Len Batcha06.12.06
A Solution for Your Logistical Nightmares
How Third-Party Logistic Providers Are Offering Sensible Solutions For OEMs' Pressing Needs
Len Batcha
Technical Transportation Inc.
Len Batcha Technical Transportation Inc. |
One of these facets is cost avoidance. This is more than just a catchphrase in today’s business world—it’s an integral component of a successful business plan. Reducing expenses through third-party service contracts not only benefits the bottom line, it also allows an organization to focus on its principal business. And for medical equipment manufacturers and the millions of people who rely on their products for diagnosis and treatment of various illnesses and diseases, focus is of utmost importance.
Another important aspect of cost avoidance is productivity, which varies greatly depending on an employee’s strengths, weaknesses, training and knowledge. When an employee is overburdened with wide-ranging job responsibilities, attention to detail suffers, strengths become less obvious and productivity in-evitably decreases.
Within the medical device industry, in particular, sales personnel and field service technicians are often stretched thin as they travel from location to location servicing equipment or delivering presentations to generate sales. In addition to these activities, they are usually required to store, transport and unpack the unit they are demonstrating, assemble it and set it up at the potential end user’s site. This cumbersome process not only distracts the sales professional from his or her area of expertise, it also diminishes productivity in terms of the actual time spent completing the sale.
On the other hand, the OEM employer is left in a position of ensuring that each of its sales or service personnel is capable of completing these tasks, which reduces the candidate’s availability and extends the job training period.
A Logical Solution
Third-party logistics providers (3PLs) can help overcome these challenges by managing demonstration programs. From a cost-savings standpoint, 3PLs can free the sales teams from storing and handling their own equipment, making them more mobile (fly vs. driving). Using this method, sales teams can increase the number of demonstrations they perform, assist in reducing asset inventory by strategically locating the demonstration equipment in more conducive geographical locations and increase the utilization of the equipment for demonstrations while managing inventory.
The selection of a medical equipment 3PL requires acknowledgement that logistics is not typically a manufacturing company’s core competence. Quality 3PL providers take the time to evaluate the entire logistics process and determine specific areas within the operation process where they can add value through specialized service. They also should be able to recommend specific areas where outsourcing would make more sense to get the job done and assist with implementation of that process.
Many important factors, including product dimensions, shape, weight, packaging and physical handling, must be taken into consideration. OEMs face challenges in proper packaging and protection of their equipment. Today’s 3PLs can assist in creating a design for packaging, assisting in protection of the product in transit and ensuring smoother delivery at customer’s site. Packaging and crating also can be designed for reuse, which can reduce costs for future shipments.
Gathering data regarding availability and the required delivery dates to determine which transportation route to take is equally as important. Depending on the distance and time frame, a decision must be made about the best way to move the product from point of origin to end-user destination. Furthermore, a 3PL also must determine if a specific delivery date and time are required based on the end customer or sales/service person’s convenience or availability. This information-gathering phase may take a few sessions to complete, but it enables logistics providers to identify specific areas that need improvement or where the company is experiencing difficulty.
In addition, delivery time can be a major concern, since OEMs cannot book the revenue until the product is delivered. In this regard, they are faced with the following dilemmas: Does the OEM pay expedited transportation costs to ensure the product is delivered in the shortest cycle? Or does it opt for a slower transport and longer cycle time?
Both options present certain disadvantages. If an OEM pays for expedited shipping (higher cost), it cuts into net profits and could exceed what the customer is willing to pay. The slower transit option may result in order cancellations due to delayed delivery. Either way, the OEM would not be able to record revenue until the delivery is performed.
A medical specialized 3PL can provide options for shorter cycle transportation, with cost being equivalent or slightly higher than “slower mode” transport. The end result is the OEM delivers the product faster, recognizes revenue faster and reduces order cancellations.
Logistics providers also can assist in coordination of transportation as well as transit time and delivery appointments with customers to ensure all necessary details are defined, communicated and provided in advance. Some 3PLs can additionally offer services such as on-site unpacking and assembly of the unit at the end-user’s location. If an OEM ships each unit 80%-90% assembled from its facility, for example, a logistics provider may complete the remaining assembly onsite with unpacking, assembly and cleanup taking approximately one to 1.5 hours per unit—saving time and money.
Working With 3PLs
Suppliers should offer written training instructions and/or a video to explain every aspect of the process in detail. Giving these materials to every delivery technician well in advance of the preset delivery and installation date will allow time for technicians performing the assembly to review the procedures and have questions answered by the logistics provider prior to the delivery. If on-site equipment failure or questions arise during a delivery, the provider may then involve the OEM’s service department for more detailed troubleshooting and repair.
After a delivery is completed, an efficient 3PL will review the process from beginning to end to determine if any improvements are necessary; in addition, the provider will conduct continuous evaluations to ensure outstanding service and compliance to end users as well as the OEM’s satisfaction.
As with any business relationship, there are some challenges to overcome during this process. Time constraints involving design and production of the product often leave little time for training before the unit is actually delivered and installed. However, with proper preparation and a good working relationship, these difficulties are readily overcome through mutual cooperation.
With third-party vendors, communication is often an issue that is one of the more complicated aspects of this relationship. However, the importance of communication cannot be overlooked, because it is the only way to ensure successful delivery.
Suppliers must work diligently with their customers to determine what type of packaging may be required or if an air-ride equipped truck with specialized material-handling equipment should be utilized for a specific shipment. In the case of air freight, the 3PL must determine the sensitivity of the equipment beforehand to ensure that takeoff, turbulence and landing will not produce too much of a jolt for the machine to endure.
For medical manufacturers, it is of utmost importance that the 3PL provider understands the organizational structure of medical facilities in order to anticipate the potential logistical challenges that may arise. For this reason, a medical-specialized carrier is a crucial link in the chain, because such carriers have vast experience in dealing with challenges related to facility constraints such as dock height accessibility, elevator size, stair access, room size and power source availability when delivering to medical facilities.
This equipment will be delivered, unpacked, set up and tested by 3PL personnel before it is ever touched by a medical professional. Photo courtesy of TechTrans. |
In addition, 3PLs are adept at utilizing reverse logistics programs to overcome the obstacles OEMs are faced with when replacing a competitor’s equipment, upgrading their own equipment or swapping for a newer model. What should OEMs do when they get to the end-user’s site and another piece of equipment needs to be replaced, returned or disposed? A 3PL can provide alternatives to reduce costs by removing the old equipment at the same time it is delivering the new equipment—existing packaging can even be used when returning the old machine. Furthermore, a 3PL can provide a method for the return or destruction of the old equipment in the field, which will eliminate the transportation costs of returning it to the OEM.
When sending out new equipment, OEMs are also faced with decisions involving how many machines to send at one time. Rather than sending shipments out one at a time for higher costs, the OEM can send the product in bulk to a 3PL location that is geographically closer to the end-user distribution network. By doing so, the 3PL will reduce the cost of transportation because it usually has strategic storage locations all throughout the United States. The 3PL can provide storage and handling for a short-term period, and the OEM will not have to invest in material handling labor or long-term leases of bricks and mortar for warehousing and distribution purposes.
Eventually, however, most pieces of equipment may break down or become obsolete. In most cases, especially in the medical field, it is critical for a piece of diagnostic equipment to be back up and running in as little time as possible. A field service rep, who can’t carry replacement parts, may or may not be able to fix it on site. In such a case, a 3PL can set up strategic stocking locations for replacement or critical repair parts to be dispatched within hours as opposed to days or weeks. This ensures an OEM’s customer will always have the peace of mind knowing that a replacement part or product is never far away.
On the back end of the 3PL/medical OEM relationship, 3PLs can provide a sophisticated system to the end user to provide automated methods for order placement, transportation, coordination and shipment tracking—complete with auto notification. Many 3PLs will also provide a single-source customer service point of contact. Combined, this will almost always guarantee smooth transactions and quality service.