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MTS Blog: Three Tales Small Companies Tell Themselves about FSL

When it comes to case scheduling and inventory management, small medical device companies have many of the same challenges as big medical device companies.  Inventory is scattered in the field, tracking systems are antiquated at best and slip shod at worst, and sales reps are largely responsible for collecting and delivering product.  For both types of companies – big and small – the results are that they spend significant amounts of capital on excess inventory, their sales reps spend more time chasing inventory than selling, and shipping costs are through the roof.  The big difference?  Small companies, those under $250 million in revenue, are always strapped for cash and can ill afford to waste money that could be put to good use in research and development or marketing and sales.

For most medical device companies, regardless of size, the answer to these inventory management challenges is a Forward Stocking Location (FSL) model.  (Click here to read more about the nuts and bolts of FSL.) 

The benefits of the FSL model are many.  As sales reps are freed from the burdens of managing inventory, sales revenue increases.  Enhanced visibility and reliability lead to reduced investment in inventory.  Additional cost-savings comes from lower operating expenses in facilities, personnel, and shipping.  Finally, the cohesive, closed-loop system delivers improved quality control.

So, why don’t small companies, in particular, institute FSL?  The three reasons given all the time are:

  1. FSL is just too expensive.  This is a shortsighted way to look at this valuable method of case scheduling and inventory management.  True, there are initial costs, but those costs are far outweighed by the millions that can be saved through inventory reductions, decreased operations costs, and increased sales productivity.  Small companies spend much of their time raising capital.  The only way to grow is to spend cash efficiently as new products are developed and sales increase.
  2. Don’t have the medical device inventory needed to stock the FSL.  The beauty of the FSL model is that inventory is reduced, not increased.  Inventory to stock the warehouses and fulfillment centers of the 3PL all comes from existing inventory that is scattered through the field and the sales reps’ secret stashes.  The first step in establishing a FSL is to pull all inventory back from the field, begin utilizing the management software, and fill the shelves of the strategically located warehousing and distribution facilities.  Inventory reductions come from increased inventory turns and utilization.
  3. Sales reps won’t like it.  Right, they won’t like it.  They will love FSL.  Medical device sales reps did not sign up to schlepp inventory around their territory, find hiding places in hospitals for their products, and deal with obsolescent paperwork.  Sales reps are happiest when they are able to increase sales and enjoy a better work/life balance.  By shifting the arduous task of managing inventory from sales reps to the FSL, sales reps save on average about 10 hours per week that can be used to sell or spend time with family.  And, small companies always looking to attract new sales reps will find that satisfied reps are the best way to appeal to new talent.

Few people embrace change slower than medical device professionals, no matter the size of the company from which they hail.  But, small companies have both more to gain and more to lose than bigger, established medical device manufacturers.  Small companies need to be nimble and innovative to stay alive and thrive.  The FSL model helps all companies streamline to become more efficient and effective so they can bring new products to market.  Why not embrace a streamlined approach from the beginning and hold on just a little longer to the allure of being a small company, one that is lean, mean, and a champion of all that is fresh and forward thinking?