Manufacturers in the healthcare industry are being squeezed from all directions. Growing government regulations and taxes combined with changes in how hospitals pay for products are putting pressure on both costs and pricing. With margins being pinched from both sides, companies are looking for new ways to increase efficiency and reduce operational expenses. That means taking a fresh look at business processes and savings through automation.
According to a recent survey of more than 4400 professionals in the medical device industry, pricing pressure is a big concern.1 Among senior management, 40% of respondents cited “pricing or profitability pressures” as one of the biggest challenges they face. Among companies with 250 or more employees, 58% said pricing pressure is a big challenge.
However, there is optimism in the responses as well. A clear majority (72%) of respondents saw average- to high-growth potential for medical device sales in North America over the next five years. With shrinking margins and growing demand, the need for increased efficiency and profitability in sales order management has never been higher. More and more medical device manufacturers are turning to automation and the cloud to innovate the order-to-cash process, and results speak for themselves. The following are three examples of medical device companies that automated their order-to-cash process and the subsequent impact on bottom-line results.
BioMérieux: Tangible ROI in First Six Months
As a world leader in the field of in vitro diagnostics for more than 50 years, bioMérieux provides solutions for improving patient health and ensuring consumer safety in more than 150 countries through 41 subsidiaries and a large network of distributors. Up until 2012, the company was manually processing 75,000 fax and email orders every year using Microsoft Outlook to manage the process. That meant customer service representatives had to handle, sort, enter, route and store each order by hand. That also meant a total inability to quickly access documents when needed and a complete lack of visibility and customer support throughout the procurement cycle.
Rather than add more staff to process its growing order volume, bioMérieux implemented an automation solution that could easily be “plugged in” to its existing SAP environment. What the company achieved was maximum process efficiency. The average number of steps to process a fax or email order was cut in half from eight steps to four. The average amount of time to process a fax/email order was reduced from eight minutes to two minutes.
BioMérieux saved $67,000 in the last half of 2013 and approximately $173,000 the following year. The company also enabled lean growth. Even with three temps leaving, automation allowed bioMérieux to manage orders without adding staff. The order fulfillment team members reported being more satisfied with their jobs and feeling more engaged once manual and tedious tasks were taken off their plates. Ultimately, bioMérieux leveraged the solution to go beyond order processing to automate service contracts as well.
Terumo: Order Management Efficiency and Business Scalability
Terumo develops, manufactures, exports, imports, markets, distributes and sells a diverse portfolio of medical devices, supplies and accessories. Its medical products are used in more than 160 countries and generate more than $3 billion in global annual sales. Prior to 2012, the company struggled with not having the appropriate system and staff to handle all incoming orders. The company was receiving orders via email as a PDF, which then had to be manually cleared on a daily basis, creating a number of issues for Terumo’s customer care team. Many calls were being dropped due to high fax traffic, and the team was drowning under significant order backlog due to insufficient management resources.
Automation drastically improved the efficiency, decreasing order-processing times by 60%. Even with the amount of inbound customer orders increasing year after year, workflow automation has allowed Terumo to maintain its current staffing levels while freeing up time for its customer care team to focus on more customer-centric tasks. Terumo recently began leveraging a “touchless” process, teaching its system rules for 575 different customer orders for which data entry is now eliminated completely
Medrad: Order-processing Time Slashed by 83%
Medrad, now a Bayer in Radiology company, develops, markets and services medical devices used to diagnose and treat disease. Its product offerings include fluid injection systems for radiology and cardiology, endovascular devices for the safe treatment of cardiovascular disease, magnetic resonance-compatible accessories and equipment services.
Under its legacy system Medrad’s customer support team was processing more than 12,000 sales orders per month via a heavily paper-oriented process. Customer service representatives would manually input data from paper faxes and printed emails into the SAP application. With automation, Medrad’s goal was to eliminate paper faxes and be able to archive documents electronically to reduce costs as well as the time associated with people having to walk to fax machines, manually enter orders and file them.
In 2005, Medrad took the plunge and automated its sales order process adding validation steps for customer support representatives to verify the order via the web interface user form for accuracy. Now, approved orders are sent to Medrad’s SAP application directly. Data from fax orders is captured and automatically populated for order confirmation, rather than manually entered.
With its cloud-based order processing solution, Medrad has automated 72 percent of all incoming orders, reduced order processing time a whopping 83 percent from 8 minutes per order to 1.35 minutes and achieved an order entry accuracy rate 99.6 percent plus. Those enhancements improved customer satisfaction with quicker and more accurate order processing and gave customer support staff visibility with access to archived documents and the ability to view orders within.
Unfortunately for manufacturers, the margin squeeze is only going to get tighter as the 2.3% excise tax on medical devices enacted as part of the Affordable Care Act (and suspended for two years in 2015) returns next year. Companies that implement measures to cut operating costs this year will position themselves to better absorb the tax as well as the perpetual growth of regulatory burdens and global competition. The good news is that software as a service (SaaS) for business process management provides solutions that have a low cost of entry and predictable expense, are scalable and easy to implement, and integrate well with existing ERP systems. In other words, for manufacturers watching every cent of operating expenses, automating business processes like sales order management provides quick and tangible returns.
- Emergo Group. 2016 Global Medical Device Industry Outlook. Retrieved from http://www.emergogroup.com/resources/research/outlook-medical-device-industry