Procurement best practices: Five things growing DSOs need to know

As dental service organizations (DSOs) become more common, DSO leadership teams are taking a closer look at procurement. To enhance efficiency, organizations need standardization and controls, as well as new systems and technology. 

During a May Becker's Dental Review webinar sponsored by Supply Clinic, Scott Drucker, DMD, Co-Founder and President of Supply Clinic, moderated a panel discussion with four experts about procurement best practices for growing DSOs. The panelists were:

  • Robert Hawkins, procurement manager, PepperPointe Partnerships in Lexington, Ky.
  • Margaret McGuckin, co-founder and principal, i3 Ignite
  • John Strong, co-founder and chief consulting officer, Access Strategy Partners Inc.
  • Derek Williams, construction project manager, Rodeo Dental & Orthodontics in Fort Worth, Texas

Five key takeaways were: 

  1. Purchasing controls are needed both internally and externally. While excessive processes aren't desirable, internal purchasing controls are a must. "Without those, things can go wild in very bad ways, very quickly. Recruiting your doctors as partners in expense control makes all the difference," Ms. McGuckin said. External controls are also essential, so DSOs and suppliers are working toward the same goals. 
  1. Good RFPs focus on pricing and mutually beneficial relationships. When developing an RFP, a recommended first step is to identify what percentage of revenue is represented by current purchasing expenditures. Focusing on the most expensive product categories can be a good strategy. "We lowered our expenses as a percentage of revenue by three points, just by concentrating on implants and bone," Ms. McGuckin said. RFPs are about more than pricing, however. "Other important factors in a partnership include things like support for marketing, training and continuing education," Mr. Hawkins said. 
  1. Growing DSOs need an articulated supply chain strategy. A supply chain strategy must outline the information technology the organization will use, how the organization plans to go to market and its anticipated growth. This doesn't have to be a long document — a one-pager is often sufficient. 
  1. The importance of supply chain redundancy can't be overlooked. Given the purchasing challenges during the pandemic, many DSOs are taking a fresh look at product availability. According to Mr. Strong, "We need greater emphasis on reshoring or bringing some supply chains closer to the United States. However, there aren't a lot of domestic manufacturers for less expensive products. It's important for organizations to know where their supplies are coming from." 

Maintaining relationships with multiple suppliers is a best practice. "It's always good to maintain a relationship with a secondary supplier, even if it's minor. If you're in an emergency situation and you approach new distributors for products, they will most likely say no," Mr. Hawkins said. 

  1. The sooner that a DSO can implement a procurement platform, the better. Early adoption means that change management issues are easier to address. In addition, the benefits grow as the organization scales. "The Supply Clinic platform enables you to purchase direct from certain manufacturers, which is where real savings comes from," Mr. Strong said. Tracking and reporting is also valuable. "Supply Clinic does an amazing job of reporting by item and location, and rolling up regions and to the total organization," Ms. McGuckin said.

Leading DSOs recognize that trying new procurement approaches is essential. "DSOs are growing so fast," Mr. Williams said. "It's easier to implement a new system or process with 10 offices, than with 40 or 100. Find a testbed, implement something new, see if it works and then adopt it or move on." 

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