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Inventory Control: Be in Charge by Lynne Fales and Kira Martell

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by Lynne Fales and Kira Martell

Orthodontic practices not taking the time to plan and organize their inventory systems are losing thousands of dollars a year. The average dental practice spends 6.68 percent and orthodontic practices average >10 percent monthly on their clinical inventory. Smart practices that take the time to plan, organize, computerize, negotiate and pay attention are able to reduce their inventory costs to 4.5-6 percent. Usual percentages includes 4-10 percent of receipts after adjustments for clinical supplies. Other inventory costs include .5-1.5 percent of receipts after adjustments for office supplies and 1-3 percent of receipts after adjustments for marketing. In a study done by FoxFales, practices that put these tips for inventory management in place saved an average of $27,693 per year. Use these suggestions to get started with inventory management to ultimately save time and money.

Organize
Start by organizing your inventory. What inventory do you have right now? Where is the inventory located? Organization means supplies are easy to identify and available quantities can quickly be determined. Like items should be stored together. For example, the cotton rolls should be kept near the dry angles and the doctor gloves should be kept near the assistant gloves. Identify overstocked supplies or supplies no longer in use. Unused supplies can sometimes be sent back to suppliers. Suppliers often provide credit on returns. Donate supplies that are not returnable. Donations can be made to assisting schools, Boy Scouts, Girl Scouts, charities, schools and other community business. These organizations will likely benefit from your donation and doing so can promote good will toward the office.

Establish a distribution location for your supplies. This is where the large quantity of your inventory will live. Use the supplies in the distribution area to replenish areas where supplies are used. The quantity levels in the distribution area determine whether a supply needs to be ordered or not. Once a supply leaves the distribution area; it should be considered used. Your distribution area does not need to be large, but should be capable of storing two to three months of back-up supplies.

Label storage areas. Make a record of where each supply is located. This will allow supplies to be put away by an entry level employee. When supplies are received, replenish them by rotating stock forward and adding new stock to the back. Once storage locations are identified, discourage future reorganization unless the entire team agrees upon the new location. Often practices have a team member with spare time and no other assigned task who will unnecessarily reorganize. This might result in overstocking due to duplicate ordering and also can result in running out of stock because of supply location confusion.

Establish “fully stocked” number and “reorder level” number for each supply to help determine when and how much stock should be ordered. Creating a barcode, tagging, or sticky note system will alert the team when a supply needs to be ordered. Some offices record each time a supply is used creating a “real-time” inventory count which can calculate exactly what should be ordered when the supply level reaches the reorder level. This counting of used supplies can be done manually or using a barcode scanner. A “keep it simple” method of preventing running out of stock is to track the last order date and calculate the usual number of weeks before a supply is ordered. Practices can then create a report or sort an excel spreadsheet showing all supplies that have not been ordered within the expected time frame. Lastly, a quick visual check of these supplies will prevent missing a supply needed for the order.

Each department within your practice should be responsible for ordering its own supplies. Each area should have a primary and a back-up ordering employee. Budgets by department should be established and reports should be created for verification.

Computerize
Computerize your inventory systems. Create a computer database that tracks everything ordered from every supplier. This can be an excel spreadsheet which will allow sorting by supply name, order date or supplier.

Alternatively there are software programs specifically designed for dental practices which track inventory purchase orders, provide reporting capabilities and history. Software programs should give practices the ability to do cost comparisons, barcode scanning, e-mail purchase orders and be able to create bid reports for multiple suppliers to compare prices and determine who to order from. Use the computerized system to track backorders and expected due dates. Supplies that have been reported by the supplier on backorder should have an alternate supplier available. Typically supplies on backorder should not be charged a separate shipping fee.

Use the computer system to identify supplies that are taxable in your state. Create a report to show the dollars spent and taxes paid to in state and to out-of-state vendors that collect sales tax. Many states are now asking offices pay the “use tax” for taxable supplies bought out of state if the supplier is not collecting and remitting. Use this report to identify tax liability and potentially save weeks of employee time compiling information should it be required.

The practice inventory system should keep track of earned versus used discounts, coupons and specials. Be sure to ask for discounts and take advantage of "two for one" offers. Discounts will, obviously, reduce your costs, but only if you ask for them. This can be done via e-mail. Verify coupon use for those suppliers providing this benefit and compare discounted prices with prices of other vendors that might charge less without these coupons.

E-mail purchase orders to supplier representatives. Phoned in orders take 15 to 20 minutes per call (expensive employee time). When phone orders are placed, there is no physical verification of exactly what has been ordered. It is also valuable to e-mail a requisition to the office manager or doctor prior to placing the order so that large purchase items can be approved prior to ordering. A quick review can save thousands if technique changes are being considered in the office and the employee ordering does not know this.

Use your inventory database system to view purchase histories and identify areas where you are overspending. Assign each supply in the database to a group or category, such as “disposable products” or “infection control.” This will allow reports to be run showing the percentage of each group of supplies. Comparing multiple years can be a quick visual of areas in the office that need management review to find the reason for increased spending. Focus on high expense items first. Many times the best option is to pay for the supply that provides the best results for your treatment techniques even though this item may be more expensive. Sometimes there are alternative choices for buying the same supply from another supplier to save money. Percentage comparison reports can also help to compare costs for specific time periods to identify trends and possible shrinkage from one year to another.

Assign a constant general ledger account (chart of accounts) to each supply in the database in order to allow the computer to sort and subtotal for correct cost posting by the bookkeeper. Print or preview bookkeeping reports showing received items with their corresponding general ledger account, tax and shipping costs to compare and attach to vendor invoices.

Negotiate
Once per year, consider sending out bids to multiple suppliers with information about how many of the specific supplies have been purchased for the past year. Ask suppliers for the best price and then make purchase decisions based on price and supplier dependability. Use Internet shopping sites like Froogle.com to compare prices for common office products.

Quantity buying might be attractive, but there are many areas that need to be considered before making the large purchase. Consider storage room availability, the cost of using your money up front instead of investing money in an interest-bearing area, taxes that need to be paid in advance, insurance costs that need to be increased because of increased inventory value and the possibility of supplies disappearing or becoming obsolete before use.

Avoid ordering online from individual suppliers. Ordering online makes it easier for the supplier and harder for the practice to create reports essential to negotiating prices. Without accurate information from each supplier it can be challenging to establish inventory value and compare prices from multiple suppliers. Track and establish accurate order frequency. Set a goal of ordering no more than once per month to save money on shipping and handling. Computer database reports can also help the office recognize seasonal variances and plan for ordering needed supplies accordingly.

Keep in contact with your supplier representatives and have them e-mail specials and new products to the office ordering e-mail. Create a Gmail ordering account (or similar account) to use specifically for ordering. The single account for ordering allows auditing by authorized administrative employees. Change the password when ordering employees leave employment. Using Outlook e-mail profiles per employee can make auditing more challenging for offices. Establish a supply budget based on industry averages and compare your actual costs to your budgeted costs on a monthly basis.

Are you confirming and comparing prices? Make sure you only pay what you owe. Don't pay for backorders, miss-shipped or returned items. Suppliers can make mistakes. Prices and quantities need to be confirmed to eliminate overpayments. If your office pays bills without this confirmation, it might result in overpayments or missing a credit due. Credits not tracked carefully might never be received by the office or might take a long time for processing. Verify packing tickets and invoices against your purchase order for items shipped, price and quantity. Generate a bookkeeping report or have the team member receiving the supplies sign off to confirm invoice accuracy before giving it to the bookkeeper to make a payment.

Inventory is an important area of your practice, one that shouldn’t be ignored. With some organization, computerizing your inventory system and negotiating with your vendors, you will save valuable time and money. Time and money that can be used to make your practice even more successful.

Author Bios
Lynne Fales is an orthodontic practice-management consultant. In 1998, she partnered with Jerry Fox, an accomplished programmer, to form FoxFales, Inc., Office Inventory Ordering, which now has more than 600 users. The company has recently announced a cloud version that allows users to compare supply prices with prices paid by other offices. She has a financial interest in products mentioned here. Lynne can be reached at lynne@foxfales.com or 941-480-9440.

Kira Martell is a practice-management consultant specializing in project and inventory management. She earned her Master's in Business Administration degree at the University of Queensland. Kira can be reached at kira@foxfales.com.
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September 2025
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