Message Boards
Today's Active Topics Today's Active Cases Browse Forum Categories My Recent Activity My Messages Private Groups My Marked Threads My Subscriptions
Today's Active Images Today's Active Polls Most Active Topics Global Townie Map Advanced Message Board Search Message Board Terms of Use

A Common Sense Approach to Six Percent by John O’Brien

View Comments (2)


Various models have been depicted over the years to show that your clinical supplies spend should equate to approximately six percent of your total revenue for optimum efficiency. I have reviewed many of these studies, and have witnessed very efficient practices running at the six percent target. This metric is a good bar to measure your purchasing efficiency, and most importantly, raise the red flag if your variance is too far above or below this six percent metric. A large variance is a sure sign that you have a process breakdown. With this metric in mind, the following article is intended to give you common sense purchasing tips on how to positively impact your supply spending, thus, keeping more money in your pocket. The purchasing process should be just that, a process. To the extent you understand your activity well enough, establish a monthly ordering process and budget. Take into consideration the following:

  • Order no more than twice a month.
  • Create a routine, working the process at the same time every month.
  • Attempt to keep the number of suppliers from which you purchase to a minimum.

The benefit of this strategy is multifold. It leverages your spending with minimal sales representatives/companies. This will allow you to negotiate for better pricing from a position of strength. Additionally, it reduces the administrative process (and associated expenses) as well as time spent meeting with multiple reps. Limiting the number of purchase orders to track and invoices to pay can make your office much more efficient.

Don't waste time "over shopping." There's nothing wrong with shopping for the best product at the best price. Indeed, it's absolutely necessary for controlling expenses. But shopping too often can waste more in productivity than you might hope to save on products. Once you have a purchasing process in place, don't continue to shop every day/week. Stick to your plan, purchasing your supplies from your known suppliers. I suggest you thoroughly "shop" all of your supplies every six months. Yes, you may miss a buying opportunity here or there, but you will save in the long run on productivity. Your time is best spent with a patient or a potential patient. Consider that every new patient will bring revenue in the thousands. Shopping for supply savings may save dollars, or even only cents. Using your limited time wisely will save you more than you think!

View your sales representatives as assets to your business. A sales representative can be very helpful in reaching and maintaining your supply spending goal. I strongly recommend allowing the rep to become part of the extended staff. A good representative understands that your business can become a long-term revenue stream and that their success relies on making you competitive. Also, sales reps can provide a good source of no-cost continuing education credits for you and your team.

There are repercussions of "free." It is fairly obvious, but worth noting, that a sales representative's job is to sell. The vast majority of representatives get paid and receive bonuses based on how much they sell. To assist them with selling, companies develop marketing gimmicks to entice you to buy. Is this a bad thing for you? Not necessarily, but it definitely can be. For starters, nothing is free. So when you hear "buy two, get one free," this should raise a caution flag. Calculate the per-unit price and compare with competitors. Is it still a good deal? Do I really need three of these? Or will the product sit on my shelf while my money is no longer in my account? If the special offer is a product with regular monthly activity, it may make sense to purchase. But avoid those specials on products rarely used. They just become expensive dust collectors. Good sales representatives will only bring to your attention specials they know will benefit you.

Go generic on low-tech and commodity items. Supplement with Internet and/or small suppliers where and when pricing warrants, especially on consumables/disposables. The reality is, many of these companies have less overhead and therefore can charge less for a very similar quality product. If you find a product and price that appears attractive, call and ask the company for a sample. Most will be very willing to cede to your requests. Be sure to factor the cost of shipping into the product price, and don't be afraid to negotiate shipping charges. The more of your consumables you can move to one smaller player, the more willing they will be to negotiate a discount and/or eliminate shipping charges.

Re-think twin brackets. The disparity among twin brackets today is almost nonexistent. Many in the industry won't say it, but twin brackets have become a commodity. It is a buyers' market for twins. Shop and negotiate for price. The situation is not the same for ligating and aesthetic brackets and wires. Overall quality is improving, but shop diligently on performance while taking price into consideration.

Just ask for a lower price. The easiest way to decrease your costs is to ask. Yes, just ask your sales representative for a decreased price. Inform them that you continue to see lower pricing on similar products. Ask them to match or improve upon it. Chances are they won't want to lose your business. Also, tell them you no longer want to pay shipping costs. There will be push back. Try negotiating a better rate or a minimum order amount for which no shipping will be charged. Start at $100 and be willing to accept a $150 minimum order amount.

Collect credit card points. Many doctors are paying for their supplies via credit card in order to accumulate rewards points. If you are able to pay off the card in full each month, it's a good idea. Please ensure you fully understand the terms of the card to include interest rates, late fees and how/when the rewards can be used. If the credit card isn't an option, negotiate with vendors for 30-day terms.

Inquire about buying groups. Many people ask if it makes sense to join a buying group. Depending on your size and spending, this might be a good route to take. A buying group charges an annual membership fee. Once a member, you have access to reduced pricing and privileges from many suppliers. Privileges may not be limited to the orthodontic industry, but may include insurance, travel and other aspects of your business. Do the quick math on the cost of participation versus the potential savings. Also, inquire as to the participating suppliers to ensure you are willing to work with these companies. Overall, these can be a good opportunity for your practice.

Be wary of reward programs. Reward programs are somewhat different than buying groups. These programs provide you "points" for purchases made that can be redeemed at a later time for products. From a supplier perspective, the concept is meant to create loyalty. You will continue to buy from them, sometimes regardless of price, to get your points. In addition to loyalty, the suppliers count on a large percentage of the points never being redeemed. You may have great intentions, but the redemption rates favor the supplier. I only recommend these programs if you have a staff member who will evaluate and manage the program closely.

Save on capital equipment. Although equipment is an asset purchase and does not affect your clinical supplies target of six percent of revenue, there are still potential cost savings you need to consider. The best time to purchase large equipment is around one of the major orthodontic/dental conferences. You will find the largest price discounts at this time. Even if you don't go to the conference, you can ask your representative for the conference discount. It is also a great time to negotiate price for the former model. Often, the product changes are minimal and vendors are eager to move inventory. If your equipment needs are not urgent, wait until the show.

If you don't already know your clinical supplies expense as a percent of revenue, I encourage you to do the math. Knowing this metric and using some of the techniques outlined can help you improve your practice profitability. Knowledge is power - in this case, negotiating, buying and saving power!

Author's Bio
John O'Brien, director of procurement, joined the OrthoSynetics team in 2012, providing leadership to the procurement team in day-to-day operations and in implementation of strategic procurement goals. Previously, John was the co-owner of retail and wholesale distribution companies. These companies provided science and classroom supplies to K-12 schools throughout the USA. Prior to the role of business owner, John had a progressive 20+ year career at Xerox Corporation in supply chain management. John has spent the vast majority of his professional career managing procurement functions. He has served on various professional and volunteer boards. In addition to numerous supply chain organizations, John was a volunteer fireman/medic within his local community. He received his degree in business administration from Rochester Institute of Technology. John is originally from Rochester, New York. He currently resides in New Orleans with his wife and two children.
Orthotown Magazine
October 2025
Orthotown Magazine October 2025 Read Current Issue Read Archived Issues
Sponsors
Townie® Poll
When did you last increase your fees?
  
Site Menu
Message Boards Magazine Continuing Education Podcasts Blogs Classifieds News Events Townie® Poll Ebooks Townie Choice Awards
Company Info
Contact Us Advertise With Us Howard Farran DDS, MBA Policies and Agreements
Site Help
Sally Gross, Member Services Specialist
Phone: +1-480-445-9710
Email: sally@farranmedia.com
©2025 Orthotown, a division of Farran Media • All Rights Reserved
9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 • Phone:+1-480-598-0001 • Fax:+1-480-598-3450