The “LEAN” and Mean Dental Laboratory Machine
Develop the right strategies for a leaner, more profitable business
Aggressively controlling costs in the dental laboratory is a solid and necessary business strategy. Even though most laboratory owners make efforts in this area, why is it that cost control never seems to deliver the desired profitability? The answer is simple. Basically it is because there is only a limited amount of variable cost that can be impacted in a dental laboratory. Since fixed costs by definition are pretty much fixed, it is really hard to “save” your way to prosperity.
All is not lost, however. There are two other places to turn for more profit. One is increasing revenue by using the existing marginally profitable methods. The second, which is more feasible, is producing product more efficiently with existing resources (increasing productivity). Studies have shown that a 5% increase in sales translates into a 5% increase in profits. Yet that same 5%, if gained in productivity, translates into a 30% increase in profits.
A dental laboratory can really help sales and profits by learning and applying the philosophies and tools of LEAN Manufacturing. The term “Lean” is used because a lean business uses less labor to perform tasks. It also uses less manufacturing space, requires less capital investment, reduces material usage, and shrinks the production time between receipt of the case and shipment of the finished case.
LEAN is a philosophical approach to developing flexible, responsive processes capable of providing your dentist customers with what they want, at the quality levels they expect, and delivering the product exactly when they want it. It is a hands-on business improvement approach that provides industry-leading performance in quality, delivery, price, and service to your customers at the lowest possible cost. The LEAN approach involves all employees in the effort to continuously pursue the elimination (and prevention) of waste from every business process. Traditional approaches in the dental laboratory have tended to focus on an individual technician’s ability to produce. By refocusing on the overall system effectiveness versus individual efficiency, LEAN guides your decisions on improvements to achieve long-term sustainable results for the business. Companies that follow a LEAN business strategy invariably reap the benefits of dollarized results that hit the “bottom line,” increased customer satisfaction, increased marketing opportunities, and growth opportunities that are the envy of the competition.
Quite often, we hear comments such as, “Lean won’t work in our lab,” or “That’s fine for a big lab. They have lots of volume.” If those thoughts occurred to you, ask yourself the following questions:
Do you have defects?
Do you have multiple quality inspections?
Do you hunt for orders or lost paperwork?
Do you have excess work-in-process?
Do you have sufficient labor during busy periods?
Do you work overtime?
Has the company grown without changing practices?
If you have answered “yes” to most or all of these questions, then LEAN is an approach to strongly consider. The concepts of LEAN are applicable, regardless of size, product, or geographical location, because LEAN examines each process to identify opportunities for eliminating wasteful activities, commonly referred to as “non-value adding” activities. Managing the resources to work on those processes must then be carefully balanced with the reality of meeting production. The LEAN approach has a bias toward action because it does not look for the perfect solution, but allows for partial solutions. The idea is to get better one step at a time.
A typical LEAN effort begins with an evaluation of the current business climate, culture, and opportunities for improvement. From this, an overall strategy is defined and execution plan is crafted that recognizes the limitations of the smaller business and develops a pace/strategy that will not strain the business resources. The execution of the plan includes LEAN Program design/deployment, training on LEAN tools and philosophy for both the office and your manufacturing areas, Kaizen workshops, and other actions designed to embed a sustainable LEAN effort with your business. The results you can reasonably expect include remake/modify reductions of 50%, lead-time reductions of 30%, and Technician Operating Effectiveness (TOE) increases of 25%, all of which translate into profitability.
Keep up the focus on managing costs, but look to a strategy of cost prevention using LEAN concepts to achieve increased profitability The tools are applicable to any size business, the learning curve is relatively short, and the benefits are
About the Authors
Bob Yenkner and Chuck Yenkner work together to help dental laboratories and dental businesses of all types grow sales and profits. They can be reached at www.growyourdentalbiz.com.