How the Medical Device Industry is Responding to Financial Challenges

During the last 6 years, the FDA regulated medical device industry has faced revenue and profitability challenges. The result has been a search for new revenue and profitability, which has included looking for new sources of profit. The field service arm of these enterprises had traditionally been treated as a cost center and a business necessity supporting the sales function. Now, it is being transformed into a profit center, with a substantially new set of goals, tools and KPIs.

The Medical Device industry had first responded to these trends by seeking the usual cost saving efficiencies in their manufacturing and distribution operations, cutting staff and looking to acquisitions and outsourcing of activities. At the same time the increased spending on R&D to produce more innovative products has sought to improve revenue streams.

However, more recently there has been a renaissance in senior management viewing the field service organization for potential profits. Historically this area had been seen strictly as a cost center, charging back to the costs of product. As a result the trend is now to begin managing the field service organization as a line business in its own right, resulting in the following strategic initiatives:

Drive a more compelling value proposition

Companies have been refining their marketing message to provide stronger financial models and value propositions justifying the use of their field service organization by customers. This is targeted at:

• Improving sales against competition
• Selling service contracts at Point of Sale
• Conversions of warranty to service contracts
• Increased service contract renewals

Changing relationships for engineer roles

It is axiomatic that the customer has a more trusted relationship with their local field service engineer than their medical device sales representative. Companies are trying to build on that trusting relationship by:

• Training engineers in customer relationship management skills
• Training engineers to identify potential sales and service opportunities at their customers location
• Improving the collaboration of engineers with the sales team
• New incentives related to team sales
• New standards for hiring qualifications beyond technical skill

Restructuring the Field Service and Sales organizations

Formerly the field service organization and sales organizations in Medical Device companies had little interaction and often had limited territory coverage overlap, so the coordination and cooperation of the two teams was limited or non-existent. This is being addressed through:

• Regionally aligning sales and service organizations such that consistent team coverage can be achieved
• Joint measurement and reporting of sales results with visibility to both teams by joint customer reporting
• Common goals and incentives to drive contract renewals and warranty conversions

Reducing costs with fewer site visits, remote diagnostics, inventory

Reducing costs in field service translates into improved productivity end to end, not just the reduction of staff as in the old model. Initiatives to accomplish this include:

• Reducing the number of unnecessary site visits with improved first call remote problem solving
• Remote diagnostics built into instruments to enable a “predictive service model” to catch problems before they grow to larger costlier issues
• Engineering for serviceability to reduce the time needed on site
• Improved dispatching processes to ensure the right qualification applied

Revise service metric-oriented processes

While all service contracts have service level agreements (SLAs) specifying critical parameters such as time to call back, time to resolution etc, the actual history of companies meeting these SLAs is not stellar, with some studies pegging the rate at 68% on average. To change this legacy, companies are:

• Employing real time data collection of work order information to capture critical details of timing from the first call to resolution
• Process oriented training of call center and engineering staff to improve team collaboration and understanding of the dynamics of SLA achievement
• A focus on the overall customer experience management process

Improving call center first call resolutions

Industry wide it is estimated that up to 50% of unplanned field service engineering dispatches are avoidable or unnecessary, with the root cause often being user training issues or easily reset parameters or calibration resolutions. To avoid this syndrome firms are investing in improving first call resolutions by:

• Increased training of first line call center staff
• Provision of improved knowledge bases and scripts for diagnostic support
• Escalation procedures to second line support prior to dispatch

Streamlining product complaint resolution process

The receipt of customer or product complaints resulting in a service call often results in the processing of regulatory complaint reports and resolution documentation. This burden is costly and companies have been taking action to improve productivity and compliance in this area through:

• Improved training of call center staff on complaint criteria and processing
• Integration of field service operational systems with complaint management systems