Lean Dental Practice & Inventory Management
Lean Dental Practice & Inventory Management
Managing your inventory instead of it managing you will go a long way to making your practice more profitable. Leadership will do the same for your people.
Blog By:
KimBleiweiss
KimBleiweiss

Inventory Control Survey, or Who’s Minding the Store? A Tale of Hidden Costs

Inventory Control Survey, or Who’s Minding the Store? A Tale of Hidden Costs

8/30/2016 11:34:27 AM   |   Comments: 0   |   Views: 145

There's no reason to become alarmed, and we hope you'll enjoy the rest of your flight. By the way, is there anyone on board who knows how to fly a plane? – Airplane (1980) 

Yeah I called her up, she gave me a bunch of crap about me not listenin' to her enough, or somethin'. I don't know, I wasn't really payin' attention. – Dumb & Dumber (1994)

 

I recently concluded a survey that’s been about 2 years in the making. Over that period of time, I’ve collected responses from 86 practices on the following question: 

Which of the following concerns about your inventory prompted you to investigate Grasshopper Mouse™? (Check all that apply)

  • Running Short of Product                                 26
  • Communication Between Staff                        22
  • Inventory Cost >6% of Gross Production        19
  • Want to Keep Track of Inventory                      15
  • Excessive Inventory                                             15
  • Expired Product                                                    12
  • All or Most of the Above                                      11
  • Tracking Credits &/or Free Goods Due             5
  • Lack of Storage Space                                          5
  • Other                                                                         1

 

As I’ve discussed in previous posts, because inventory costs are such a significant percentage of overhead, they merit careful monitoring. However, there is something that cannot be monitored quite so easily – lost productivity due to hidden costs. 

Let’s discuss the list above in terms of hidden cost. It’s easier if we delete the items that are less hidden-cost driven:

  • Inventory cost - which is what you’re paying, so it’s really just “price”.
  • Expired product (costs hard cash, because it must be replaced – although keeping track of it takes time (read: $$)).
  • Excessive inventory is a function of Opportunity Cost: money that could be used for other things is tied-up in inventory. 

So, what about the others? Here are a couple of big ones:

  • Running Short – How do you put a price tag on frustration? Ever have to re-appoint a patient because you were out of product? Panic and spend time calling your vendor or rep to see if you can get product before 3:00 when Mrs. Jones is coming in for her appointment? Pay (actually part of price) extra to have product sent overnight?
    • This is from an email to which I was copied: “To: Staff, Today, during a scheduled implant and grafting procedure, we ran out the following material (bone graft material).” That ever happen to you?
  • Tracking Credits &/or Free Goods Due – First of all, these both impact bottom-line cost. The reason that Grasshopper Mouse includes functions that track these for you is because it was specifically requested by dentists and dental staff who were our consultants as we built our system. It takes time (read: $$) for you to have to remember and follow-up on these.

    (Please don’t let the following examples serve as a blanket indictment of vendor reps. The vast majority are very competent and honest.)

    • One doctor told me that he estimated he was losing between $100-$200/month on product that had been promised to him by vendor reps, but not delivered.
    • Here’s a scenario I often use: You hand a rep a product for them to take back for credit. The rep puts it in their trunk. A month later, when cleaning out their car, they find a box of (fill in the blank) and think, “Oh, #&//, where did that come from?!”
  • Want to Keep Track of Inventory – And how do you do that?
    • Take time (read: $$) to go through every drawer and shelf at least once a week?
    • Keep a spreadsheet that you take time (read: $$) to develop and to which you manually transcribe data? 

Twenty six (15, plus 11 “All or Most of the Above”) respondents realize that there’s a need to keep accurate track of inventory. Why? For the same reason that Walmart, Costco, General Motors, and countless other businesses do: because it’s a basic expectation of any well-managed business to know what inventory is on-hand. Can you imagine Toyota having to close down an assembly line because somebody forgot to order a bolt? But, scaled-down, it happens countless times in dental offices all over the world and has the same scale of impact on their production. 

When I was growing up in the business (I’ve been around for 40 years), many dental practices felt it mercenary to discuss or even think about good management practices. It was like a ministry. But, even a ministry can’t last long if its resources are poorly managed. 

Manage your practice – or your practice will dictate to you what your resources are and, along with limiting those resources, it will limit your choices. Don’t allow poor inventory control to limit possibilities for your practice’s growth. Believe me, I’ve seen it. Poor inventory control can be an anchor that can put the brakes on in places you never anticipated.

 

Need help with controlling your inventory? Go to https://www.ghmouse.com/ or call us at 714.912.4183 to schedule a ½-hour demonstration.

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