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Every year, the president of the United States delivers his State of the Union Address.
Every year, the president of the United States delivers his State of the Union Address.
It is an opportunity for the president to report on the current state of the nation and outline his plans for the future. In this story, we layout a similar report regarding dental labs describing the goods, the bads and how your lab can position itself for a prosperous 2015.
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2014 wasn’t a banner year for the dental lab industry, but it wasn’t horrible, either.
“If we look at it from a sales revenue standpoint, unfortunately, flat was good,” says Bennett Napier, executive director of the National Association of Dental Laboratories (NADL).
Of course, some labs fared better than others.
“There are clearly laboratories out there that are making fairly good gross revenue and, in many cases, good net profit,” Napier continues. “But a lot of that has been driven by the choices they’ve made, and where they were on the adoption of new materials and technology in terms of getting a head start, and that is something to recognize: That there are labs out there doing well, but if we look across the board, the preponderance of labs are trying to catch up. Unfortunately, it seems like it could be too late for some; however, I wouldn’t discourage anyone from looking at the options that are available and then figuring out which are best for them to move forward.”
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There are fewer dental laboratories now than there were just a few years ago. Napier says there are just shy of 8,700 dental laboratories in the United States, down from around 13,500.
“It’s quite a significant decline from our heyday, but we do believe that the significant consolidation of the industry has somewhat plateaued during the last few years, and we believe that it’ll be another three to five years from now and we’ll see another major consolidation,” Napier says. “But for the next two to three years, we think there’ll be some stability in the marketplace.”
The smaller number of dental labs isn’t completely bad news. There seem to be plenty of well-paying jobs out there for technicians.
“On the positive side, even though the number of laboratories has declined, the number of technician employees is actually going up slightly, and also a dental technician’s wages are going up at about 4 percent, compared to their pay scale last year,” Napier says. “So that’s an interesting dynamic to see the supply and demand and its outcomes on wages and employment.”
The overall trend seems to be that labs are getting bigger, but there is still a place for the smaller labs that offer their own unique services.
“The large are getting larger,” Napier observes. “There are still small laboratories in the market, and there will always be a place for smaller laboratories in the market-what I would call a boutique-type business model.”
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It should come as no surprise that CAD/CAM has been-and likely will continue to be-a burgeoning powerhouse in dental laboratory technology. But while the use of CAD/CAM seems to be prevalent, there are some labs that have elected not to embrace it.
“We call it ‘The haves and have nots,’” Napier says. “What we mean by that is that the marketplace has made a choice: Those people who have made the transition or the decision to go digital are all-in, and they’ve gone heavily invested in capital, time and labor to make those transitions. And then you have another segment of the market to not go that route, and in some cases to not use digital in any capacity, even including outsourcing to people who have the digital technology. Clearly it appears that digital is here to stay, and the ROI that comes with digital makes sense for the long term, but it’s very interesting to see a segment of the market basically not go down that path in any way, shape or form.”
Rob Nazzal, CEO of Custom Automated Prosthetics in Stoneham, Mass., observes that new products tend to go through phases of maturation, and CAD/CAM has finally reached the point where it is established enough for popular adoption.
“There’s been a decade of people trying to bring CAD/CAM into this market,” Nazzal says. “There were a lot of innovators and early adopters who put a lot of blood, sweat and tears into figuring out how to make this work for their lab-and sometimes it worked and sometimes it didn’t. At the 100,000-foot level, we’re at the fastest pace of adoption of CAD/CAM in our industry right now. It has a lot to do with the economics making sense for most laboratories and ease-of-use being there, so people can consistently produce great products. Now, we’re seeing systems and tools that were built from the ground up to address this dental market, so it’s a really neat time in our industry.”
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Some labs might eschew CAD/CAM for the simple reason that they don’t know whether or not they should make the financial commitment.
“It’s definitely something that’s in flux right now,” says Dr. John Flucke, DDS, technology editor for Dental Products Report. “We’re seeing labs that aren’t really sure what to do, and I don’t blame them. We’ve got CAD/CAM systems all over the place that are starting to hit the market, thanks to open source. We’re beta testing one in my office right now. That caused a lab, owned by a friend of mine, some angst, and I was like, ‘It’s just a beta test. It’s OK.’ But I think labs need to probably work on the idea that the digital impression system is here. It doesn’t matter whose it is. Digital impressions are here and they work. People need to prepare for that and just get ready for some doctors who are not going to want to design in-office. But I think most doctors are going to wind up doing digital impressions.”
While CAD/CAM may be the future, some labs have trouble with it because it can make the work more difficult.
“Dental labs are becoming more and more digital on a daily basis,” says Mark Ferguson, assistant manager at Core3dcentres in Las Vegas. “The trick that they’re having with it is being properly trained on what to really be able to expect out of the CAD/CAM systems. Some labs, by bringing in digital, are actually taking steps backwards because they think that the CAD/CAM system in and of itself is the answer and replaces technicians, where other labs are giving the CAD/CAM systems to seasoned technicians as a tool to be more productive, and those are the ones who are really elevating what they are doing and expanding what they’re doing.”
The year of digital
In the year ahead, labs can look forward to much of the same that they’ve experienced in 2014, most notably the need to get involved with the digital realm.
“If somebody hasn’t gotten into the scanner side of things, that’s kind of a clear, prevailing thing to do for most laboratories,” Napier advises. “And then, looking at milling, whether that should be in-house or outsourced. And I think you see digital impression systems and printers kind of lagging behind because they’re not exactly new to the market. They are new in terms of widespread utilization in the lab side.”
While the number of dentists using intraoral scanning is still low (only about 12 percent of all-digital cases are initiated by dentists), that number is expected to rise, and dental labs must to be ready to accept their doctors’ digital files.
“The number of digital impressions continues to increase,” Dr. Flucke says. “Don’t be caught waiting or thinking, ‘Well, my doctors won’t ever do that,’ because more and more are doing it all the time. I think it behooves them to become educated about the systems and the way to deal with them.”
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“If you can get where you can accept digital files, it’s important that you’re able to get an iTero scan or a CEREC scan,” adds Shaun Keating, president and CEO of Keating Dental Arts in Irvine, Calif.
“You don’t even have to have the milling units for the models. We’re starting to get them in here, but a lot of stuff is being done model-less. Be part of the digital revolution if you can. Get in wherever you can. Get in on the entry level with Roland on some of their stuff, and get in on a 3Shape scanner, but be able to take digital scans and files. If you stay out of it another five years, you’re going to be completely an afterthought, and dentists are going to want somebody who’s on the cutting edge.”
If a lab isn’t quite ready to tackle digital files but wants to be able to do so, it can do it by outsourcing that work to a milling center. Ferguson advises labs to build stronger relationships with their outsourcing partners.
“Stop looking who you’re outsourcing from as ‘This is just my outsourcer,’” Ferguson says. “Look at it as ‘This is my partner.’ When I run into something that I’m not ready to handle, can this group handle that for me?’”
Nazzal recommends that labs look at what they offer, what they want to offer and then build an expansion plan based on that.
“The first thing to really understand is which materials and indications you want to implement for your laboratory, either because you want to add it to your product line or you want to do more of it in your laboratory,” Nazzal says. “Maybe you’re seeing a shift from metal to zirconia, for example, or metal to e.max, and you want to be prepared for that transition. My advice is to look at what materials and indications are going to be important for you, and then go through a process of evaluation before making any capital investment, where you can outsource those products to those who use the equipment that you consider using.”
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Understanding your business needs and evaluating the results from an outsourcing partner will tell you how to proceed.
“You’ll know that you have the volume of work to justify bringing it in-house,” Nazzal adds. “You’ll know about using a piece of equipment that has already been used for your cases for the last several months, so you’ll be comfortable with the technology. You’ll be comfortable that the return on your investment makes sense, and then it’s just a matter of bringing that equipment in-house and investing your time and energy into the learning curve, but at least you don’t have the risk of not knowing if the cases are going to come or the risk of not knowing if the product is going to deliver the quality that you’re looking for. I always tell people: If it feels like you’re jumping off of a cliff when you’re making a purchase like this, it’s probably not the right time to make the purchase. You have a little bit more investigating to do.”
Being ready to handle digital files goes beyond simply buying the right equipment and having a trained staff. It also means being available to help client doctors.
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"Labs really need to become a resource for their doctors on the intraoral scanners,” Ferguson says. “The labs that I see getting the benefit from intraoral scanners are the ones that are talking to their doctors about, ‘This one works better for this, this one works better for that’ before the doctor buys. On the other hand, a doctor buys an intraoral scanner, and now the doctor doesn’t feel comfortable sending to that lab, one of the labs that they were using before, so that lab’s losing out on work because they are not ready to handle that type of a case. Hopefully, what will come of this is that the doctors are going to rely more on the labs as a source of information, and the whole thing will be actually very team-building.’”
While CAD/CAM is powerful tool, the new technology also requires new workflows to meld the digital system with the people using it.
“As these systems are getting put in place, there’s a lot of human glue keeping all the pieces together,” Nazzal says, “moving files around, tracking the status of cases, moving things from the scan to the design to the manufacturing and having an audit log and traceability of the whole process. These things are largely missing from CAD/CAM systems today because the workflow is shifting in the laboratory, and there’s not a good way to manage these digital workflows. I think in the next year we’re going to see a big shift toward production optimization based around managing the digital workflow through software.”
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Implants Implants are another source of expansion and profitability for dental labs.
“We’ve seen explosive growth with our implant division this year,” Keating observes. “We set records seven of the 12 months in sales on implants, and it’s just booming.”
Current implant sales don’t just involve basic, standard devices-they tend to be more complex.
“They’re more of the hybrid-type bar implants, overdentures,” Keating says. “Hybrid implants are just going through the roof. My bruxers are up 73 percent. The doctors are going more and more the back of the mouth and even some of the anteriors. These bruxers are kind of fitting into the oral environment nicely. I never thought I’d be doing them in any kind of anterior segment, but they’re coming up above the premolars, and getting up there to some of the anteriors. Not as much, probably 90 percent are still posterior and 10 percent is anterior, but it’s amazing the doctors are going with that and we are getting our stuff looking better than ever.”
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It’s an area Keating expects will continue flourishing.
“There’s a lot of opportunity out there, but I think you’ve really got to look at your implant dentistry,” Keating says. “Especially the high-end esthetics. If you can get some really good anterior work done, because everyone can do that posterior work, and a lot of labs aren’t getting those onesie, twosies because doctors are going to send them off to a little bit cheaper area, and then the anterior pieces are going out to the people who really know their stuff, so we’d like to get more of the anterior work.”
Being able to help doctors with implants is another way your lab can offer value.
“More and more GPs are starting to place implants, so implant planning software and for a lab to be comfortable with that is also going to increase the strength of the relationship with their doctors, where they can bring in implant planning software and offer newer, easier, better ways for doctors to handle implant cases,” Ferguson says. “All-in-one solutions of implant placement guides; a temporary, screw-retained implant abutment or crown; and things like that-anything where it makes it easy on the doctor from the very beginning, and he’s going to love you for it.”
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Products and materials
Keating anticipates e.max to be an important material in 2015.
“You have to be involved with e.max,” Keating says. “E.max is marketed so much to the dentists, that every dentist wants it, so if you can’t afford the $70,000 for a milling system, that’s fine, but to get into it to at least press it-that’s a no brainer. Dentists are going to want them always, it’s very profitable and you can usually sell them for about $150 or so and make a really good margin.”
He adds, “Find yourself a good zirconia company because monolithic is here to stay, and you’ve got to be able to have that crown from $100 to $140, but the monolithic is important for the back of the mouth; e.max for the front of the mouth.”
Nazzal expects big things for the coming year, especially for materials used in CAD/CAM.
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“It seems as though some of the most exciting things that will be happening in 2015 will be around materials, and I think that speaks to the fact that the CAD and the CAM systems are all established, and now people are kind of focusing on optimization and getting to the point that we can do more with the equipment we have,” Nazzal says. “One of the most exciting materials is this super-translucent zirconia coming out. The 600 megapascal, high-translucency zirconia gives a much more natural translucency in a zirconia that’s not quite as strong as what we see in the full-contour zirconias today but plenty strong enough for single units and small bridges.
Removables and partials are other products where Keating foresees growth, for no other reason than fewer labs are doing them.
“So few labs are doing them nowadays, and I can’t keep enough people in there,” Keating says. “We do everything in-house, but if you can somehow get a couple of old-timers into your lab to do your own stuff, or even if you have to outsource your frames and set your teeth yourself, if your doctor knows you’re full-service, he’s going to send you a lot of his stuff because he hates sending it to other labs. But if he knows you’re doing your fixed work already, you’ve got to do the removables if you can.”
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Build your relationships
An inexpensive way to be more effective is to simply communicate with your doctors. By helping them understand what you can do-and how you can help them-your lab is only strengthened.
“I think if the labs make sure that their accounts know that they are there as a resource, whether it be mailers or postcards in the cases that they are sending back saying ‘now accepting these types of files’, or ‘talk to us about intraoral scanning,’ and things like that,” Ferguson says. “I think that doctors are looking for the information. At times, they’re just not looking in the right places. They’re looking for information on which intraoral scanner they should get, but they’re talking to sales reps for the scanner companies, rather than the labs that they’ve been using, and hopefully the labs have information on it. You’ve got five or six scanners out there right now, and if the doctor chooses one that the lab can’t accept files from, then the lab’s going to lose a doctor because they’ve just invested a good amount of money on a piece of equipment, and it’s easier for them to find another lab than to not use this piece of equipment they just got. ”
Having a solid relationship with one’s doctors is critical for lab success. Building that relationship requires someone to make the first move, and it might as well be the laboratory.
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“It does become a chicken-and-the-egg thing,” Dr. Flucke says, “and I think it behooves labs to reach out to their best clients and ask them, ‘Where are you going? What are you thinking about?’ I think it behooves the lab to know what their dentists are thinking and say, ‘I heard about digital impressions,’ or whatever it might be, and ‘Where are you on this teeter totter?’ Find out ahead of time because the last thing that a lab wants to do is be caught flat-footed on this.”
Some labs are even going so far as to have their own in-house doctor as a resource and provide educational opportunities for their clients.
“We’ve found a lot of success with doing more and more seminars here, with over-the-shoulder programs,” Keating says. “We’re working more with Dr. David Hornbrook. He’s going to become our director of clinical dentistry and provide education for our technicians and the dentists that work with us. They’ll have a voice here, too, rather than just listen to us dental technicians.”
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The key to success in the dental lab industry is the same as every other industry.
“Service, service, service,” Keating says. “You have to take care of your customers and let them know how appreciative you are because they have 10,000 options out there to send to. They’re getting coupons every day in the mail, and they’re getting solicited every week, multiple different ways, from labs that are really good at marketing but aren’t really good labs. The future’s as bright as it’s ever been, and opportunities exist for many dental labs. There are a lot of dentists out there who aren’t happy with the bigger commercial labs. I think they’re going to be looking for labs in the next year to get better dentistry and better service.”
While dental labs have sustained a year with a steady flow of ups and downs, the ability to position themselves for a successful 2015 exists, and it’s just a case of seizing the opportunities.
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While the dental lab industry has seen its numbers decline in recent years, Shaun Keating of Keating Dental Arts in Irvine, Calif. thinks the time is right for a turnaround, especially for small labs.
“I think the industry is ready to take off again,” Keating says. “I know a lot of the smaller labs closed down because a lot of the large, commercial labs squeezing them with price and everything else, but I just see a lot of dentists looking for a good lab that has a good value.”
The smaller lab is something he tries to emulate so doctors don’t feel overwhelmed by the size of his lab.
“I’m kind of a big commercial lab, too, but we try to emulate ourselves as a small lab,” Keating adds. “We try to make it where there’s a certain few people that work for every doctor the same each time. That’s what a small lab is, so we try to keep the same ceramists and the same waxers and the same designers, same customer service-it’s a small team that works with our dentists, so we try to emulate those small labs.”
Keating suggests bolstering your marketing efforts to improve your lab’s recognition.
“I think if the small labs can get the marketing out there to get a dentist to notice them and try them is the hardest thing,” Keating says. “There are so many little dental offices in these little arteries in these little towns in rural areas that don’t have labs, and they don’t have the big city right in their back yard. Those are the labs that we’re trying to reach out to get, and it’s hard for them.”
This article originally appeared in the January 2015 issue of Dental Lab Products. For more great articles like this every month, click here to subscribe. Photo: © All Rights Reserved to Sarin Soman. www.sarinsoman.com / Getty Images