

Bettering your supply costs doesn't need an entire transformation of how you do business -- it simply needs to be assessed first.

A good starting point may be your Top 10 Most Frequently Purchased Products. This list will include the products for which you would see the greatest cumulative price difference as a result of even the smallest of price differentials.

While reviewing, ask yourself:

  • Do we pay competitive prices for these items?
  • Can we test equivalent alternatives?
  • Are we ordering in such a manner as to maximize our efficiency and minimize waste?

Categories like Gloves, Masks, Sterilization Products and Everyday Disposables usually represent the best opportunity to quickly achieve cost reduction.

Even a simple comparison of the prices of similar products from various vendors will likely allow you to identify some significant cost reductions. There is no need to modify the workflow used when selecting a product nor the quality of the product itself. 

If you desire to create a more structured plan to improve your supply costs, using a vendor who offers transparent pricing and flexible options regarding sourcing will greatly simplify this process. Because, in most cases, reducing your supply costs is not about creating additional work; it's about being more intelligent in what you're currently buying.


Sources and benchmark notes

 

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