The Evolution of Lab
Traditional services are making room for new technology, competition and consolidation
"We love what we do," says Dena Lanier, owner of The Lab 2000, a dental lab in Columbus, Ga. "We create smiles every day." That’s what dental labs have always done. That’s what they always will do. But the way they do it is changing … rapidly.
In fact, if distributor sales reps think their profession has gone through some major changes in the past five to 10 years, they might try talking to a dental lab tech.
For starters, he or she might very well be the owner and sole employee of the lab - or maybe a partner with his or her spouse. But that’s changing, as labs consolidate.
Then there is the massive change in the materials being used to make crowns, bridges, dentures and partials. The mainstay, porcelain-fused-to-metal, is giving way to all-ceramic materials, such as aluminum oxide, zirconium oxide and lithium disilicate.
Part and parcel of the change in materials is the change in processes used to construct restorations. The traditional method, starting with the dentist creating an impression in the office, then sending it to the lab for stone-casting, fabrication of a coping, etc., is giving way to digital scanning and milling. In some cases, the dentists are doing the milling themselves, with in-office CAD/CAM machines. In others, they are digitally scanning their patients, then transmitting the images either to a lab or to the manufacturer of the digital system, who constructs a model and sends it to the lab for finishing. In a sense, the technician, who used to view himself as an artisan, is now a computer operator.
As all these changes unfold, U.S. dental labs are facing stiff competition from overseas suppliers. According to the U.S. Food and Drug Administration, dental labs from 32 countries are importing restorations into the United States. The time it takes to produce a finished product may be longer, but the price - even with shipping - is considerably less than a "made in the USA" model. Some experts say that as much as 25 percent of restoration work is being done offshore today, and that it would not be unrealistic to predict that as much as 35 to 40 percent of dental laboratory sales will be generated by foreign labs in the future.
Then there’s the state of today’s economy. Just like dentists and distributors, labs are feeling the pinch, as patients put off costly restoration work until the economic storm passes.
Despite these disturbing trends, there are some bright spots. For example, most observers would concur that once the economy turns around, the demand for restorations will be as strong - or stronger - than ever. One promising area of growth is occlusal therapy, such as sleep appliances and mouth guards; and oral appliances for the treatment of sleep apnea. Dental labs that can hang in there, provide excellent customer service, adapt technologically and come to terms with offshore competition should succeed in the market.
Being big doesn’t hurt
A lab doesn’t have to be large to do all that. Outsourcing work to other labs - rather than bringing on additional staff or equipment - is a time-honored practice among dental labs. "It would be unusual for a lab not to be outsourcing something today," says Bennett Napier, co-executive director of the National Association of Dental Laboratories, Tallahassee, Fla. What one lab can’t do, it outsources to another. The upshot is, a small lab can look and feel just like a big one.
Still, it doesn’t hurt to be big. That’s why, as with so many industries in the United States today, the dental lab industry is undergoing consolidation. Today, there are about 13,000 labs in the United States, of which approximately 6,000 are one-person operations, according to the Brandow Company. The average annual gross sales per lab is $632,000, with total U.S. dental lab sales reaching $10.5 billion in 2008, according to iData Research.
Each year since 2002, the number of dental labs has declined 1.2 percent, according to a 2008 market report by MindBranch. Even so, dental lab sales are expected to increase 5 percent each year through 2015.
"It was predicted to happen - the big are getting bigger," says Napier. Larger lab firms are acquiring smaller ones, often making them, in essence, satellite offices. Some of the larger players are Glidewell Laboratories, Newport Beach, Calif.; National Dentex Corp., Natick, Mass. (publicly traded on the Nasdaq); and Dental Services Group, Minneapolis, Minn.
"The prediction is that within the next seven years, there could be half the number of physical labs in the United States as there are today," says Napier. "But that doesn’t mean they’ll be doing less work." Indeed, the adoption of so-called "lean" manufacturing processes, as well as CAD/CAM, are making today’s labs more productive than their predecessors. "[CAD/CAM] speeds up the process for all parties involved," he says. "Turnaround time is better, and the end restoration is much better in terms of margin and fit, because that initial impression is so much more accurate."
Economy’s role
There’s little doubt that the dismal economy has hastened the closure of some small labs. "The economy has facilitated some natural attrition that was already going to occur," says Napier. Many owners of one- or two-person labs are reaching retirement age. "But the economy has sped up their retirement plans.
"Certainly, another aspect of consolidation is offshore competition," he says. According to the U.S. Department of Commerce, the number of crowns being made overseas has climbed steadily for several years, and will continue to do so. In 2005, foreign dental labs made 5 million crowns for U.S. patients - or 10 percent of the market at the time. In 2007, the number reached an estimated 7.1 million. By 2010, 14 million crowns will be manufactured by foreign dental laboratories for U.S. dental patients, predicts the government. Part of that is driven by economics. "Dentists are saying more and more, ‘I need an economy-level, single crown,’" says Napier.
Nor will labs and dentists look to overseas labs only for lower-quality or last-generation products. "By the time these new materials are [in the United States], the offshore labs have either been using them or are training on them," says Napier. "There’s not a lot of lag time, and materials manufacturers worldwide are selling to all markets, not just the United States."
Dental Services Group
"We’re very upfront and ethical about it," says Kevin Connolly, senior vice president of sales and marketing for Dental Services Group. "If the doctor is interested in something from China, we have partnered with Prident, a Dentsply owned laboratory, and turnaround time is 14 days, but the price is substantially less than [it would be] from a lab in the United States. But a doctor has to specifically ask for it."
Dental Services Group was founded a little more than 20 years ago and today has more than 30 full-service labs around the country, employing more than 1,000 lab specialists. It also employs close to 30 sales reps, who are charged with building relationships and educating doctors in the field, says Connolly. In 2006, the company acquired Jamaica, N.Y.-based Americus Dental Labs, which itself employed 300 people and whose annual revenues were $28 million.
For a number of reasons, the company represents the strength of large labs in today’s market. First, it can provide a wide variety of products and services. Second, it’s in a good position to handle the large capital investments required for much of today’s CAD/CAM technology. And third, it’s big enough to enjoy substantial leverage vis-à-vis its suppliers.
"Even though we’re 30 separate locations, we’re one network," says Steve Druley, marketing manager. Rather than specializing in, say, crowns and bridges, or partials and dentures, the company can provide virtually any work the dentist needs. "We can be the ultimate one-stop shop."
The CAD/CAM revolution
Being a national firm, Dental Services Group can do something small labs cannot - that is, accommodate multiple new-technology processes and materials, including Cercon™, Cerec inLab®, IPS Empress® Esthetic and IPS e.max, Lava™ 3M ESPE, NobelProcera™ and others.
"The more we read about this and educate ourselves on it, the more we realize that technology will become more of a major player in the years to come," says Connolly. "[Porcelain-fused-to-metal] will never go away; it’s the bread and butter of the industry. But it is decreasing, while all-ceramics and zirconia are increasing, because of their strength and aesthetics."
Indeed, according to iData Research, a total of 61 million units were manufactured by U.S. labs in 2008, with 4 million of those units produced by laboratory CAD/CAM systems. By 2015, it is predicted that 81 million units will be produced overall. In 2008, there were 1,496 full CAD/CAM systems in the market; by 2015, it is estimated there will be 4,100. Similarly, in 2008, there were 2,225 stand-alone scanner systems in the market; by 2015, it is estimated there will be 8,500. The market for digital impression systems in 2008 was $12 million, a 73 percent increase from 2007.
"Ten years ago, you could have opened a lab for $10,000," says Napier. "Today, you’d be hard-pressed to open up one for less than $100,000 or $150,000. But again, not everybody has to run out and buy all that new technology. Somebody else can take on that burden in an outsourced model."
Another advantage enjoyed by larger labs such as Dental Services Group is the leverage they enjoy in the market. "We try to negotiate better prices for everything from UPS services to [products and services] from manufacturers and distributors," says Connolly. In addition to its owned facilities, the company has built a network of approximately 75 affiliate labs in order to increase its purchasing power and technological expertise. Big labs can also achieve volume discounts from foreign labs, to whom they outsource work.
Although Dental Services Group does not deal exclusively with the Zahn Dental Laboratory Division of Henry Schein, "we value the strong working relationship with the dental lab distributor leader," says Connolly. That said, the company is "not a closed door," he says. "We are constantly re-evaluating our vendors."
Still, the company prefers to deal with a key account manager, "who will sit down with us and say, ‘Here are some things that could save you some money - they’re better for the doctor and the patient,’" says Connolly. "We don’t want our 30 individual labs making 30 different decisions."
The Lab 2000
While Dental Services Group represents one end of the spectrum, The Lab 2000 in Columbus, Ga., represents another. Founded as a one-person lab in 1995 by dental technician Dena Lanier, The Lab 2000 now employs 27 people servicing dentists from Maine to Texas.
"Every day [as a tech], I would say to my husband, Dennis [also a tech], ‘If I had a lab, I would run it this way or that,’" she says. "He got tired of hearing that and said, ‘Why don’t you open your own lab?’" She did, and started building a client base. "Dennis told me, ‘When you get twice as big, I’ll sell [my business] to you.’ I got three times as big; now he works for me." In fact, she now employs at least three people (including her husband) who used to have their own businesses.
Like others in the business, Lanier - who is the 2009 president of the Georgia Dental Laboratory Association and an NADL laboratory representative - sees an older generation of technicians retiring. The U. S. Department of Labor reports that in 2008, approximately 53,000 dental techs (including lab owners who work in some capacity at the bench) practiced their trade in this country. By 2014, the government predicts that as many as 11,000 will leave the field either for career changes or retirement.
But the opportunities for those who remain and adapt are many, says Lanier. "There are a lot of new technologies that some dentists don’t even know exist." For example, The Lab 2000 uses a digital printer from Germany-based envisionTEC (along with CAD/CAM software from Montreal, Que.-based Dental Wings) to produce wax coping or units in a fraction of the time of hand waxing. "Once these machines are up and running and paid for, you can offer a less expensive product and a quicker [turnaround]." And the quality of today’s technology is high, she says, noting that the Cadent iTero™ digital impression system has resulted in "zero remakes" for The Lab 2000.
"The other good thing about machinery is this - it’s bringing that younger generation back in," says Lanier. "They’d rather be a computer programmer than sit behind a bench all day and craft something."
While labs face competition from in-office milling systems as well as offshore competition, Lanier feels that a well-managed U.S. lab, regardless of size, can fare just fine in today’s market. That’s true for a couple of reasons, she says. First, while offshore labs may capture a good portion of posterior work (what she calls the industry’s "hamburgers and fries,"), they won’t make as big a dent in higher-margin cosmetic work and anteriors.
Second, and just as important, labs can remain strong by keeping their eyes on the customer. "You keep your accounts happy and they’ll keep coming back," says Lanier. She learned the lesson from her dad, who managed a local grocery store. "He said that once [grocery shoppers] get their groceries, they want to check out and check out quick," she recalls. "So he’d jump on a cash register if there was a backup in one of the lines."
And while offshore labs can produce high-quality products, they will have a tough time duplicating the personal touch of a local lab. In fact, telephone callers getting in touch with The Lab 2000 will be greeted either by Dena or Dennis Lanier.
Supplying the industry
Distributors servicing dental labs should keep the same principle in mind, she says. "It’s customer service. When the lab needs a product, they need it right away." The distributor who can deliver on that basis will win the business.
Distributors servicing the lab market find that there is some overlap in the products purchased by labs and clinicians. For example, both purchase burs, instruments and adhesives. It’s the quantity that differs.
"A lot of dentists buy stone," says Paul Jackson, vice president of marketing, Benco Dental, Wilkes-Barre, Pa. "But they’re buying it in 25-pound containers, which might last a year, whereas a lab buys 100-pound containers. Even a small lab will buy 300 to 500 pounds a quarter. And they both buy burs, but a dentist might use a couple a year, whereas a lab will use one per day per technician."
Even so, labs typically purchase little if any impression and composite materials, which are the products that every new sales rep learns from Day One, adds David Gardiner, senior product manager for Benco Dental’s lab division. For that reason, Benco is committed to working with its manufacturers to help educate its reps on lab processes and products, so they can call on labs with knowledge and confidence.
Different markets
But the task may not be easy. "The dental and lab [markets] are so different," says Mary Frances Studzinski, president of Only Smile Supply LLC, Killingworth, Conn., an independent rep firm focused on the dental lab market. "Many people in lab don’t understand dental, and vice versa. Even though we’re in the same industry, there’s a huge separation between the two."
Studzinski was a sales rep for manufacturer Jensen Industries, then for distributors Zahn/DLDS and Nowak Dental Supplies, before starting Only Smile Supply in February 2009. Her focus is small and medium-sized labs.
"I work for my customers to make their lives as easy as possible," she says. "I still find that a lot of labs ask questions on forums that, if they had good sales reps, they would be confident enough to ask them." Reps aren’t always trained as well as they should be on the products they sell, she adds.
But today’s labs need all the help they can get. "Small labs are struggling," says Studzinski. "Many have had a lot of work taken away from them." Others continue to do well with conventional porcelain-fused-on metal work. "That may be directed from their dentists," she says, adding that older dentists may not be up to speed on new materials. But it’s the high-end labs that will thrive. By "high-end," she is referring to those whose techs continue to learn new techniques and materials, and who work to improve communication with dentists.
"Some labs are looking five years ahead. They want to know where digital impressions are going to go and where they’re going to put them. With our industry turning to more of a technological, computerized model, education is going to change."
But the transition can be painful. "Most techs would consider themselves artists," says Studzinski. "You ask them to draw something, and they’ll draw something beautiful. They’re used to hand-crafting a restoration - physically working with a brush and material.
"But that’s changing with computerization. A lot feel their craft is being taken away from them. All of these techs have gone to school to handcraft things, and now they could be doing those things on a computer with a mouse. They have to learn their craft all over again."
Sidebar:
Push toward certification
The U.S. Department of Labor predicts that 11,000 dental technicians - out of today’s pool of 53,000 - will leave the field by 2014, due either to career changes or retirement. While significant, the numbers aren’t alarming. That’s because new manufacturing techniques, especially CAD/CAM, are speeding up the process of making restoratives, meaning the industry can be productive with fewer people on the job.
"There’s no lack of people," says Bennett Napier, co-executive director of the National Association of Dental Laboratories. In fact, the lab community doesn’t fear a lack of technicians so much as a lack of qualified technicians.
Today, approximately 6,500 technicians - about 12 percent - are active Certified Dental Technicians (CDT). That means that they have been in the profession at least five years, have taken two written and one practical exam, and receive 12 hours of continuing education annually. Overseeing the CDT program is the National Board for Certification in Dental Laboratory Technology (NBC), an independent board founded by NADL in 1955.
The NBC has a related program - the Certified Dental Laboratory program - designed to ensure that a lab has met specific standards relating to quality assurance, business processes and OSHA standards. More than 300 labs are certified today.
NADL offers another program designed to audit the quality assurance systems of today’s labs. The program, called DAMAS, for Dental Appliance Manufacturers Audit Scheme, requires a third-party onsite inspection. Based on ISO 13485 medical device standards and geared to the dental lab environment, DAMAS is intended to ensure that the lab complies with U.S. Food and Drug Administration regulations regarding quality system/good manufacturing practices. It also provides the dentist with assurance that the laboratory is tracing raw materials by patient case.
At press time, seven states - Texas, Florida, Oklahoma, South Carolina, Kentucky, Ohio and Illinois - had dental laboratory regulations in place. A number of others were working on developing them.
Grass-roots support
Far from being an edict from above, oversight of technicians and labs is supported by most in the industry. A June 2009 survey by NADL and NBC showed that 76 percent of dental labs support mandated registration of labs with a state agency, and 82 percent support a mandate that at least one technician in each lab be a Certified Dental Technician.
In addition, the survey showed that 92 percent of laboratories support a requirement that both foreign and domestic dental labs disclose where a restoration was manufactured and provide a list of patient contact materials used in each restoration. Forty-two percent support point-of-origin and material disclosure to the patient at the time of final invoice from the dentist to the patient. (While labs are required to disclose to dentists the point-of-origin of their restorations, dentists are not required to pass on that information to their patients.) Another 44 percent support such information going in the patient’s record.
While labs support higher standards for their own technicians, they also believe that dentists need to be better educated on what the lab does. In the same survey, respondents said that 77 percent of the lab owners and Certified Dental Technicians have to routinely select the materials to fulfill a prescription from a licensed dentist, further underscoring the need for formal education by dental technicians.
Editor’s note: For more information on certification programs for dental technicians and dental laboratories, go to www.nbccert.org and www.nadl.org.
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