These questions were asked in response to our previous article “The Changing Face of Dental Technology“
As a respected businessman and laboratory owner, Jim Glidewell is often asked many questions about his rise to success and how he's managed to keep his competitive edge. In this issue of Lab Perspectives, Jim answers five questions with answers that are equally honest and informative. Read on, and perhaps you'll find a helpful hint to apply in your own lab.
Question 1: For many years, you were a big advocate of piecework or other production-based incentive systems. Has the growth of CAD/CAM technology changed your philosophy in this area?
Mark Jackson, Vice President and General Manager Precision Ceramics Dental Laboratory
Jim Glidewell: Mark, this answer hurts me but machines don't take breaks, they don't call in sick and they don't rush cases because they are on piecework. They just mindlessly perform their functions exactly the same, time after time. Once a machine has produced enough to payback the acquisition cost, you still have the machine and now it works for "free".
An examination of the hearing-aid manufacturing industry, which in many ways parallels our own, pointed out that CAD/CAM technology has enabled productivity to increase tenfold as consistency and fit are more accurate than ever before. Just six years ago, in 2001, the average hearing-aid manufacturing pieceworker made eight to 10 units a day. Thanks to CAD/CAM, that number has skyrocketed—on average, 120 to 150 units are now fabricated everyday. Not only does this indicate that better parts may come from machines, but it emphasizes that labor costs will decrease as manual work is eliminated. What's more, it also diminishes any threats or worries about outsourcing.
At Glidewell Laboratories, our professional position has been to do what is right for the dental patient. If CAD/CAM machines can make better products for a more cost-effective price, we must support that which is best for the patient—even if it changes our industry. The new mini-implants are also going to change the way we think about what we produce. Mini-implants are filling spaces that would traditionally result in a bridge being made. So now think of single-units instead of the fixed bridges that we have been making for over one hundred years. Bridges were one of the reasons I thought we would protect our technical jobs from these new machines; once again, I am wrong.
We are on the threshold of a new era in dental technology. What we are doing today will not be considered reasonable in 15 years. Some labs will be 80 percent digital in the next five years and 100 percent digital in 10 years.
Piecework systems have always had their drawbacks. The pieceworker is in a battle with the buyer (lab owner) to get as many pieces out in as little time as possible so that their company (their bench) makes as much as possible. It's a survival strategy for the lab owner but not always in the best interests of the dental patient.
The real victims of the CAD/CAM revolution are going to be the high-end boutique laboratories. These new machines can make products that have a 20um fit, contacts, occlusion and the colors will be totally predictable. They are also going to be sub $100 products.
If labs have not yet begun to think about incorporating CAD/CAM into their future, the time is now.
Q2: With the growth of CAD/CAM and other emerging technologies, we are seeing dramatic increases in material costs. For many years it was a widely accepted notion that a dental lab should run at 12 to 15 percent material costs and 25 to 30 percent labor. How has this new dynamic changed the way you run your business and what do you suggest might be an achievable budget for these two categories, which generally are a labs biggest expense?
JG: There is a belief that business is akin to warfare. Your job is to get more than your fair share of business. The Dental Laboratory Vendors, or DLV's, are launching a battle to get a larger part of the invoice you send to your dentist customer. We used to calculate that we used about $1 of material in a ceramic fused-to-metal crown. The DLV's have steadily expanded that dollar by advertising to your customers that they need a new material—like zirconia, composite and machine-fabricated glasses—which can be supplied to them by you. The catch: between $12 to $40 or more per crown in material costs. In many cases, these new costs are only material costs. They don't decrease the amount of labor YOU must put into the finished crown.
In this battle for Dentist Dollars, the DLV's are winning. And we're letting them win because many of us do not have marketing or sales operations—we allow the DLV's to become our marketing partners. We make what they sell for us.
Because the industry is using more CAD/CAM systems, traditional costs of 15 percent materials and 40 percent labor is going to change. In fact, I think that the ratios will flip; we're going to have 15 percent labor costs and 40 percent material costs. Less labor and more automation are going to produce products that fit better and cost less at the retail level (what we charge the dentist).
The shortage of trained technicians and the loss of handcrafted jobs—which are now being sent to low-cost labor countries like China—comes at a time when CAD/CAM systems are becoming available, which don't require low cost labor. In the end, CAD/CAM may be the knight in shining armor who saves the dental industry of the U.S.
Today I examined a CEREC-manufactured part made with Ivoclar Vivadent Lithium Disilicate "Blue Block" material—and I think they've effectively won the battle for Dentist Dollars. The parts were as good as it gets. The total cost for the material, tools and dongle charge is approximately $30. The labor is no more than about $8. How about that ratio? I don't begin to guess what the selling price of this $38 part is going to be. However, since labor is no longer a big part of the charge and predictable results are better, I think that you will see labs selling these parts for under $80. Anything with a gross margin of 50 percent usually can be successful.
In the scenario that I have described, the material costs are 37.5 percent and the direct labor is 10 percent. I hope this helps you out with your budget estimations.
Q3: "How do you maintain product consistency in such a large laboratory?"
Matt Winstead, Executive Vice President, Oral Arts Dental Laboratories
JG: Matt, the answer is this: we try to standardize our crown morphology through the use of pressable ceramics and silicone occlusal molds. We have also produced a dental technology DVD, "Common Sense Laboratory Technology for Dental Technicians," which attempts to teach a repeatable morphology. If you'd like a copy of the DVD, contact Razi Setoodegan at 949-440-3848.
There are still subtle differences that good technicians can see but that dentist customers cannot discern. Remember, dentists do not have the same familiarity with morphology that we do as technicians. I like to think that technicians see crowns in microns and dentists observe them in millimeters. But then again, that's because our lives revolve around morphology.
The control of quality with 10 people in a lab is the same as if you have 1,000 in a lab. But a common perception is that a lot of the technicians are not as good as the rest, and dentists always seem to want your "best technician" to work on his cases. Does that assume the others are not up to par? It's not quite fair, is it?
The truth is we try our best but never really attain a perfect quality product, that is the same from the first crown to the last crown. However, the more we become involved with CAD/CAM products, the better control you will have on quality. Machines don't care how they feel in the morning; they just mindlessly perform their tasks.
Q4: "With so much emphasis being put on CAD/CAM—and its ability to effectively complete procedures with limited human interaction while reducing labor costs—is it still smart business to invest in pressable type technology, where more technicians and man-hours are oftentimes required?"
Henry Husemann, Prosthodontics Dept. and Instructional Research Associate University of Iowa College of Dentistry
JG: CAD/CAM will be a marvel for the near future, but some prosthesis' will still require custom modifications for many years to come. I think large bridges will demand hand-sculpting and pressable technology. Handmade single-units will disappear over the next five to eight years, but the software developments that will be a usable tool for the CAD/CAM design of complex bridges is still in the early blueprint stage. It is also dependent on material innovation. We need a very strong monolithic bridge material that has strength of about 650 MPa.
Q5: "Our personal contact sales are working great, but the effectiveness of our brochures has declined steadily for the last several months. Could you please give us some guidelines and tips for more effective mailers?"
Dena & Dennis Lanier, Co-Owners, The Lab 2000, Inc
JG: Dena and Dennis—try sending your direct mail solicitations to zip codes that have fewer than 10 dentists in them. You will receive a little higher response rate. Also, do not quit mailing! You only need to have your ad arrive at a dentist's office on the day he or she is disappointed by his or her current laboratory. And voila! The answer to his or her frustration just arrived in the mail that day!
Additionally, there are a few golden rules about advertising that you must adhere to. NO more than nine words in the opening statement. Include clear photos of the product and/or service in the optical top left center of the first page. Include a discount coupon worthy of consideration, such as $40 off on the first case. I would also suggest that you advertise an offer that promotes a change in the customers' buying habits. You should try to get at least six cases out of them, not just one. Offer a program that provides additional savings on the next six cases. Heck, by the time he or she has used your lab for six cases, you are old friends!
