Table of Contents

Continuing Education
Cover Story

Inside Dental Technology

October 2012, Volume 3, Issue 9
Published by AEGIS Communications

Outsourcing Opportunities

Find opportunities for growth and hedging market trends.

By Kyle Swan, CDT

Over the past decade, most laboratory owners have been faced with the business decision on whether or not to send a segment of their product line to an outsource provider. From purchasing a milled abutment from an implant company or a printed metal coping on which to layer porcelain to purchasing and repackaging an entire crown, the advent of outsource production centers has opened the door of opportunity for laboratory business owners. Today, for many laboratory owners, the decision is not whether to outsource, but the degree to which they should outsource.

The product choices available to the dental laboratory community have exploded as new materials and the technologies used to mill or print them have been introduced to the marketplace. In turn, these new technological developments have spurred the proliferation of new businesses committed to supplying the industry with products that would otherwise require the risk of a weighty financial investment in machinery to produce. Numerous suppliers now cater to the growing needs of the dental laboratory. They help laboratory owners hedge market trends by offering the newest materials that may have captured the fleeting interest of their dentist clients or allowing laboratory owners to “test drive” certain products before making the decision to purchase the entire system. Outsourcing offers laboratories the opportunity to keep up with new technologies and even change their entire business model. As with anything, however, choosing how to make outsourcing work for your business is critical.

There is no doubt that outsourcing is a game changer for the dental technology industry. It provides laboratory owners with options by allowing them to offer additional products to their clients without the financial investment or risk of purchasing expensive equipment that could conceivably be outdated or obsolete before it is even paid off. The ability of laboratory owners to tap into outsource providers for restoration products in part or in whole has also helped solve the serious labor shortage faced by the industry. With fewer and fewer students choosing dental technology as a career and the median age of the average technician near retirement, outsourcing has filled or even replaced the need for skilled technicians in select departments within the laboratory business. At the risk of using a hackneyed phrase, we are truly in the midst of a paradigm shift.

Decisions, Decisions

Buy it and do it yourself, or let someone else do it for you. More and more laboratories have chosen the latter, which has created a booming outsource marketplace. Milling centers have popped up across the entire breadth of the country (Figure 1).

One of the most immediate changes to our industry was the reduced barrier to entry for a ceramist desiring to open a business. In the past, a ceramist would have to find a partner equally as skilled in metal framework fabrication in order to start a new business. The advent of the outsourced all-ceramic framework eliminated the need for a partner. For the first time, a crown-and-bridge laboratory could be created without the purchase of a casting machine or dependence on an entire metal department.

The outsourcing concept began to permeate the dental industry. Dentists became accustomed to the idea that part of what they were purchasing from their dental laboratory partner was actually fabricated somewhere else. They quickly understood that they could get a wider range of restorative choices through the outsource business model, yet still work with their laboratory of choice. Possibilities and new opportunities arose. Soon, laboratories looked to their outsourcing partners for additional product options. Some of the larger and smaller outsourcing companies began to take advantage of the burgeoning market.

Today, adding new product lines to your laboratory’s menu of services no longer means hiring new employees, purchasing costly equipment, or suffering the growing pains of training. New technologies are moving faster than most laboratory owners can keep up with. Milled zirconia, lithium disilicate, and composite-infused nano-porcelain crowns are all examples of new products on the market, and they are available through milling center partners. Many laboratory owners today are caught up in the quandary of wanting to stay on top of new technology and provide their clientele with the “latest and greatest” new material or restorative technique but do not want to make another large capital expenditure.

Today laboratories can test the water first by outsourcing to explore whether the demand for this new material or process is genuine and sustainable. It is a great way to hedge against the fickleness of market trends.

Today, there are numerous ways to get a crown produced. First, you could purchase a CAD/CAM system from one of the “big box” or major manufacturers and scan, design, and mill all in-house. Or, you could produce a model from the impression and send that model to an outsource facility, letting them handle the entire production process. But if design control is important, then purchasing an open-architecture scanner to send digital design files to your outsource partner would be a logical choice. There are companies that allow the scanning and design work to be done in-house with no restrictions on where your .stl file is sent for milling production. There are outsourcing laboratories that accept digital design files transmitted over the Internet; and this is often preferred by the outsource center, as they do not have to use their man power for the design phase of production.

Choosing an Outsource Partner

Many of the outsourcing laboratories provide support products like metal and zirconia copings, partial frames, and bars. But there are plenty of outsourcing laboratories that will provide everything, including the crown-and-porcelain work. Outsource centers, like regular dental laboratories, can vary widely in terms of the range of products they offer and in the quality of the products they produce. It is important to shop around and find the provider that is right for your business model. Finding the right outsource partner can help you provide the same quality of product your clients expect of your business and also afford you the opportunity to add a new product line without making a long-term capital investment. If you do add a new product line, make sure it fits in with what you currently provide. If it does not, and it does not meet your dentists’ expectations, they will rightfully blame you and not the outsource provider. There are many excellent choices, so choose wisely.

Today, the outsourcing centers provide services as vast as the laboratories they service. They produce implant abutments, milled denture bars, provisionals, copings, crowns of all kinds, model work, and partials—just to name a few (Figure 2). Using an outsource provider could replace a machine, a person, a department, or even the entire staff, depending on your needs and business model.

Offshoring

There are dental laboratories in the United States—some big and some small—with business models predicated on “repackaging” cases. Dentists send the case to a laboratory in the United States, which then sends the case overseas for fabrication. The case comes back to the laboratory in the states, and is then marked up and sent to the dentist. As long as all concerned, including the patient, know what they are getting, then there is nothing wrong with this business model. On the contrary, it serves a certain segment of the marketplace that is price-driven and has become the “go to” option for more business.

Offshoring can be a hot topic with arguments made about free trade versus protectionism. But consider this: If a segment of your clients are demanding the low end of the median price point, then offshoring may allow a more cost-effective avenue to service this segment of dentistry. You will need to try one or more of the offshore providers for a restoration or two. It might be best to find laboratories overseas that are certified by the Dental Appliance Manufacturers Audit System (DAMAS). If the restoration you get back is as good or better than what you are selling, and at a lower cost than you can currently sell for in your market place, then, like it or not, it is something to consider. Low profit margins and high overhead, coupled with a sluggish economy are causing a boom in this type of outsourcing.

Conclusion

Outsourcing ultimately provides opportunity. It is difficult for most dental laboratories to provide every single product on the market, especially in light of the number of new choices introduced each year. And, it is unrealistic for laboratories to invest in every new technology that comes to the market. To borrow from baseball, outsourcing can be the designated hitter. Outsource providers are there for you when you need them. They can replace the employee who quit to open a laboratory down the street. They can be the support staff and marketing team you have always wanted. They can be the answer to that one dentist who insistently wants you to provide him or her with a product no one else is asking for. They can help you ease into new product lines without feeling like you are going to get hit by a bus. They can propel your business into the future by being the missing puzzle piece in today’s complex marketplace.

About the Author

Kyle Swan, CDT, is the vice president of Functional Esthetics, Inc., in Lewisville, Texas.