8 habits of highly profitable DSOs

In a session sponsored by Supply Clinic at the Becker's Dental + DSO virtual event, "The Driving Forces Transforming the Dental + DSO Industry," held in January, Scott Drucker, DMD, president and cofounder of Supply Clinic, discussed eight best practices for DSOs to optimize their procurement function. 

Below is a recap of those eight practices:

  1. Manage the request for proposal process. The goal of closely supervising the RFP process is to decrease a DSO's supply spend. "When you put your business out to bid, you are going to see competition and pricing come down," Dr. Drucker said. He gave the hypothetical example of a 10-practice DSO that has six different accounts with the same implant vendor, with several of those accounts having a different price for the same product. "Going through the RFP process forces organization and a cleaning up of formulary," as well as consolidating vendor accounts, streamlining and lowering costs and periodically renegotiating prices, he said.
  1. Own the relationship. This comes down to DSOs not allowing themselves to be "held hostage" by a distributor. Organizations may be reluctant to scale down the volume of business due to either a longstanding relationship with a vendor or a perception that equipment service and repair provided by that vendor may suffer. One way to hedge against such risks is to have relationships with both vendors and manufacturers, Dr. Drucker said. 
  1. Cover your bases through redundancy. As healthcare providers have experienced firsthand during the COVID-19 pandemic, stockouts and backorders can happen. It is important for dental practices to protect themselves against such risks by having backup vendor options, even if they prefer to order most of their supplies from a particular seller. "It can make or break your ability to continue operations," Dr. Drucker said.
  1. Institutionalize good habits through systems change. It is crucial to implement basic guidelines regarding supply ordering frequency and monitoring inventory, as well as setting a monthly budget. This helps procurement staff keep closets stocked and avoid having to pay overnight fees for last-minute orders. 
  1. Do change management right. It is important to have transparency of goals and a team approach to accomplishing those goals. Tracking compliance is then essential for monitoring desired behavior change in support of those goals.
  1. Measure what matters. You can't improve what you don't measure, so it is key for DSOs to get a handle on procurement-related metrics that matter. The idea is to give everyone access to and visibility of what is being measured and to nurture company-wide interest in those metrics.
  1. Track prices. Prices change over time, often even within the confines of a negotiated contract, so it is useful to get in the habit of matching invoices with the fee schedules that have been agreed to. "People are often surprised that pricing is wrong at the point of invoice," Dr. Drucker said.
  1. Implement procurement software. Procurement software such as that provided by Supply Clinic can be instrumental in saving DSOs time and money by consolidating the experience of purchasing supplies, enabling data visibility, and tracking to improve understanding of spend patterns and measurement of formulary compliance. "It takes a ton of the pain points away from the process of procurement," Dr. Drucker said.

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