In the second segment* of our new FutureLAB series, LMT takes a look at the fate of the small lab and trends that will shape the laboratory of the future, as seen by respondents to our survey of U.S. laboratory owners/managers who employ more than 50 technicians.
If the predictions of the large lab owners come true, the fate of the small laboratory is on shaky ground. Over half of the owners/managers employing more than 50 technicians who responded to LMT's FutureLAB survey believe the number of small laboratories will decline in the next five years.
While this is not a new prediction, it's one that has yet to come to fruition: the demographic breakdown of laboratory sizes has remained relatively consistent over the past 25 years, with 83% of U.S. labs employing less than six people. However, the difference is that today's conditions create a market prime for consolidation. Specifically, respondents cite three key catalysts that will accelerate a decrease in the number of small operations:
1. Owner retirement, not surprising given that almost half of the laboratory owners in the industry are over 55 years old. Although the "graying of our industry" is occurring among operators of all laboratory sizes, it's the smaller lab owners who are more likely to simply close their doors rather than selling the business, because so often the owner is the lab.
2. Growth in CAD/CAM technology. While this technology opens doors to new services and provides a potential solution to our labor shortage, it also poses an economic challenge to the smaller lab owners because of the high equipment costs. "As pricing of quality restorations becomes more related to volume and efficiency because of automated technology, those who are not positioned to compete may find it time to align themselves with those who can," says Chang Kim, owner, Prowest Dental Lab, Calgary, Canada.
3. Price-competitive offshore laboratories. Small labs are more apt to feel the squeeze as more posterior work goes overseas, however, respondents also predict an increase in small niche labs: ones that focus on personalized attention and high-end work in an effort to combat the impact of offshore outsourcing.
Already, these factors have had an impact: in the past five years we've seen an increase in the number of small labs being bought out by larger labs+ and our respondents clearly expect this to continue. "I see fewer, but larger operations dominating the industry," says one respondent.
The lab of the future
If small laboratories are on the wane, what will the typical laboratory of the future look like? "More technicians will spend more time with a computer mouse than an instrument or handpiece!" says Jim Spallino, Great White Dental, Santa Maria, CA. Another survey respondent, Dell Dine, vice president of research and development, National Dentex, says, "There will be fewer technicians and increased laboratory profits as our business changes from labor-intensive to capital-intensive."
In fact, the next 20 years will bring changes that we cannot even envision today. As one respondent notes, "small- to medium-sized labs could become a thing of the past. Impressions will not be taken as we know them today and most will be digital impressions, or possibly something more advanced than that. Technicians will have to change to survive."
Owner Gregory Thayer, Thayer Dental Laboratory, Mechanicsburg, PA, predicts that the combined impact of automation and offshore outsourcing will result in a C&B lab with several distinct departments:
1. A small, very high-end cosmetic department doing anterior and esthetic cases and demanding higher prices.
2. A general lab department that relies on CAD/CAM technology to design cases.
3. An outsourcing department that will be packing and unpacking most of the posterior PFM units to send to offshore labs.
Due to tremendously rapid advances in data capture and automated technology, respondents feel the next five years will prove to be a very critical time for research and development. "Aligning our companies with the most comprehensive and long-term technologies that will truly help us compete globally will prove to create difficult and potentially hazardous choices. We do not want to fall prey to the 'guinea pig syndrome', investing hard-earned dollars and valuable time into technologies that don't get us into this arena or that become obsolete before amortization," says Chang Kim.
Clearly the laboratory of the future will also be guided by the choices that owners and managers of all size laboratories make. "If all goes well with the growth of the global economy and we make good decisions by choosing the right weapons (technologies) and picking the right battles (markets), it could be the greatest period of time ever for our industry," says Kim.
FutureLAB Survey respondents sound off on what the lab of the future will look like
"There will be a larger percentage of restorations moving to all-ceramic CAD/CAM with more pressed-to-metal and pressed-to-zirconia in the posterior, with some pressing in the anterior. Mostly higher-skilled technicians will hand-craft just for esthetics and characteristics. Hopefully digital impressions will be realized and effective. This will open up a whole new world to the dentist, lab and patient." --Survey respondent
"Machinery and computers are going to take over, like they did in every other industry." --Gregory Thayer, owner, Thayer Dental Laboratory, Mechanicsburg, PA
"We will see a different look to the crown and bridge department. Fewer technicians will be needed to produce the substructures. We will also see much larger labs with the ability to purchase the costly CAD/CAM machines. Consolidation will continue to accelerate because of the owners getting ready for retirement." --Survey respondent
"There will be fewer technicians and increased laboratory profits as our business changes from labor-intensive to capital-intensive." --Dell Dine, vice president of research and development, National Dentex Corp.