Understanding the Procurement Process: Source, Procure, Pay

DSOPro: Describe your background and what brought you into the dental procurement arena:

I served five years as a U.S. Army ranger. When I got out in 2015, I moved to Portland, and then to Los Angeles where I started my first business, which had nothing to do with dental procurement. We helped nonprofits market and fundraise. While I was doing that, I was working on my MBA at Pepperdine University in Malibu, California. That’s where I came across the dental industry and some of its issues, and the procurement problem in particular.

In 2017, I was part of the Executive MBA program. A classmate was involved with a major implant company and he was always talking about implants and dentistry, but I didn’t pay much attention. About a year into the program, we had to do a project on macroeconomics. He brought up the supply chain issues DSOs and offices with multiple locations where having and what the manufacturers and the suppliers were dealing with. We walked through the core procurement issues and discussed how they were depending on the suppliers to solve those problems, which the suppliers didn’t have the capabilities to do.

I enjoy creating technology solutions for complex problems, particularly for people who don’t really use technology. If you can bring technology into their life and make it better, that’s a really cool thing. This sounded like an interesting problem to solve. For the seven months left in our program we focused all our projects on the concept. We decided to attend the Association of Dental Support Organizations (ADSO) meeting as students. So, I went and asked the CEOs at the meeting if this was an issue, and they all said yes. At that point we realized, “Okay, we got something here.”

I asked as many CEOs who would listen if they would allow us to do some consulting workshops. We wanted to go to their organizations and dive into their problems and actually see it, which we call “go to gemba,” which is part of the kaizen methodology of the Toyota manufacturing process, where you increase efficiencies. To go to gemba is to go to the source. 

We did a variety of consulting gigs with some of the bigger groups, as well as some small groups, and started building gap analyses of their current processes. By the end of the MBA program, we had an idea of what we wanted to build and in January 2020, along with my co-founder Chris Rathgeb, we released our V1 of CureMint. That’s the origin of CureMint.

DSOPro: What are some examples of the types of problems you were addressing?

First there’s a problem caused by the vertical structure of an organization. You have the headquarters, where the CEO and others are obviously concerned about growth, revenue, and operations—cost control, cost management, processes, and running an efficient business. In dental, all the actual execution is happening at the practice level, and the practices are spread out in individual business units. There is a gap between what we call the operational side at the practice level and what’s happening at the organizational level. In dentistry, specifically, there’s this really fine line between control and freedom.

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It’s a really big deal in dentistry where you don’t tell a doctor what to buy. And by law, you can’t do that. But as a business, DSOs want to encourage them to buy the product of value—like not buying Ferraris if you can use a Toyota. There is a conflict around purchasing and pricing. How does the management team control what can be purchased, at what prices, etc? Can you actually create economies of scale with all the practices to get the best outcome?

The second problem is because they’re separated, they don’t always know what’s going on. If you have 100 offices, how do you know what they are buying? Or if they’re buying what you would like them to? How do you ensure they’re not buying too much or not enough? They often don’t know any of that and are literally just going into it blind.

Yet, they’re paying for the products, and paying for the outcome of the business, because these products result in revenue as they’re serving patients. So, it’s about addressing the whole concept of lacking visibility into what’s happening at individual practices.

If dental organizations put any sort of new processes in, it usually slows down the practice. So, it’s just like the wild west, where they do whatever they need to do. And when the headquarters team gets a bill at the end of the month and do their financial statements, it’s all reactive. Everything’s so reactive in this space. Those are the highest-level issues here.

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DSOPro: How can a program like CureMint help?

When you get into the specifics of the procurement function, we always approach it this way: source, procure, pay.

Source

First, we look at sourcing. Who are your partners? What do you buy from them? Are you getting the best price? How do we negotiate with them? That process is extremely manual because you’re having to go to each of your vendors individually. Before the procurement step, you ask them all for your order history so you have the data and can negotiate pricing with them. You then aggregate all that to create Request for Proposals.

You’re looking at months of work just to figure out who you want to buy from. Often this doesn’t even happen because it’s so much work. Instead, they’ll just ask their different sales reps for their best price. But there’s no competitive component and it takes so much time to do this. Only the biggest dental organizations can get it done that way. The emerging market and mid-tier DSOs just don’t have the capacity or expertise to do it. This results in a lot of wasted money.

Procure

“Procure” is the day-to-day operational side. Without a procurement tool like CureMint, the issue is “how do I buy my products?” Say you have 15 different suppliers. They have 15 different logins, and everybody has their own username and password. And that’s if they are even doing their ordering online. People are still text messaging, faxing, and sending emails to place orders. If you’re trying to run a $100 million company, that’s not the best way to do it and that’s where the management team loses control of the process. CureMint provides one central place to order.

When it comes to the actual ordering, you’re looking at budgets. What is the budget for your practice? Typically, dental organizations create a budget based on the revenue or the production that occurred that month or the previous month. If I generated a million dollars in revenue and my budget is 5% of that, my budget is $50,000. Does the staff know that? When they’re making day-to-day decisions on what to buy, do they know if they’re on track with the budget? We found that if this data was on a spreadsheet, it often was outdated and nobody followed it. This means there is no proactive control in place in real life.

The next hurdle is what we call “approval workflows.” If someone places an order, how do I proactively manage what you’re about to spend? Let’s say you buy a $100,000 piece of equipment and I just get a bill. How do I actually control whether you can buy that or not? That approval workflow didn’t exist.

The last part of the puzzle is accountability of items, which is receiving things. This really hit home with PPE specifically with the advent of COVID. When I ordered things, did I actually get them all? Or did I get just a partial order? That leads us into the final section of issues, which is on the accounts payable side.

Pay

In most organizations, staff will buy something, but they don’t pay for it right away. They pay 30 days later or have a net 30 agreement or something like that. Imagine being a controller or an AP person at the headquarters. With 100 offices placing orders, you are receiving 10,000 invoices a month, and you have no idea who ordered it, if the pricing was right, or if they received what they ordered. You may have no information on that, but your job is to just take the invoices at face value and pay them.

When the invoices come in, which may be via email or paper mail, the AP team needs to input them into their accounting software to save the data and then generate checks. Whether they’re paying with paper checks or by credit card, they have to generate payments for all these different invoices and monitor the timing of it all. Then they have to close their books.

That’s the process and the pain points from a dental organization perspective. Now amplify that by the vendor side. They’re sending out an invoice, but not getting paid on net 30. It may take anywhere from 45 to 60 days. They also may not know what invoices were sent out or what got paid. If the DSO doesn’t pay on time, there’s a conflict. There is a huge problem around the supply chain in dentistry. With our product, we call the next step the “payables module.”

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DSOPro: What are the best ways to fix the problem?

Private equity groups and investors looked at the dental industry and saw so much inefficiency and all these practices doing these things by themselves and wondered if they were able to group them together and take on the operational side at scale, if they could increase the profitability in the industry to the point that it would be worth the investment. That’s what’s going on in the space right now. If we group it together and create efficiencies, there’s a lot of money to be made for investors and the business. That’s where tools like CureMint and the other technology companies come in.

DSOPro: How does it work?

We consider ourselves a procure-to-pay solution. We manage procurement and accounts payable. Our product allows dental organizations to have one central place to place orders. And then we provide proactive spend-management controls over that for the leadership or management team.

We improve what they’re already doing. We put all your vendor relationships into one system to eliminate having to log into 15 different platforms. You just log into CureMint and can see all your data in one place. It will show you what you are spending, what you need, and what you should buy. The office staff can place an order with multiple suppliers in one system.

Our software then automatically generates those orders to go to all the different vendors for fulfillment. This creates a lot of efficiencies. Staff can also create procedure lists to help them place orders. And it’s independent of any one supplier. That’s the order experience.

Other aspects, like budgeting, approval workflows, and dashboards are also included. For example, one approval workflow might be where a lead assistant places an order and the office manager approves it before it goes to the vendor. The regional manager could approve it first, too. We call this transitioning from being a reactive organization to being proactive. So, before it’s actually spent, you have the ability to make those decisions as a management team.

The last part of the puzzle is a big one. When we’re talking about procurement, a lot of people don’t realize that these are connected. There is the ordering part, paying for things part, and the need to document this in your financials and accounting system. We help with accounts payable and the management of all your invoices in one place, too. Our software digitizes PDF invoices and matches them all to the orders. Your AP team can log into CureMint and see all this in one place. Then it connects the invoice to the purchase order. AP can now see the invoice, who ordered it, if the price is acceptable, and if the items were received without ever having to bother the office staff.

The outcome is that we can push all the data into the DSO’s financial software and house it all in one place so the CFOs can run their reports. We connect purchasing day-to-day operations with accounting and financial needs. This addresses the vertical challenge between headquarters and the office staff and connects the silos inside of the dental organization between operations and finance. We’re actually bridging the gap both vertically and horizontally.

If there are mundane tasks that can be automated with technology we shouldn’t have human beings doing them. The job of a human is to be creative, solve problems, etc. We analyze your business and provide a technology solution to automate the mundane tasks and free you up to do more valuable things like patient care. We strive to create an opportunity for businesses to be more innovative and move the industry forward.

DSOPro: What are the basic dos and don’ts for small and large dental groups?

I’ll start with don’ts. In summary, a lot of people think the goal of procurement as something to save money, which is correct. However, they often assume shopping around for the lowest price point is the way to save money. Don’t confuse cost reduction with cost management. That’s our slogan.

When you look at costs, and at the outcome of your business, the costs are not only is the widget $4 instead of $5 or whatever. There is also the process of getting the items on time. What’s the cost if they’re not on time or if the product doesn’t work? What’s the cost for your team to process that invoice? What’s the cost of taking 10 minutes to find it at $4 versus $5? The concept we always explain is, don’t look at saving money on a widget as your cost reduction strategy, look at the entire cost of ownership of your business as the thing to analyze. There are multiple levers to pull to drive down cost, it’s not just about the widget.

Other factors to consider are if you have a relationship with that vendor, and will the vendor provide the services you need if your staff doesn’t know how to use this new thing? People are also misled by incentives for a platform to lead products to another vendor. The real way to reduce cost is consolidating purchasing power, driving consistency to what you buy. The idea is to get into the game of volume and consistency to create predictability and drive cost down.

From a “do” perspective, do look at procurement as the total cost of ownership. Do identify the biggest needle mover or the biggest problem. Is it the price of products or the time it takes to order them, or are you overspending? Are you proactive or reactive?

When one of our customers, a really big DSO, implemented CureMint, they didn’t do anything else differently. They bought from the same people. They didn’t negotiate pricing. But they saved nearly a million dollars in their first year by just having control over the process.

Within two months of using CureMint, the CFO got a call from one of their main vendors asking if there were any issues because of their reduction in spend. He said, “No, it’s just that we know what’s going on. We approve things before they get sent out.” Their catalog used to be around 90,000 products and now it was 30,000 because it was under control.

I think the biggest thing is to look at how to control costs and remember it’s not just about the widgets. When you look at your profit and loss statement, it’s not just supplies. You can move that needle only a fraction of a percent. Costs are really about people and time. Figuring out how to increase the efficiencies so you can do more is the real cost savings.

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About the Author

Brandon McCarty is the cofounder and CEO of CureMint, Inc. He is a two-time startup founder who prides himself in being a business generalist with a focus on using technology to solve complex problems. Brandon’s current project has him leading CureMint which aims to help the dental industry transact business cheaper and more efficiently. Before CureMint, Brandon cofounded Corporate Giving Connection which helped Nonprofits and Corporations work together to accomplish their altruistic goals. In addition to his Startup experience, Brandon served five years as a member of the elite 75th Ranger Regiment, where he participated in nearly 70 combat missions overseas. Today, Brandon resides in the Raleigh, NC, with his wife and two children.

CureMint empowers dental organizations with a cloud-based source-to-pay platform that manages their entire procurement lifecycle in one easy-to-use place. CureMint’s Procure module delivers a streamlined ordering experience that office staff will love while arming managers with the tools necessary to gain full control and visibility across their organization. CureMint’s Pay module removes the costly blind spots that exist between procurement and accounts payable departments by removing silos and streamlining invoicing and other A/P processes.