2012: The year ahead

March 21, 2012
Noah Levine
Issue 1

No one really knows what’s coming just around the corner tomorrow-let alone throughout the next 12 months-but proceeding without even a general concept of what might be on the way can be just as risky.

No one really knows what’s coming just around the corner tomorrow-let alone throughout the next 12 months-but proceeding without even a general concept of what might be on the way can be just as risky.

Thinking about the future can be a useful exercise for a dental lab, or any other business. It can help when setting goals, planning for contingencies or even just enjoying a daydream about a pie in the sky, best case scenario. It starts with taking stock of the current situation, but from there it’s all about examining possibilities and deciding which course seems the most likely to be the correct path.

To help along that journey, we’ve talked to industry analysts, manufacturers, opinion leaders and lab technicians who shared what they think might be the big trends in technology, business plans and the overall dental lab industry throughout 2012. Read on to discover their thoughts on which categories are poised to grow, what’s on the CAD/CAM horizon, business models on the rise and the biggest challenges facing individual labs and the industry as a whole.

The year in trends

Global growth predictions

It should come as no surprise that industry analysis from business intelligence firm GlobalData predicts implants to be one of the largest categories for growth in the coming year. Dental Equipment Analyst Vishwajit Gaikwad said expanded marketing of implants to dental consumers will be driving this growth. He said the $900 million U.S. implant market is likely to grow by approximately 4% over the next three years.

But while talking with lab owners and technicians yields anecdotal evidence of growth in the removables arena, Gaikwad said GlobalData’s research and analysis shows greater potential for growth in the crown and bridge market which will grow an expected 6% in the next three years spurred by the continued spread of cost-efficient zirconia materials and expanded CAD/CAM fabrication.

The technology powering those efficiencies is also an area GlobalData believes will experience growth in the near term. Sales of CAD/CAM technologies are expected to grow by 7% during the coming three years, with adoption by mid- to large-sized labs powering this growth because they are in the best position to purchase new technologies, Gaikwad said.

“Affordability of CAD/CAM systems will be the chief criterion for their adoption,” he added.

If expansion of CAD/CAM technologies continues at its expected rate of growth, Gaikwad said it will be powering the creation of a majority of crown and bridge restorations by 2015. That milestone would be quite remarkable as Gaikwad cited data published by Lab Management Today showing just 4% of crowns and bridges were fabricated via CAD/CAM in 2003 and that number had risen to 18% in 2010.

But while the predicted growth in these categories for the U.S. is decent, Gaikwad said GlobalData’s research expects the rate of growth globally to be even more significant with double-digit growth percentages expected across the board, highlighted by an expected 9.6% growth in the European implant market and 15.5% in the Asia-Pacific implant market over the next three years.

Tapping into the expected growth

While those macro-predictions can provide a general overview of the direction the dental lab industry is headed, for most labs it still comes down to providing high quality restorations at a fair price. The growth of CAD/CAM and the lower costs it offers to larger scale operations can make things more difficult for smaller operators to stay competitive.

However, that doesn’t mean small labs don’t have a way to stay up to date and capture some of the growth whether via outsourcing production to milling or printing partners or finding cost effective ways to add CAD/CAM in house. Dr. Mark Murphy, head of clinical education at MicroDental/DTI, said finding a production partner could be the move that keeps small labs afloat in 2012.

“Smart small to medium labs will have to adjust to this by saying ‘I can’t afford to digitize my processes so I’m going to have outsource more and more,’ ” he said. “Those who don’t adapt will be some of the numbers in 2012 who end up closing up shop.”

Outsourcing has established its place in the industry, and BEGO USA VP/General Manager William Oremus said he expects more and more labs will be using services such as his company’s BEGO Production Center-which offers the cost effective fabrication of non-precious metal copings via Selective Laser Technology-to eliminate the most time consuming and technique sensitive workflow steps.

While continued growth of outsourcing is a trend Oremus expects to see in 2012, he doesn’t see the availability of CAD/CAM copings to eliminate casting any time soon and he hopes labs making use of these services find ways to turn efficiencies into growth rather than shrinking the business to stay competitive.

“Hopefully no jobs will be lost, but it will just be a transfer of responsibilities where these people will go into new departments in the laboratory,” he said.

The other area where labs of all sizes are tapping into the efficiencies CAD/CAM offers are monolithic restorations. The influx of monolithic zirconia materials that started in late 2010 will continue in 2012 with the launch of materials from DENTSPLY Prosthetics and 3M ESPE among other companies. But while monolithic crowns can be produced rapidly via digital technologies, Steven Pigliacelli, CDT, VP at Marotta Dental Studio in Farmingdale, N.Y., hopes those materials and his preferred monolithic option, Ivoclar Vivadent’s e.max, are not used to cut corners when it comes to quality and esthetics.

“With the right technicians doing it, you can make a wonderful product,” he said. “It’s a great concept, but I don’t see why the answer is always let’s make it cheaper and make it quicker.”

Information age

But regardless of the route a lab takes to make workflows more efficient, it’s important for labs to understand what sets them apart and make sure those differences are highlighted to their customers. Digital technologies and outsourced production even the playing field in many ways, so labs need to set themselves up as an informational resource to their practices, Oremus said. In 2012 and beyond, the labs with the ability to leverage their knowledge and expertise as clinical resources are going to thrive.

“That is going to be so important in the future, especially in removables. The lack of education on both sides of the fence in removables is really there today, and the technician that can be the value add and take the doctor through the case will have an edge in securing that doctor’s business,” he said.

Unfortunately Pigliacelli believes one of the biggest trends for 2012 will be the continued loss of benchtop knowledge throughout the industry. With an aging technician population, shrinking educational opportunities and expanding automation increasing pressure from competition the core knowledge required to create high quality dental restorations is becoming an ever rarer commodity.

Pigliacelli said he thinks the dental lab industry is heading for a disaster where dentists who have never been taught about lab processes are working with technicians who are trained only on digital design and production. That might work fine for simple cases, but it’s the complex cases that can really change patients’ lives but only when these restorations are designed and fabricated properly, and that requires more educational opportunities for technicians.

This is something Pigliacelli is working on locally with the hopes of convincing Stoney Brook University to open a dental technology school. Others in the industry such as the Foundation for Dental Laboratory Technology also plan to use 2012 to raise awareness of the gaps in education and work to expand upon the limited training opportunities for new technicians. However, this is one challenge that will still be facing the industry when 2013 arrives.

“My goal is to train a new generation, but we’re just starting and they’re not going to be ready for another 4 to 6 years,” Pigliacelli said. “It’s going to get worse before it gets better.”

The year in technology

CAD/CAM spread continues

Technology as a trend is certainly nothing new for the dental lab industry. Every year there are new materials, new techniques and new ways of creating the prostheses and other products produced by dental labs. Dr. Murphy said this may not be new, but 2012 will certainly be marked by the continued shift of lab processes to digital technologies.

For most labs this will take the form of scanning impressions or models and using CAD software to digitally design restorations. There are numerous scanners already available and major players such as Dental Wings and Delcam recently launched their latest models. Some labs will adopt mills and with the influx of tabletop milling units from companies such as Wieland Dental Systems, CadBlu and soon Jensen Dental there are more milling options than ever before.

However, Dr. Murphy said labs that are not large enough to invest in industrial scale production technologies might be better served by outsourcing production to a business with the financial capability to pay for those technologies. This is because while most labs evaluate a technology purchase based on the potential revenue to be made from that investment, Dr. Murphy said they need to base those calculations on net profit from the investment or they might not be capable of taking in enough new business to pay for the new system.

Another caution for labs of any size making technology investments is the pace of development in both production technologies and materials. A mill might be efficient today, but the reductive nature of milled restorations means there is a lot of material wasted during the cutting of one crown or coping.

Additive technologies on the rise

It is for this reason that Oremus said additive manufacturing processes such as SLM and other 3D printing concepts will be areas of growth. Additive processes require less material for production and thus have the potential to lower production costs. In 2012 BEGO hopes to be ready to offer SLM production in semi-precious metal to expand the cases for which framework production can be outsourced to the company’s facility and save even more production time for labs using the service.

“Those hours saved during the day allows them to sit at the ceramist bench where the artistry is really made,” Oremus said. “I think you’ll see more of the technology going in that direction. I think we’re already seeing it in the fabrication of models.”

Adopting new technology really needs to be about adding efficiencies without sacrificing quality. For this reason, Oremus sees 2012 as another year where there will be fewer cast frameworks and fewer hand-poured refractory models as SLM and milled framework and 3D printed models grow more common. Still lab technicians will be needed to add the customized esthetic touches to these restorations, and a close relationship with the doctor will remain key to delivering on those expectations.

“For any type of anterior work I think it’s always going to take the artistry of a technician to make it a win win for everyone and where the patient is going to be able to smile and be happy with it,” he said.

Still just a tool

Pigliacelli agrees that digital technologies will continue to grow within the industry and he loves the potential they bring in terms of enhancing communication between dentists and technicians, and producing high quality restorations more efficiently. However, he worries that any gains in speed could be offset by a reduction in quality.

As the technology grows more common, Pigliacelli hopes that proper technician education and training will not be lost. It might be easier for someone off the streets to learn on a computer than on a bench, but no scanner, design program or mill is perfect and the industry will only move forward with this technology if it is being used by people who understand the principles behind the restorations being produced.

“I’m a firm believer in having trained technicians use it rather than people off the street,” he said. “You have to know what you’re doing to get the machines to do what you want them to do.”

Chairside digitization

While dental labs are seeing the pace of digitization increase, chairside CAD/CAM systems and digital impression technologies remain a niche and despite some innovative efforts from the lab industry, that is not going to change in 2012, Dr. Murphy said.

Starting with a digital impression can certainly increase the efficiency of a lab set up to work in a digital environment, but dentists are slow to embrace new ways of doing things and chairside technologies remain significant investments for dental practices. In late 2011 Dental Services Group (DSG) launched a rebate program in partnership with Sirona to defray the costs of adding CEREC AC digital impression systems to practices sending cases to DSG labs.

For an operation the size of DSG this makes sense, Dr. Murphy said, noting that DTI is likely to begin offering similar rebates and purchase support to help more practices add digital impression capabilities. This allows large scale lab operations to cut the costs associated with models and lower overhead in other areas. The scale of the lab operations allow for these efficiencies to work in a way that makes less sense for a smaller lab with less to be gained from creating the same efficiencies.

However, even if DSG’s program takes off and similar programs are put in place by DTI and other lab groups such as National Dentex, they are still unlikely to push digital impressioning into the mainstream. Dr. Murphy noted that even if all three lab chains are able to place 500 digital impression systems in practices before 2012 is out, that would still be just 1,500 systems total, not enough to outfit 1% of U.S. dentists.

“Digital impressions will tip when the scanners hit the market at some price that makes it cost effective to buy the scanner and not buy the impression material.”

The year in business

Economic realities

The sluggish economy has been the story underlying the dental lab industry for the past four or five years as the U.S. slipped into recession and has struggled to recover in a meaningful way. A slower business environment has hit the industry in a number of ways, most notably by shrinking its size.

Dr. Murphy said he believes 2012 will continue this trend with fewer labs open by the time the year ends. Small labs are most vulnerable to these outside economic pressures. They have smaller margin for error or miscalculations, and Dr. Murphy said this is compounded when small labs are run by people who are technicians first and business owners second.

“If the economy was robust, we would still be consolidating, but with the economy not being very robust, it accelerates the mistakes many of us make in small business and magnifies the inefficiencies in the business side of small to medium sized laboratories,” he said.

Larger labs are better equipped to ride out the economic situation, but the decline in the number of dental labs is not just due to the slow economy. The lab industry was already beginning to contract before the recession due to the efficiencies large labs can realize via technology and outside investment capital takes an interest in profiting off this situation.

Still the consolidation and economic forces have yet to create a mega-lab capable of controlling more than a tiny fraction of the overall market for dental lab work in the U.S. This year is the beginning of that changing, Dr. Murphy said, and he believes lab groups such as DTI and DSG will continue to grow via acquisitions while other groups may be created and the size of the businesses operating in the industry may grow.

Place for smaller labs

But this consolidation is not going to happen overnight or even during the course of one year, and even small labs will be able to thrive if they are run as smart businesses. Pigliacelli said Marotta Dental Studio has felt the impact of the economy but continues to be successful because they stick to what they do best -delivering quality restorations to accounts that have come to trust their lab as a partner.

“I feel a lot has to do with integrity and quality of work. We just try to do a good product,” he said. “We have a great relationship with our accounts. We give a consistent product to all of our doctors and we give consistent service to all of our doctors, and that’s very important to me.”

Having solid relationships as the foundation of the business is a part of weathering a difficult economic climate, but knowing the lab’s identity and sticking to it is just as critical, Pigliacelli said. Rather than cutting prices to compete with the biggest labs that can deliver a crown for less, Marotta focuses on delivering a quality product clients can rely on and the type of personal service and collaboration production focused labs can’t always provide. Just as there are different types of stores in a mall, there is room for different types of dental labs, and Pigliacelli said a lab that tries to straddle the line between competing on price or competing on service and quality will likely succeed at neither.

“I think you have to make a choice. You can’t be both,” he said.

A changing industry

Regardless of how a lab wants to position itself with its clients, it will need to operate efficiently from a business perspective to be successful in the coming year, Dr. Murphy said. Labs need to monitor expenses and income and find places where processes can be optimized from both a cost and a quality perspective.

Small labs will need to be lean in their operations and watch their overhead carefully to stay competitive. Still there are a variety of viable business models out there for smaller lab operations, Dr. Murphy said. There will still be room for boutique labs providing high end restorations, there will also be small operations that outsource most of the actual production and simply maintain close ties with their clients and add the finishing touches to restorations to make certain they are exactly what the clinician is looking for.

In fact, those client relationships might be the biggest advantage smaller labs have right now, Dr. Murphy said. A well maintained client roster held by a lab with solid financial footing can make the business a real commodity and something that might be of interest to the expanding groups such as DTI which grew its business in 2011 while acquiring more than $10 million in existing lab operations.

Dr. Murphy said that expansion is likely to continue in 2012, and older lab owners looking for a path toward retirement, or younger lab owners who want to get back to the bench and worry less about the business side of things could use the year to prepare for a transition from standalone business to part of a lab group.

Labs that want to merge while maintaining continuity in the client relationships are the most attractive to the existing lab groups and the people with investment capital scouting the industry. Those labs can gain access to the cost efficiencies of larger scale operations without giving up the day-to-day business they are used to, Dr. Murphy said.

“2012 would be a great year for a small to medium sized laboratory owner to clean their house and get their business ready for transition,” he said.

What the next 12 months will actually bring will always be a mystery. The industry will likely continue to experience change in the technologies and materials available to dental labs and the ways those labs operate as businesses. But while those changes are unstoppable, the value of a technician’s close relationship to the practices sending him or her cases will only continue to grow.

This is an industry built around people because at its core it’s about creating something unique for every case and that requires collaboration, trust and communication. There might be more machines and corporations involved but in the end it will always come back to the people who stand behind the work being produced.