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In response to Claus Dampmann's letter, Labor--Not Material Costs--is Key Factor Driving Selling Price of Chinese Crowns, in your June/July issue, please allow me to point out some things he failed to mention. While it's true that ProLab Solutions, Inc. and many other offshore labs are FDA-, ISO- and DAMAS-compliant, many of the American labs that buy crowns and bridges from them are not. Also, even though ProLab Solutions is "very supportive of full disclosure"¯ the same can't be said for a great number of its lab customers. Dampmann is...See more either naive or less than forthright when he states that offshore outsourcing is only labor driven. If a 10-person lab grossing $1.5 million per year decided to outsource 50% of its work to China (for $40 per unit or less), five technicians at that lab lose their jobs, American dental suppliers lose 50% of that lab's annual purchases, American refiners lose 50% of the lab's scrap business, and the list goes on and on. It's irresponsible to claim that all of this is driven by the "lack of new technicians entering the dental laboratory profession." By facilitating the cheapening of our profession, the offshore business model has helped make it a less attractive field to enter and, consequently, many of our technical training programs have closed their doors. I personally know of several labs that have fired most of their technicians because they can get restorations from China much cheaper than those they themselves can produce. Finally, let's call a spade a spade. In the end, outsourcing to China is a greed-driven business model that's undermining the future of dental technology in the U.S. ~ Bill Thomas, CDT, President Smile Science, Inc. Cleveland, GA
Hi, Being a reseller of CAD CAM equipment we have found it to be very interesting that many decision makers in dental labs want help figuring out if it's the right time to buy. From a business perspective it's all about return on investment (ROI). So, for the sake of this exercise let's look at the cost of borrowing $10K over 5 years. Based on 21 manufacturing days in a month the $10K turns out to cost about $8.50 per day. So, a $27K scanner will run a little less than $25 per day. That said, if you are outsourcing models and the model base...See more work flow is costing $25 more than just sending a digital file for manufacturing you can logically see that it does not take much work to get to a break even or to become significantly more profitable. In addition, you need to add in the labor to scan and design the cases in your facility. This cost can very widely with efficiency of the individual(s) performing this operation. On the other side of the coin, you gain the savings of the cost of packaging and shipping (in addition to time savings). In reality, these two costs may be close to equal, so, it's a wash. In conclusion, labs outsourcing 20 plus units a month are at the break even point to purchase a scanner and CAD software that is in the cost range of about $27K. In conclusion, one can figure a daily cost of about $8.50 per $10K borrower over 5 years. Hope this post can help some of those in question. Please feel free to add comments. Bob
Dear LMT: Why is everything made in China? Here are some possible reasons: 1. People in China work for very little money. 2. The Chinese work ethic is extremely strong. 3. The fundamental cost to manufacture products in the U.S. is much higher than China due to: health insurance for employees, business insurance, minimum wage requirements, taxes, and regulations from OSHA, EPA, FDA, NLRB and countless other government agencies. 4. U.S. trade barriers are much lower than Chinese trade barriers. 5. Chinese currency is artificially...See more deflated by the Chinese government. Despite these possible reasons, there are opportunities for foreign goods to get a foothold in the Chinese market. In general, quality control is a concept that isn't completely understood by many Chinese manufacturers. Most Chinese manufacturers are driven to be the lowest-cost producers. In addition, the Chinese are very adept at making "fake" goods. These two factors result in a general mistrust of Chinese-made goods by ordinary Chinese people, and especially those in the middleclass who can afford higher quality foreign made products. This phenomenon is true in just about all product categories, and especially dental products. For example, the Nobilium division of CMP Industries LLC manufactures the Demco grinder, a relatively simple alloy grinding machine. While many Chinese-made replicas of this machine can be found at dental trade shows in China, Nobilium sells about 1,000 Demco grinders in China each year at a price that's about double the cost of the Chinese- made product. The small difference between the Demco grinder and the Chinese-made counterpart is the quality of a key part--the spindle--that requires some precision machining and ultra-high quality bearings and springs. Another example is Nobilium's line of partial denture alloys and materials. We exhibit at three or four dental trade shows per year in China and offer non-precious alloys made from virgin raw materials. Nobilium's presence at these shows and high quality products gives Chinese dental product consumers a feeling of confidence they're willing to pay for. In the 60s, "Made in Japan" meant low quality. The Japanese fundamentally reformed their thinking by developing quality control systems to engineer quality upfront into each and every process so that the end result was consistent and high quality. William Edwards Deming, a U.S. manufacturing expert, has been credited with starting this remarkable revolution from low to high quality in Japan. If China can reform its approach to quality as did the Japanese, the Chinese people may eventually have more trust in products produced by their fellow countrymen. This may make U.S.-made products less attractive in the Chinese market; however, this will also increase production costs in China. As a result, Chinese-made dental prosthetics will be less competitive in the U.S. market, and then maybe U.S.-based dental laboratories will see a gradual upswing of business. Let's hope this comes true! ~ Devon Howe, President & CEO, Nobilium/Ticonium (CMP Industries LLC), Albany, NY