Dentsply Partners With Chinese Laboratory to Offer Restorations to U.S. Laboratory Customers
Posted Apr 28, 2011 in Industry News
Although rumors had been circulating, Dentsply Prosthetics has now formally announced its partnership with an affiliate laboratory in China through which it is offering competitively priced restorations to its U.S. laboratory customers. The announcement, made at the 80th annual CAL-Lab meeting in Chicago, was the topic of conversation at Mid-Winter events. LMT talks with Steve Jensen, vice president and general manager of Dentsply Prosthetics, to learn more.
LMT: Why did Dentsply Prosthetics choose this business model?
Jensen: We've spent the past two-and-a-half years researching this concept, including taking more than 20 international trips, assessing regulatory issues and studying customer behaviors. There is a significant expansion in laboratory work moving offshore to Eastern Europe, Asia and Latin America. We estimate that about 10% of U.S. restorations are currently being made offshore - which represents four to six million fixed units per year - and we predict that it will grow to 25% by 2010. With the expansion of offshore work and the growth of chairside CAD/CAM technology, we estimate a permanent 5% to 8% per year decline in the fixed area of the U.S. restorative market. These are trends with which we and other manufacturers are wrestling.
We felt we had three options: do nothing; expand our services to include chairside technology, which we refused to do; or provide a service to help our laboratory customers compete with offshore labs that sell direct to dentists.
LMT: Can you explain the new service?
Jensen: It is only available to Dentsply Prosthetics laboratory customers in the U.S. who purchase Ceramco porcelain or DeguDent alloys, and to our licensed Vitallium® laboratories. We are not offering this service to dentists.
The restorative options are limited to PFMs, cast crowns and bridges and Vitallium partial denture frames; the service does not include Cercon®-fabricated restorations or restorations made with Trubyte® products. All restorations will be manufactured with FDA-registered materials and Dentsply will assume all regulatory risks for the materials in the products offered.
LMT: If a laboratory that is not currently a customer starts buying product from Dentsply, can it take advantage of the service?
Jensen: We have a limited production capacity. If a new customer comes on board, they would be eligible but not immediately.
LMT: Can you give us more details on the logistics? For instance, what is the turnaround time? The fee structure?
Jensen: It works similar to any other laboratory outsourcing service. The customer sends its cases to a central location in the U.S. and we handle shipping to our affiliate in China and back to the U.S. laboratory. The turnaround time will be between five and seven days for traditional PFM restorations and perhaps a day longer for partial denture frames.
I can't comment on the specific fee structure except to say that it will reflect the labor-saving advantages of the location.
It's also important to note that our affiliate that is fabricating the restorations is purchasing Dentsply products at U.S. prices. We wanted to make sure that U.S. labs are on equal footing.
LMT: How big is the laboratory?
Jensen: It has about 200 technicians, all of whom are graduates of a three-year dental technology school in China. Before going into a production role, they spend another six weeks training in the laboratory to learn the anatomy and shading preferences of U.S. customers.
LMT: Your announcement has caused quite a stir in the industry. Some laboratory owners and managers have voiced concerns that Dentsply, the laboratory product supplier, is becoming their competitor and they resent the idea of buying product from their competition. What do you say to them?
Jensen: We don't view ourselves as a competitor because we don't sell outsourcing services to dentists. That's our defining principle - we don't sell to dentists.
Our industry is changing. Dealers are establishing unique relationships with manufacturers. Laboratories are selling products. Many dentists and dental clinics have their own laboratories or chairside CAD/CAM systems. The lines are all blurring and we're all wrestling with those marketplace changes.
LMT: Although Dentsply is specifically not making this service available to dentists, some laboratory owners have expressed their skepticism about your future plans. Perhaps this is because they've seen several Chinese labs that started out with the same business model of selling only to U.S. labs and then changed their policy and are now selling direct to U.S. dentists. How do you respond to them?
Jensen: We are committed to not doing that. The U.S. laboratory market is a significant portion of our business and, to build on that, our strategy is to continue working with labs and to invest heavily to support them with products and services. For example, we have a long-standing history of maintaining the distribution models of the companies we have purchased. When we bought Austenal, we kept the Vitallium distribution channels intact. Once we're committed to a strategy, we stay committed.
The reaction from the industry has been mixed: some customers are concerned, some are still processing the concept and others are interested in taking advantage of the service. It's a range of emotions you would expect - and that we anticipated - but some of the emotions stem from misunderstandings and rumors. To that end, we encourage all customers, potential customers and interested parties to call Dentsply at 800-877-0020 and have a one-on-one conversation so we can communicate the facts and clearly explain the details of the service.
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