MTS Blog: Ops Elevator Pitch - How to Get the Inventory Management Tool You Need
Often in business, but particularly in the medical device world, the magic elixir that delivers profitability is the combination of a reduction of inventory and an increase in sales efficiency. This desired combination is achieved with the help of a comprehensive inventory management system. If it’s so easy, though, why isn’t every company using this critical technology? Sometimes operations professionals have difficulty articulating the value of an inventory management tool in a way that their Chief Executive Officers (CEOs), who are hyper-focused on growth, can understand and fully appreciate.
Too Much Inventory Can Kill a Growth Buzz
Growing businesses are often in a state of perpetual imbalance. Companies in growth mode are often cash strapped because capital expenses outpace the speed of sales. To grow, CEOs are convinced they need more inventory to fuel sales when in reality sales professionals need technological support to better manage inventory. CEOs spend a significant amount of their time chasing funds to finance growth, and much of their growth expense is tied to inventory.
Historically, the medical device industry's inventory turn rate is 3x per year. Some portions of the industry, like the greater orthopedics market, turn at rates of less than 1x per year. Cash-strapped companies that invest in inventory would be better served to develop a clear picture of where their inventory is, how it can be utilized most effectively, and how to leverage less inventory through greater efficiency. It is of paramount importance that the tool used to streamline inventory management is scalable so as to meet a growing company’s current and future needs.
Cut to the Chase
CEOs care about profitability, efficacy of sales, and efficient use of inventory – in that order. But, they live in fear of growing too fast and of not growing fast enough. Operations can help allay a CEO’s fears while addressing what they care about most through effective sales and efficient use of inventory.
- Increase sales hours by at least seven to ten hours per week. Sales reps waste countless hours – at least a minimum of seven to ten hours a week – driving around finding inventory, calling other reps to track down trays and kits, and locating and filling out forms. A mobile inventory and case management system provides product visibility across the enterprise, enables ordering and replenishment, and streamlines billing. As sales reps decrease the number of hours spent chasing inventory and paperwork, they have more time to build their client base and actually sell.
- Reduce inventory by 25-50% while maintaining 100% visibility. By many accounts, medical device companies are carrying 25-50 percent more inventory than they need in order to successfully serve customers. By cutting out excess inventory and enhancing turn rates, mid-sized companies could decrease inventory spend by millions of dollars annually; in the largest companies the figure is billions of dollars. But, reducing inventory makes CEOs of growing companies nervous. The goal is to articulate the amount of money being lost to poor inventory management and usage. This is done by having the data that enables decision-making about increasing inventory as well as the data that demonstrates the efficacy of sales. A comprehensive inventory management tool provides the visibility and tracking needed to help CEOs make critical, fact-based decisions with real-time information.
- Boost the bottom line by 2-4%. Increased profitability comes from improved sales efficiency, advanced inventory control, amplified operational effectiveness, and enhanced financial accountability. Boom.
And, the sweetener is that an inventory management system that tracks product by part, lot, and serial number from manufacturer to patient provides compliance with Unique Device Identification (UDI) regulations and Food and Drug Administration requirements.
The elevator pitch is simple: A comprehensive inventory management system will boost the bottom line by 2-4 percent by increasing sales hours per rep by at least seven to ten hours a week and reducing unnecessary inventory by 25-50 percent.
The fact is every medical device company that incorporates an inventory management solution from the outset has an advantage over any company that spins its wheels with antiquated or homegrown processes. Growth requires leverage – the leveraging of sales reps and the leveraging of inventory. Only when sales reps are closing deals in less time, with less hassle, and more accuracy will revenue go up, and only when expensive inventory is used with optimal efficiency will expenses go down. The balance this combination strikes makes it possible for profitability to increase and for CEOs to put their fears to rest and make clear, informed decisions that enable their companies to grow.