Finding a Cure for an Ailing Post-Sales Function
What Medical Equipment Manufacturers Can Learn From High-Tech Industries, Including the Benefit of Partnering With a Third-Party Logistics Provider
Bill Hook, Vice President, Global Strategy, Healthcare Logistics, UPS
In the not so recent past, the time and cost associated with post-sales activities for medical devices and equipment had a grim prognosis.
Now, however, lessons can be learned from observing the success the high-tech industry has achieved by providing post-sales services to its customers. Healthcare companies can clearly see that when it comes to managing parts and equipment there is a favorable diagnosis: bottom-line improvement.
Rather than spending time on securing, tracking and delivering parts, companies with the best post-sales solution already have a system in place that ensures easy and reliable access to their parts. The right solution also helps companies determine how and where to store high-value parts. The system ensures fast, accurate and committed customer service and support, which are all part of the most important value proposition.
Today, some third-party logistics (3PL) providers offer post-sales service capabilities along with strategically placed field stocking locations (FSLs). From these FSLs technicians can quickly acquire repair parts or even have the parts delivered directly to a customer’s business. When an end-of-runway distribution center is part of the post-sales solution, further opportunities exist to implement very responsive and streamlined inventory replenishment services.
According to Transport Intelligence Ltd., a London, England-based research firm, “Service parts logistics—a component of post-sales—has a strong role to play in the medical technology sector. The relationship between manufacturers of medical technology and the customer is often a close one. The largest machines often have distinct types of ownership—they may be leased by the customer or even wholly owned by the manufacturer. Therefore, the relationship between the customer and the equipment manufacturer is an ongoing one.”
From large medical equipment manufacturers that build magnetic resonating imaging, tomography/X-ray or ultrasound machines to makers of small devices, often there are commonly shared concerns that make them good candidates to consider when marketing post-sales services. These manufacturers know that the purchase of their products will include maintenance that can be expensive to offer and often require labor-intensive technical expertise. Also intrinsic to the post-sales process is the obligation—actually, the necessity—because the delivery of crucial healthcare services is at stake.
Naturally, of utmost concern to the end-users of this critically important equipment and those responsible for the manufacture and sale is maintaining its uninterrupted operation. The more expensive the equipment, generally, the more important it is for it to be operational at all times. The critical role the equipment plays in treating injuries and saving lives makes it so.
Outsourcing: The Key to Smooth Operations
Healthcare companies face regulatory and quality control obligations that can include strict distribution and other control requirements, such as the adherence to a chain of custody, that create a separate set of challenges. Luckily, many 3PL providers can provide solutions that would otherwise require a significant investment of time and money by the manufacturer. A reputable 3PL provider not only establishes capabilities that are sensitive and responsive to government regulations and industry standards, but also works closely with customers to understand and manage their expectations.
What’s paramount for healthcare is to maintain high standards and guarantee order inventory and delivery accuracy. Working with a knowledgeable third party can provide a process to manage existing inventory and document the lifecycle of the product.
Healthcare manufacturers also have an opportunity to turn an outsourced supply chain into a competitive advantage in five key ways:
1. Integrated 3PL providers deliver enhanced economies of scale. Distribution costs can be reduced, because the 3PL partner creates operational efficiencies and spreads its investment in equipment, facilities, labor and systems, as well as purchased transportation, across a broader customer base.
2. Leveraging the breadth and scope of a 3PL provider’s service portfolio puts smaller or newer industry entrants on competitive footing with their larger business rivals. They can tap into value-added combinations optimized to meet healthcare industry needs but differentiated for product requirements, service responsiveness and coordinated channel flow.
3. Outsourced service providers have turnkey shared utility solutions that require minimal capital investment. The healthcare executive then can assign the balance of the financial resources to meet strategic business objectives. With a 3PL partner, the options expand.
4. Beyond bottom-line efficiencies, outsourced logistics providers also can positively contribute to their clients' top-line sales growth through high-quality, customer-focused service delivery. Leading corporations in all sectors of the global economy understand that product and price differentiation can contribute to marketplace success, but consistent customer service delivery drives it.
5. Better informed and more demanding consumers and channel partners make good customer service crucial to operating a profitable business. Medical and surgical product manufacturers have learned from their peers in the high-tech and consumer electronics sectors that a properly configured supply chain allows for visibility and product-use projections. Service delivery then is reinforced with consistent, reliable performance and proactive communication.
As healthcare products become more sophisticated and fragile, it is all the more important for companies to look at a 3PL provider for specialized resources. A 3PL partner can handle expiration management, pedigree systems as well as climate and security controls. Using such an outsourced provider can be less expensive in the long run when a company lacks the requisite expertise, infrastructure, systems and skilled personnel in-house.
A 3PL provider also may provide customer-facing services to resolve issues and chargebacks on behalf of a manufacturer. This isn’t conceding control but, rather, is ensuring accountability to manufacturers by having performance measurements in place.
Selecting the Right 3PL Provider
Due to the important role a 3PL provider plays in meeting the many needs of its customers, hiring a 3PL provider is a strategic decision. Before entering in the business relationship with a 3PL partner, it is important to get a thorough assessment when evaluating its ability to perform. The right answers to these key questions will help determine the best 3PL provider from an operations, financial and customer service perspective—and even a cultural fit. Price is an important consideration but not the only element to consider.
• Does the company have the infrastructure (distribution centers or FSLs) to store, distribute and transport finished medical devices, device components and repair parts?
• Does the 3PL provider have the transportation network to provide a range of services including same day delivery, international air express and air and ocean freight?
• Will the 3PL provider be able to align its operations and capabilities to meet your company’s existing operation and growth strategy?
• Is the 3PL provider knowledgeable and capable of adhering to the applicable healthcare–related federal, state and industry rules and regulations?
• Can the 3PL provider provide visibility into inventory levels and provide reports that show how and when inventory replenishment will take place?
• Does the 3PL provider have the systems and expertise to move your goods through the import/export, customs brokerage and freight forwarding processes?
• Are the products and services in the 3PL provider’s portfolio diverse and up-to-date enough to meet your current needs? What about your future needs? If not, to what degree are the disparate elements offered by a non end-to-end 3PL provider then integrated?
• Are the cost efficiencies and pricing being offered dependent on maintaining a certain volume of shipping? What happens if there is a decrease in the shipping volume?
• Can the 3PL provider demonstrably enhance your brand by providing high-quality and reliable service delivery to your customers?
• How will command and control of the operation be handled internally and externally? Will there be a need to have an employee of your company onsite at the 3PL provider’s distribution center to ensure agreed-upon procedures are followed?
• Is there an established and effective protocol in place to guarantee effective distribution of critical information in a timely and consistent manner?
• Is the 3PL provider financially solid enough to maintain reliable and continuous service for the long-term?
• In those instances where there may be short- or long-term issues, will the 3PL provider have the ability to mitigate your company’s risk or will its performance add to the risk?
Given the industry’s intense competition, market channel diversification is a mantra for many companies. Traditional medical device companies, along with newer biotech and equipment enterprises, increasingly are working together to produce systems that link drugs with devices and diagnostics. Their products are sent to consumers through multiple distribution channels: traditional wholesale, to retailers for sale over the counter and directly to consumers’ homes.
These diversified channels can provide new revenue streams and new growth areas. However, manufacturers’ gains can be lost and critical errors made, particularly in transportation and distribution, when dozens of participants are involved.
Outsourcing supply chain operations is increasing as a way for companies to regain their focus and remain competitive despite new market challenges. A 3PL provider can help streamline the process—particularly in post-manufacturing handling and distribution.
In fact, more than two thirds of medical device, in-vitro diagnostics and pharmaceutical manufacturers surveyed in recent years by consultants at PRTM said they use or plan to use a 3PL provider soon. With a 3PL partner, products can be moved quickly from a manufacturing site to a store shelf or dispensary. Market introduction is accelerated because the distribution channels already are in place.
3PLs Improve Operations for Old and New Companies Alike
The methodology used to redesign a supply chain for well-established healthcare companies also can benefit new companies. A 3PL provider can help both older and new companies more efficiently enter new markets as they migrate from legacy systems and infrastructure to newer technology. New medical device companies can eliminate supply chain problems altogether by using an outsourced partner. By doing so, the company can focus on product development and marketing. And by using a 3PL partner that has multi-client facilities, a company can benefit from sharing the costs of IT and distribution infrastructure.
Post-Sales Capabilities Help Meet Critical Business Needs
Heavy competition in today’s global market is a given. Therefore, companies in every sector must look for ways to provide better customer service and support as a means to strengthen and improve their brand. Excellence in these categories will set a company apart from its competitors.
The right 3PL provider can offer such effective post-sales capabilities to achieve this brand recognition goal. With the right provider, medical device and equipment manufacturers can concentrate on what they do best: create and produce products that improve overall quality of life.
A study published by Transportation Intelligence and the consulting firm Cap-Gemini revealed that when freight movements of healthcare products are involved, there are eight key items to consider. They include the ability of the third-party logistics (3PL) provider to:
• Provide proactive problem notification and resolution
• Offer operational reliability
• Track and trace capabilities
• Deliver price and economic value
• Establish effective service and sales relationships
• Provide global scope and capacity
• Offer value-added services
• Ensure the reliability offered by a proven and trusted brand
As each company’s needs differ, the ranking of the eight will be different and the degree of importance to a company or relative weighting will differ as well. Ideally, however, all eight will have some level of importance in the overall evaluation.
If you are considering partnering with a 3PL provider, also pay attention to the 3PL provider’s existing physical footprint, its regional locations, plans for future growth, connectivity with the different modes of transportation options and how it can help your company access international markets.
The company should have the ability to forecast parts planning that is linked directly with inventory management and returns, field tech support and strategically placed inventory locations. All of these functions should be supported by reliable and advanced IT and visibility systems for consistent control and performance.