Can't Someone Else Do It? Outsourcing Can Help Dental Labs Adapt to Changing Market Conditions

Dental labs have many challenges today. There is a shortage of labor in dental labs and fewer programs that train new ones. Also, a commoditization mindset prevails in many lab owners' pricing strategies, which decreases profit margins. Further pressing profit margins are the rising costs of business in an inflationary market.

During times like these, dental labs could try to produce as many cases as they can in-house to stay in the black. However, some outsource work to trusted partners that can help carry the load.

We explore why dental labs need outsource partners today, what is possible for labs to outsource, from digital design to fabrication and more, and what they can do to avoid problems with their customers—and the government—from outsourcing.

Travis Zick, Co-Founder and Director of Finance & Acquisitions for Apex Dental Laboratory Group and former President of the National Association of Dental Laboratories (NADL), says having an outsourcing partner is essential in today's lab environment. Several factors might inspire a lab to leverage outsourcing options rather than producing it themselves. For example, if the type of product the doctor needs isn't something the lab has the staff for or if there is not enough business with those products to justify additional staffing, having an outsourcing partner is essential.

"We're doing more things than we've done in the past, as far as types of products and treatment plans, so that's a significant reason to outsource," Zick says. "Another major factor that drives outsourcing is the labor shortage, which could mean you don't have enough technicians to do the work you are getting. The employee shortage has been real for everybody, but especially for the dental lab industry."

Tim Torbenson, President of evo820, LLC, an FDA compliance consultancy for dental labs, agrees that staffing issues are hitting labs hard. Many of his clients have staffing issues, which leads to increased labor costs through wages for overtime and more remakes because of pressure to do more at the same time with fewer people. Outsourcing provides a great way to manage workloads and reduce these costs when a lab's digital production is at capacity.

"Outsourcing provides that release valve," Torbenson says.

Jack Marrano, CDT, Director of Signature Prosthetics, Absolute Dental Services, says that smaller labs with limited staff feel the labor shortage felt even more keenly. For example, if a designer is on vacation, that smaller lab might not have a designer that week. However, he says larger labs also feel the sting of this labor shortage. Labs of all sizes get in a production bind when technicians get sick. Moreover, the uncertain future of the dental laboratory labor pool means labs will continue to use outsourcing partners.

Marrano says another part of the problem is that the easy-to-fill positions requiring technicians with less skill and experience are not what a lab needs. Instead, dental labs need technicians with higher degrees of skill, knowledge, and expertise. Unfortunately, the dental lab industry lacks personnel in those areas.

"We're staring down the barrel of a massive vacuum of experienced labor in dental technology. Plus, if you look at the demographics and the breakdown, we currently do not have any new blood coming in," Marrano says. "Therefore, it helps to lean heavily on the outsourcing available to laboratories today."

Marrano says tactics like outsourcing provide ways for labs to adapt to the market conditions they face today. Dental labs must think of different ways to continue providing quality products while also having the ability to scale. Otherwise, the lab won't be around much longer.

"If you don't grow, you die," Marrano says. "We are all looking for ways to grow without sacrificing quality."

Having Someone Else Handle the United States Food and Drug Administration (FDA)

Zick says another good reason to outsource is the changing FDA regulations and compliance requirements for dental labs that produce some dental restorations. While most core products a dental lab makes are exempt from FDA oversight, some products, like abutments or sleep appliances, are not. Producing these products opens the dental lab up to FDA audits and inspections, which can carry steep consequences if the FDA cites the lab for non-compliance. Zick says an excellent solution is for the lab to outsource these products to an FDA-compliant partner.

For example, Zick says implant services have recently been a high-growth area for dental lab services. However, many parts of the implant fall under FDA oversight. So, if a dental lab wants to offer implants produced in-house to meet this rising demand, it will require committing resources to comply with FDA regulations.

Another less complicated option is for the dental lab to work with implant companies, like Dentsply Sirona, Straumann, and Nobel, that are FDA-registered and compliant. Dental labs can buy the implant parts from the manufacturers and then produce the final crown, which falls outside of FDA oversight in-house.

"That's what we do because it's just not worth the headache," Zick says.

Torbenson agrees with this strategy, adding that using an FDA-compliant outsourcing partner means labs can bring to market any devices that have FDA requirements, such as Titanium custom abutments, screw-retained crowns and bridges, surgical guides, sleep appliances, and orthodontic aligners.

"It's a tremendous benefit to offer those devices under someone else's 510(k) or FDA compliance," Torbenson says.

However, Torbenson emphasizes that any dental laboratory offering these devices must use an outsource partner that is FDA-registered and should be able to prove the partner is compliant during an FDA audit. Otherwise, the FDA could shut down the lab's use of the outsourcing partner, which could end up leaving the lab's clients that want those appliances hanging. Torbenson recommends labs get a confirmation that the outsource partner is FDA compliant in writing every year to protect against that scenario.

"You should request a copy of their recent FDA Establishment Registration and repeat that exercise every February," Torbenson says. "Be sure you protect your company from a surprise shutdown of your source because of FDA-compliance issues."

Moreover, if the outsourced partner is offshore, Torbenson reminds the United States labs they need to be FDA-registered as an Initial Importer. Many labs are unaware of this FDA requirement. Historically, Torbenson says labs have not experienced shipment interruptions regarding this regulation. However, he says United States Customs is increasing their intensity on shipment inspection from offshore suppliers and holding many more shipments until customs officers can confirm the supplier's FDA compliance.

"If you have been receiving shipments from any foreign outsource, best to get FDA-registered and eliminate the potential having cases held for an extended period," Torbenson says.

Other Cautions for Working with Outsourcing Partners

Disclosure is another area that Zick would caution labs to bear in mind about outsourcing. Per the NADL, 12 states have either administrative or statutory laws that regulate dental labs and their technicians. These laws usually require dental labs to register with the state and disclose materials and point of origin for the delivered restorations to their clients. However, Zick says that many labs in these states don't comply with these laws, nor are dentists aware of the regulations. Nevertheless, Zick says up-front communication about where the restoration is produced and disclosing this information with delivery is crucial for the lab.

"A key factor to keep in mind if you want to utilize an outsource partner for some of these things is to be honest and tell your client that you're not making it and who is," Zick says.

Many dentists will not care who produces the restoration, Zick says. Instead, the clients call because the dentist likes working with the lab, and they have a relationship. The dentist trusts the lab to handle those details as long as the lab can vouch for the outsourced partner's work. To live up to that trust, Zick advises labs to know their outsource partners and to have consistent quality control (QC) reviews for the delivered cases.

"We all care about our relationship with our client and the end-of-the-line patient care," Zick says. "So, you need to know who you partner with and know they have the proper compliance in place."

Marrano agrees that it is essential to have a QC check when the cases come back to ensure the restorations meet the lab's standards. Also, the lab should track the outsourced cases to ensure the appliances come back on time.

Moreover, a lab should also have a QC check on their data entry. If the lab has something specific that they want for their cases, it should put those details in the case notes for the outsourcing partners. Outsourcing partners will do what you tell them to do, Marrano says.

"If you don't pay attention to your data entry, there is a good chance you will get a restoration that you aren't happy with," Marrano says.

Also, Marrano cautions lab technicians to measure success differently on outsourced cases. Differences exist between a restoration that meets the industry standards for shape, contour, occlusion, and margins and a restoration with all those things plus the technician's signature touches. Besides, technicians can always add those final touches after the case returns. Marrano sees putting those final artistic touches on the case as a far more efficient use of that technician's time than handling it end-to-end.

"When you look at the benefit of an outsource partner, you have to look at the benefit of having a restoration that meets the standards apart from the artistry element," Marrano says. "When you use that metric, overwhelmingly, labs will say that outsourcing has great value and that their partners are an indispensable part of the way labs do business today."

The Benefits of Using an Outsource Partner

Some labs want to outsource as part of a digitalization strategy. Torbenson tells smaller labs that want to digitalize to start by investing in a quality scanner, giving the lab access to outsourcing opportunities.

When a client is considering adding another digital manufacturing process, Torbenson suggests starting with the CAD capability and leveraging an outsource manufacturer to build the lab's client base. Then, a lab can confirm they have the business to justify the equipment investment.

"Too many of our clients invested in the CAD and the equipment in manufacturing that did not meet their expectations. So, when you build the caseload, then purchase the equipment and bring the manufacturing in-house, it is a solid plan that will get you an ROI," Torbenson says.

Zick agrees using outsourcing partners to manage equipment investment timing is a sound strategy for dental labs in today's business environment. He says that a new mill or 3D printer costs tens of thousands of dollars, and to get a predictable ROI, a lab needs consistent work for that equipment. Zick thinks offering products that require that equipment and then outsourcing those projects until the lab builds enough business to bring those cases in-house makes good business sense for a dental lab today.

"If it's something new where only a certain printer can produce a specific product that your doctors are asking for, then use an outsourcing partner at first," Zick says.

Zick likes this outsourcing strategy for labs that want to offer digital dentures. Many doctors like the idea of digital dentures, especially when they hear about 3D-printed dentures, Zick says. However, unless the dental lab has technicians that can design dentures digitally and printers to make them, this product is difficult and expensive to introduce in-house.

"But you can immediately start offering them if you use a third party," Zick says. "Then, once you build up a little demand, you can run the ROIs for doing them yourself, comparing the benefit of bringing it in-house versus continuing to utilize an outside partner."

Absolute Dental Services has several outsourcing partners for their lab. For example, they order all of their milled gold crowns from Argen. They also use Bertram Dental Lab for their cobalt chrome frameworks.

Like many of the complicated restorative lab processes, waxing and casting a traditional partial is a skill that requires knowledge and experience. However, experienced technicians didn't pass on those skills to the next generation, Marrano says, and then many of them retired. Therefore, Bertram is a resource Absolute can lean on for those cases rather than scrambling to train someone on staff.

In addition to cast-partial frames, Zick says another area that is increasing in popularity for outsourcing is design. He says the shortage of trained designers drives this trend, with design centers filling that technician void. For example, FullContour by 3Shape and Evident CAD designs allow labs to send scan files and get completed case designs back in 6 to 24 hours.

"And they cost us less than it would to have a trained staff designer sitting around hoping there's work for them to do," Zick says. "These design centers can do some complex designs or different types of cases that you aren't used to. For example, they can do your denture design or partial design. They can even do surgical planning for you. So, it opens a new line of products for labs that may not be able to offer those in-house."

Torbenson also encourages labs to outsource design to 3Shape Automate, the artificial intelligence (AI) design service for posterior crowns and mouth guards, which he describes as an incredible advantage for dental labs.

"It is a very efficient, affordable, reliable, and precise service available with the bonus of not falling under FDA regulatory oversight," Torbenson says. "This is a tremendous advancement in our industry in its infancy that will reshape CAD and outsourcing."

Marrano agrees, adding that Absolute Dental Services is the most extensive user of 3Shape Automate for AI design of nightguards and single crown posteriors. He appreciates the efficiency of uploading the case to the cloud, getting the design back in seven to eight minutes, and then sending it to their 3D printers. Plus, he thinks the designs are fantastic.

"AI eliminates the grunt work," Marrano says. "It frees up a technician with a lot of skill and experience to do the other jobs in the lab where those skills are needed."