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Digital Boot Camp
What you need to know to make an informed purchasing decision.
By Pam Johnson
Incorporating digital technologies into a business operation is not cheap, and it does not come easily. And, not every dental laboratory has to conform to the fully digital landscape. For the majority of laboratory owners in the United States, however, the phenomenon of digitization that has been set in motion and is impacting the dental industry is reaching an inflection point where complacency is not an option and going forward means making serious business decisions that will determine the relative competitiveness of the company for the foreseeable future. The choices are becoming clearer for industry professionals who have yet to take that initial step toward digitization. Begin to invest now in internal and external digital capabilities that the business will need to differentiate itself from competitors. Or wait and watch while hoping not to be outflanked by faster-moving rivals.
Either choice involves a tremendous degree of risk. For business owners wanting to build the right capabilities for their companies to remain relevant in an increasingly digitized global environment and fend off competitive threats, risk lies in making the wrong investment choices. For those on the fence, the flirtation with danger that their business will b come as relevant in the future as the typewriter, film, or the VCR is a serious probability. Deploying technology in the right place at the right time and with the right investment choice is a daunting set of business decisions.
“This is the dilemma that is on the minds of everyone who is trying to find their way in this industry,” says Dell Dine, vice president of research and development for National Dentex Corporation (NDX).
However, as Dine points out, when looking ahead to the future, the dental technology industry may not have a choice about whether or not to automate production in order to keep up with demand. If the number of dental laboratories in the United States continues to diminish at the current rate, the traditional fabrication methodologies being used will not be conducive to serving the same 140,000+ clients and a growing patient population. For this reason, Dine encourages laboratory owners positioning their businesses for the future to look beyond current industry conditions to the next 3 or more years and analyze the types and volume of products and services that will be required. “The changes you make in your laboratory now will set you up for where dentistry will be in a few years,” Dine advises. “If you do not make these changes soon, you will not be able to catch up.”
Taking the initial steps toward automation requires having the available capital or access to capital to invest in equipment that is highly sophisticated and expensive. With costs for a piece of the digital puzzle starting at five figures and easily rising to six, the financial risks for a single capital expenditure rise to a new level. “This is new territory for those who have yet to invest,” says Jerry Ragle, owner of Ragle Dental Laboratory Inc. “It is not like the good old days when you had a manufacturer’s representative drop off a $5,000 porcelain oven to try out. Once you buy it, there is no turning back. You are committed to making it work.”
That is why careful planning and doing due diligence is so important, says Chuck Yenkner, president and founder of Business Development Associates. “Lab owners have to understand the true value this equipment will bring to the operation.”
And once bought, the equipment is hardly the end game. The new digital process sets in motion a paradigm shift in the traditional approach to business practices, fabrication methodology, and workflow processes. “This digital world is a complete change for the laboratory,” says Rob Nazzal, CEO of Custom Automated Prosthetics. “It requires a completely different way of working and thinking.”
And if done properly, all agree, digitization and automation of laboratory production can reap significant economic rewards, increasing productivity, cutting labor costs, and opening the door to new business.
So what key factors must be considered and which questions need to be asked and answered to successfully incorporate digital processes into the line of production?
A Question of WHY
The first and most important question that must be addressed when considering the purchase of equipment that will automate a production process, says Nazzal, is that of why. Is it because CAD/CAM technology is perceived as a way to better balance home and work life by freeing up the workload and working less while producing the same amount? Or, will the technology offer the potential to economize production and lower labor costs while increasing production capabilities?
For Ragle it was the realization of how quickly digitalization can take a thriving business and transform it to irrelevancy that ultimately drove him to be one of the early adopters of CAD/CAM technology. “When the first digital camera came on the market, I immediately purchased one,” said Ragle. “I took it to the local film shop that developed all my clinical slides to show the owner. His comment to me was, ‘Digital will never replace film.’ Within a year, the film shop owner had closed his doors and was gone.” In fact, Ragle continues, during the time the film store’s business was dropping off, the owner invested heavily to upgrade his existing film developing equipment. “His refusal to recognize that the film developing processes he was using were going to be replaced was an important lesson for me to learn. I swore then that I would never let the same thing happen to my business.” He began the digital conversion of his business in 2005, purchasing the Sirona inLab system not with ROI in mind at first but rather to learn how this technology could fit into his laboratory processes. Today, his business has acquired the last piece of the digital puzzle, an Objet model printer, to digitize the production process from intraoral or impression scans to the finished product. “Today 70% of our clients send us a digital impression scan from the operatory from which we mill the model in our milling center,” says Ragle. “The remaining 30% are traditional impressions that we digitize and 3-D print the model. Once your operation is completely digital, then you start to see the real savings in cost.”
The “why” for Tim Tyndall, owner of a North Carolina two-person laboratory, was born out of necessity. He had purchased the Amann Girrbach manual milling unit 6 years ago and built up a significant zirconia market. In a few short years, 60% of his business was zirconia-based. However, the labor involved in the manual milling, sintering, layering, and finishing processes for his small operation were too time intensive. He needed to find a more streamlined process to handle the volume of work coming into the laboratory. “That’s when I began investigating scanning technology to outsource these copings,” recounts Tyndall. “I was 59 years old back then. I had been in this business for nearly 40 years and never really worked with computers except for our simple billing software. I did not even have an e-mail account.” But he knew that the ability to scan and outsource would be life-changing. It was not until 3 years later after he had bought his 3Shape scanner that he found out just how valuable it was to scan cases and outsource the work. “My wife and laboratory partner was stricken with cancer and required four surgeries that year,” says Tyndall. “The scanner became my assistant. While cases were being produced by my outsource partners, I could not only care for my wife but also take over the functions in the laboratory that she normally handled.” With his wife now back at work, Tyndall is looking to purchase a tabletop-milling unit to bring his outsourced work back in-house and to offer outsourcing services to smaller laboratories that do not want to make the large capital investment.
Rick Fair, owner of Digital Dental Arts, a one-person laboratory in Tempe, Arizona, and a recent Recognized Specialist of the Kois Institute, found himself at a crossroads 3 years ago. He had perfected his technical skills and was at the top of his game but found some of the laboratory fabrication processes such as casting, metal finishing, even model-making tedious and often unpleasant. His first introduction to CAD/CAM automation and zirconia material came at a Chicago Midwinter meeting. “Zirconia was a very appealing material for me,” says Fair. “Now I could use a cost-stable material that had the strength and esthetics of metal. And the equipment would eliminate the metal casting and finishing production steps.” Fair presented the benefits of the material to his clients and invested in scanning and milling technology. “Soon the milling unit was running at 80% capacity and I realized then that this technology would be the future of our industry.”
A Question of WHAT
A second consideration to making any technology purchasing decision is identifying the area or areas of the production chain where automation brings value to the process. “It is a matter of defining what you need done and then buying the machine that can do that task,” says Yenkner. “You need to carefully analyze and evaluate your production processes. If you don’t do that then you will struggle to mold your business around a piece of technology that really is not doing what you need it to do.” And, he adds, if that piece of machinery is not running, then it’s costing the business money, not making money for the business. “You are going to be paying the same lease or bank payment whether it’s running 24 minutes a day or 24 hours a day.” In the end, Yenkner says, the return on investment for automation comes either from new business if the technology provides access to a volume of business you didn’t have before or from reduced labor costs to produce the existing production volume.
If the goal is to reduce the production cost of existing products, it’s vital to execute a cost comparison to determine if those products will actually cost you less than current traditional fabrication techniques. “You have to know exactly how much the units you are producing traditionally cost and then calculate what they will cost if a machine produces them.”
If the goal is to bring in new business, Dine suggests conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to define areas of strengths and weaknesses and adding equipment that would give access to those weak areas. “For example, buying a scanner could provide access to products and services from outsource partners that you currently do not offer, opening the avenue to a new business segment and new clients while freeing you to concentrate on other areas of expansion.”
Regardless of what piece of automated equipment is purchased, the machinery must bring a value proposition to the production process either in the numbers of units produced or in the reduced cost of labor needed to produce the same amount of units. “If you are producing 10 crowns a day manually with the labor you have and you bring in a piece of equipment, then you will need to double that production volume to be operating profitably or you will need to reduce your labor costs,” advised Dine. “If you can increase volume and reduce labor costs, that’s even better.”
In his two-person operation, Tyndall has been able to achieve both. To maximize production efficiencies in his laboratory to increase labor efficiencies and production volume, he applied Lean manufacturing principles to his manual production processes. This allowed him to increase production volume significantly, which in turn, increased the number of accounts the laboratory can handle. “By working in small batches we’ve eliminated the wasted time that clogs the traditional production process and have dramatically increased production capacity while cutting our turn-around time,” says Tyndall. “It is a matter of evaluating the labor, cost in time-savings, and understanding the value of having a scanner and outsource partners do the labor for you while you are doing something else.” He uses a variety of outsource partners from Argen for laser-sintered metal copings and CadBlu for 3-D printed wax patterns to B&D’s Precision Milling Center in Salt Lake City, Utah, for zirconia and titanium frameworks. The flexibility to send STL files for designed parts has also increased the number of products Tyndall can now offer clients from full-contour BruxZir® for posterior crowns to the new translucent zirconia for anterior cases, which he can design with a cutback for application of a thin layer of ceramic. “Once I understood how all these technologies work together, we reached a sweet spot so that in three clicks I can take the design from the interface to the coping to the restoration ready to send to the milling center. Our goal is to reduce that CAD design time down to 7 minutes,” he says.
As an early adopter, Ragle has found himself investing in various new segments of technology as they evolved over the last 6 years in order to further digitize workflow or to set in motion a new digital process: From scanning models and designing and milling zirconia frameworks to investing in 3-D printing technology to manufacture wax copings and crowns for pressing to producing 3-D models from both intraoral and impression scans. As more and more production processes became digitized and streamlined, employees who left were not replaced and this once 30-person laboratory is producing the same volume with 15 employees and has capacity for 30% more volume when the economy takes a positive turn. “As we digitized our operations, the capital expense of the equipment was being offset by the reduction in labor costs as employees left, retired, or moved away,” said Ragle. “Today, instead of labor representing 30% of my overhead, it is now 20%. And the productivity in dollars per employee per year increased 170% from $86,000 in 2002 to $232,000 in 2010. Once on this path, you find that the innovation in technology does not sit still and there is always something new and better on the horizon that will produce faster, better, or more efficiently.” For metal-based restorations or the few zirconia frameworks being prescribed in his central Illinois area, Ragle splits the design file, transmitting the coping design data to Argen for laser-sintered noble alloy copings or to a zirconia-milling center. The anatomical top of the restoration is designed and wax-printed in-house awaiting the return of the coping or framework for pressing.
A Question of Who
Equally important to the decision-making process is a thorough evaluation of the brand choices within the chosen digital technology category to assess whether or not the equipment will meet production needs and deliver the calculated return on investment. Inherent in the decision on which piece of equipment to purchase is the choice of vendor, whether the manufacturer or distributor selling that equipment.
For some users whose knowledge and comfort level with computer technology is limited, the large system providers such as Sirona, DENTSPLY, 3M ESPE, Straumann, and Nobel Biocare offer end-to-end solutions and processes with entry points at varying levels from scanning only to full-circle manufacturing. “Single-brand suppliers, for the most part, have done a decent job of taking an end-to-end approach to deliver varying qualities of restorations,” says Nazzal. These companies have also opened up their technologies and blurred the lines between “open” and “closed” systems to provide users with greater product choice through corporate partnerships and the addition of material indications and new technologies through their outsource facilities.
For laboratories whose top priorities are flexibility of material choice, indications, and add-on technology, then it is possible to select system components from a variety of different scanning, milling, and 3-D printing manufacturers. In the case of some of the open-file format technologies, such as the scanners from 3Shape and Dental Wings, users can even access restorative options from the large brand manufacturers. “Technology and materials are evolving faster in dental technology than ever. For those who are taking a leap into digital technology today, having the flexibility to evolve with the market is increasingly important,” says Nazzal. Further, he does warn that plugging various open scan and design technologies with open fabrication technologies has a learning curve. He suggests if the decision is to select fabrication components from different manufacturers, then add an R&D line item to the budget to cover costs of the learning curve.
Because of the complexity of his plug-and-play operation, Ragle employs a systems administrator to handle internal IT issues as well as those that pop up in his Cadent iTero™ model milling center. “We were spending close to $25,000 a year on an outside service to just to set up and maintain our equipment,” says Ragle. Tyndall uses a local IT service that charges him $60 an hour to fix computer issues and relies on the IT support of the scanner provider to work through any CAD software problems.
Other considerations that must factor into a purchase decision and that will affect the ROI of any equipment purchased is the yearly service and maintenance fee for the equipment and the annual upgrade fee for the CAD software that is charged by some companies. Yenkner advises that potential buyers need to be sure to ask whether these costs are included in the purchase price or annual maintenance fee or are they extra charges each year.
“When calculating ROI, it has to be divided into two categories: the purchase price of the equipment and the operating costs,” says Yenkner. “Calculate how many units a day would have to be produced on the machine to cover the purchase price and then do the same for how many units a day the machine would have to produce to cover the cost of the materials the equipment will use to produce those units, the cost for labor to operate that machinery, and the fee charged to maintain and service the equipment. That will tell you exactly how many units a day you need to manufacture to break even.” This is the reason why Yenker stresses the importanceof getting fairly quick payback on any technology purchased. “Technology is moving so fast that I have accelerated my r commended return on investment of 3 years to 18 months.”
A Question of How
By his own admission, Ragle’s curiosity and excitement over the digital technologies that first came to market led him to be over confident in his early purchases and in his projections for how rapidly his business would grow to recapture his investment. “We bought multiples of the equipment, convinced the market would shift rapidly to all-ceramic,” said Ragle. “Melding digital technologies with traditional fabrication processes is not any easy road, but as I look back I wonder where my business would be today if I had not been an early adopter of this technology.”
Walk—don’t run—is the advice Ragle suggests to those preparing to invest. Every segment of the digital process involves a learning curve that must be ove come before a piece of equipment b comes self-supporting and profitable. Having sustainable revenues on hand to support the business while the technology is being integrated into the workflow is vital. “This is not like buying a new porcelain oven that makes money for the business as soon as it is turned on,” says Ragle.
To help shorten the learning curve, explore avenues that will provide hands-on exposure to the technology. For CAD software, Nazzal suggests acquiring a demonstration license from the scanner manufacturer for experimenting with the software to gauge its ease of use, breadth of indications, and quality of the initial design proposal. Also be sure that the technology being considered is connected to the suppliers you want to buy from. If scanning technology, for example, is being purchased from a distributor that is also a milling or outsource center, then it is important to know if the system is “locked” to only send design data files to that outsource center for the finished product. “Any ‘open’ system can be sold as a physically or contractually ‘closed’ system depending on who the reseller is,” says Nazzal.
If considering an investment in milling technology, send a model to a laboratory or outsource center using the technology being considered for purchase. If the quality standards of the end product meet your expectations, then Tyndall r commends finding out what CAM software is installed on the milling units. “You need to know if the CAM software that the outsource provider or laboratory has installed on its milling units is an add-on, or if it comes standard with the unit from the factory. That’s the only way I can ensure that the tabletop unit I buy will deliver the same results.”
To ensure a smoother integration, make sure the manufacturer or distributor has the IT support in place to help users work through problems should they occur. “Because of my limited experience with computers, when I bought my scanner one of the prerequisites that determined who I bought from was if they had a live IT person available to work me through problems,” says Tyndall. “When I call, one of their IT guys gets on the phone with me and through TeamViewer software remotely accesses my computer to solve the problem.”
Expect bumps along the road as technology changes and production processes constantly move from analog to digital, Ragle says. “In the end, it is inevitable that laboratories continue the conversion to digital processes.”
As the production volume of the industry increases through mechanization, the better it can compete on a global scale says Yenkner. “I think the US dental laboratory industry has a better chance of competing worldwide because we are being forced to consider industrial ways to increase our capacity and streamline productivity.”