Unlocking growth – healthcare & medical distribution
The healthcare and medical distribution marketplace is changing at speed and scale. Here, Head of SAP, James Peel looks at how SMEs can grow rapidly, without losing stability.
Rapid growth can be a blessing for many SMEs. But, if they’re not prepared for the sudden surges in demand, it can be a curse too. The healthcare and medical distribution sector has experienced more spikes in demand than most in recent years.
Sudden, exponential growth is a huge opportunity as well as a challenge. So, how can SMEs avoid the risks and turn a concentrated period of demand into long-term, sustainable growth?
What are the factors that are driving growth?
Many factors contribute to an increase in demand. However, three key drivers have shaped the healthcare and medical distribution sector in recent months.
The impact of coronavirus
The coronavirus pandemic has had, and will continue to have, an incredible impact on every area of the industry. Due to the unprecedented nature of the crisis, the sector is learning lessons every day on how surges in demand can be dealt with effectively and swiftly.
Changes in procurement practices
Government contracts with GPs have changed. Today they are much more business-focused, meaning that the procurement of medical consumables is front-of-mind at all times. Alongside this, a greater number of buying groups are now looking to have supplier framework agreements in place for their members.
Also, private sector partners such as Virgin are gaining contracts to provide services to NHS trusts. These partners then seek to source their consumables and gain supplier rebates as their involvement in the industry grows.
The stockpiling mindset
Thanks to the problems of supply following Brexit, a culture of stockpiling has become embedded at all levels of the sector, with users being increasingly worried about operating on low stocks.
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What does this mean for medical and healthcare distribution SMEs?
For distribution SMEs that are already established in the sector, the challenge is clear: how can they use the current climate to propel growth plans without overreaching and coming unstuck later on?
Thanks to industry legislation, gaining momentum in the sector requires heavy lifting at the outset. Businesses cannot afford to put the brakes on that forward motion, regardless of the opportunities.
This is only exacerbated by the requirement to commit to distributor stocking agreements—something that is becoming more common among manufacturers.
Within many SMEs, these elements combine to create a fear of change. Paradoxically, by standing still these same businesses are increasingly unable to cope with spikes in demand.
"We decided to implement our selected ERP solution (SAP B1) in partnership with Thinc because we felt they took the time to fully understand our requirements, business goals and pains.
They worked with us in a transparent and consultative way to guide us through the solution specification process."
Beyond this obvious challenge, there are other aspects of the operation that could cause a business to become unable to fulfil orders, or maximise on opportunities:
- When transaction levels increase rapidly and swiftly (as with the COVID-19 crisis), an outdated database and IT infrastructure will quickly show its limitations, holding the business back from successfully riding this opportunity to grow.
- Profit can be reduced by a lack of data on key customers, accounts and order information, even if overall demand is soaring.
- Reliance on people rather than systems will eventually lead to cracks in logistics and warehousing operations. Leaning too heavily on a small number of knowledgeable staff during a demand surge is bound to fail before too long.
- Sales teams are under pressure to process orders and ship stock. That means customer notes are not getting saved, making follow-up activity more difficult. This short-term approach will come unstuck as the spike of demand slows, and sales teams seek to build on existing client relationships.
In short, rapid growth now doesn’t automatically lead to continued expansion over the long-term. But handled correctly, it can—and to dramatic effect. To take full advantage of the opportunity, a robust ERP may well be the answer.
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Getting started on a new solution
When it comes to implementing a system that can address both the challenges and significant opportunities, there are two key areas to address:
1. Business goals
Start by considering where you see future growth for your business and build a solution that fits that need.
For example, if you have already established that the potential is going to come from large customer accounts with an annual rebate, make life easier by automating the rebate report and have this sent out on email directly to customers.
Ensure the solutions you explore will take you far into the future. Transforming from SME to large enterprise is one of the most challenging phases in the development of any business. Having the right processes in place now could make this daunting journey substantially smoother.
Use our assessment tool to gain an idea of whether your current systems are likely to meet your future needs.
2. Legislation compliance
Understand what the red lines are for your business operations in terms of legislation compliance, now and in the future.
Recent EU regulations for companies involved in the distribution of medical devices are an example of this. These regulations apply to a range of devices and provide an obligation to store various traceable digital data, including barcodes, against each item in an item master record.
Making sure that this is easy to do and maintain in any new system, for your expanding range of products, is very important.
An ERP could be the answer
An ERP can be transformational. If specified and installed correctly, and with the correct training applied, it could help you potentially overcome all of the above issues within a single project.
When is the right time to invest?
The main challenge with any implementation is making sure you pick the right time to invest in the improvements required.
“Always try to choose a managed services provider. That’ll mean you are getting someone who can look at the whole picture, rather than a small part.”
Fortunately for businesses currently experiencing a surge in sales, an ERP programme can be designed and delivered with minimal disruption to your daily activity. So momentum needn’t halt whilst you plan for the future. Of course, this will require the recruitment of a trusted, impartial ERP provider.
That way, you can be sure the solution you are being advised to use is right for your business, rather than right for the provider.
And always try to choose a managed services provider. That’ll mean you are getting someone who can look at the whole picture, rather than a small part.
Any potential ERP provider who is confident about their solution and operates openly and transparently will ask to understand more about your current business operations.
Will implementation disrupt momentum?
Like a lot of large tasks, once you start breaking things down into sections or project phases (and analysing the ROI available for each step) then a suitable roadmap starts to appear.
This activity can help make a daunting project manageable, in terms of the investments in both time and finance.
Most ERP providers should have a full implementation methodology, which is all about creating control and identifying risk. This should cover both to your day-to-day business operations and the overall success of the project.
Rushing to make knee-jerk decisions without due diligence often can result in being spat out with a failed ERP implementation in worse shape than when you started.
Only commit to investment once you know you have the right assurances from your potential ERP implementation partner in place, along with a detailed ERP specification.
This will ensure you ride the wave of demand all the way to the beach. And, when you get there, you’ll be in far-better shape than ever before.
Speak to James
James Peel, Head of SAP
James works with small and medium sized enterprises all over the UK to help them achieve the business benefits associated with use of SAP Business One.
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Gary McKnight Sage team member
Gary works with ambitious SME leaders to help realise their business goals. His experience and knowledge of Sage products is unrivalled and he spearheads our drive for customer service excellence.
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