INVENTORY CONTROL

TOP INVENTORY CONTROL SUMMARY

 
Inventory is a major part of most businesses, including dental practices. Dentists depend daily on supplies and materials to treat patients. Overhead rises when practices have several negative inventory factors. These include oversupply, misallocation, excessive purchase of new products and materials and not establishing ordering targets.

Oversupply of inventory. Most practices tend to warehouse supplies, boosting inventory levels unnecessarily. Regardless of the reason, an oversupply of inventory depletes cash flow and uses up valuable storage space. Inevitably, some inventory will not be used because doctors change their minds concerning which materials are best suited for specific circumstances. Consequently, old inventory is either stored indefinitely or thrown away.

How can this situation be avoided? By developing a just-in-time inventory control system. In manufacturing, the term "just-in-time" refers to having a supply of inventory that covers a limited period. In the case of Toyota, the automobile manufacturer, just-in-time inventory refers to approximately four hours. My suggestion for dental practices is that the just-in-time inventory control system be established at 10 days. Nearly all supplies or materials can be shipped to the practice in less than 10 days, and a 10-day inventory of any supply or material is more than sufficient. Ultimately, the goal is not to have an oversupply of inventory, but to purchase what you need.

Inventory misallocation. How much is too much? How much is not enough? This is the dilemma of inventory allocation. Inventory misallocation occurs in practices that do not have a strong inventory system with targeted purchasing numbers. For example, a practice may have the proper number of patient napkins but an unnecessary six-month supply of impression material. Unfortunately, this allocation can result in inventory that exceeds the product’s shelf life and must be thrown away.

Excessive purchase of new products and materials. New dental products and materials arrive on a regular basis. Many dentists are highly motivated to try new supplies or materials, while others believe that it is essential to maintain quality by using established supplies or materials. Remember, buying new products can be very costly because old supplies and materials are often thrown away. To make matters worse, the dentist may find out after having purchased a large quantity that newer is not necessarily better.

I suggest purchasing a limited amount of any new supply, product or material during a trial period of 90 days. After three months, most practices have a sense as to the effectiveness of that supply, product or material and then can make proper ordering decisions. During a 90-day trial period, practices can determine how frequently they will use the inventory, allowing proper ordering protocols to be established.

Not establishing ordering targets. Practices should design ordering targets for each item purchased by the office. This ordering system allows a staff member to order supplies on a regular basis and understand the exact amount to order. Without such a system, it becomes too easy to run out of key supplies or, conversely, to have too many on hand. I strongly recommend this system because the task is easy for the doctor to delegate to a team member. If for some reason the amount ordered is to exceed the targeted amount, an approval signature should be required from the doctor to complete the transaction. This keeps the doctor in touch with the increasing use of supplies or materials in the practice.

	SUMMARY

TOP INVENTORY CONTROL SUMMARY

 
By establishing clear inventory ordering targets and following the guidelines outlined in this column, the staff member handling the process will understand the high and low levels of inventory control and be able to maintain an accurate system. Inventory control represents approximately 6 to 8 percent of practice purchasing. The main goal of the advice in this column is not to reduce the cost, unless there is waste involved, but rather to establish a process that allows the practice to purchase supplies on a regular basis, avoid mistakes and maintain a steady expense level.

View larger version (148K): [in this window] [in a new window]   Dr. Levin is chief executive officer, Levin Group Inc., 10 New Plant Court, Owings Mills, Md. 21117, e-mail "rlevin{at}levingroup.com". Address reprint requests to Dr. Levin.