How do you generate cash flow from servicing your medical device rather than treating service as an afterthought?

The trick is to view service as another business opportunity and plan for it during development. 

In our new series, In Focus, our team will highlight different aspects of manufacturing. Our goal for this series is to help you prepare for manufacturing and provide tips to manage your customer expectations while building a successful business for your product.

In this first interview, Julia Grenon will be speaking with our director of operations, Brett Creech. She’s been in the medical device field for 14 years. 12 of those in manufacturing and service.

 

Julia

Britt, before we dive into the business side of service, can you give us a definition? What exactly is service and why is it so important in the medical device industry?

 

Britt

Thanks for having me on! I’m very passionate about service. It’s something that means a lot to me. I think that a lot of people have service as an afterthought; they don’t consider it as a “transfer to manufacturing” piece and then they have to scramble when they get their units in the field to provide service to their customers.

 

It’s important that you educate your customers about service because it can be a positive to do so. People generally are prepared for their electromechanical devices to have service at some point, as long as you tell them that it’s going to happen. The last thing you want to do is tell your client this thing will never fail. It’s 100% guaranteed not to work forever. If they are given no insight into future service solutions, they will be very disappointed when something goes wrong. Naturally, if you can warn them that the device may need a repair–say, every two years–then they prepare for that. So, instead of being upset, they’re welcoming that service and avoid having to scramble to service their device because they didn’t think of the fact that their unit can fail once it gets in. 

 

Medical devices have electrical mechanical components and they have wear and tear. It’s just a natural aspect of what an electrical mechanical device is. Your customer needs to know that they need to be prepared that at some point their medical device will need service and repairs.

 

There is also the option for depot repairs, where a customer can return their device to a location and the repair happens on site and is shipped back to them. Or there’s field repairs where you send a person out in the field to go to that person’s location, repair their device at their site, real time.

 

There are pros and cons to both of these types of repairs. The pro for depot repair is you’re not invading someone’s space to do the repair, but it takes a little longer shipping back and forth. That takes a couple of days, whereas a field repair can happen much faster but you interrupt their practice. So, you need to think about the pros and cons of each of those.

 

Julia

In your experience, Britt, who typically performs service; is it the customer is that the contract manufacturer? What have you seen? 

 

Britt

I recommend that if you’re going to do deep repairs, you utilize your contract manufacturer. They already know the device. They manufacture it for you. They’re going to be the experts who can troubleshoot, get that unit repaired and back out in the field as soon as possible.

 

If you’re going with field service or even a combination, I recommend that the customer utilizes their own internal resources because they need to be the person engaging with their customers and maintaining that relationship. As a contract manufacturer, we’re behind the scenes. You are the one handling your customers expectations, managing those relationships, and we’re backing you up, doing the service repair work for you, but you get all the credit.

 

Julia

So we’ve defined what services we’ve talked about and who should perform service in which situations. When during the development process do you think someone should begin considering service for their product?

 

Britt

You should really be thinking about service early on, but by the time you’re transferring to manufacturing, you really need to have it locked down as part of the process of transferring it to manufacturing. You want to go ahead and plan out what’s going to happen once you deploy medical devices out in the field. For instance, how are you upfront selling service agreements to your customers? Are you going ahead and talking to them about service?

 

It’s just like Geek Squad at Best Buy. They tell you right away at the point of sale of a computer that, hey, you should go ahead and purchase this Geek squad agreement because at some point your computer is going to fail and that’s how you manage expectations.

 

Be sure to communicate future repairs that may be needed upfront, and keep on hand the parts you may need for repairs. That way, you’re not scrambling with lead times on parts and can quickly have units shipped to your facility, get them repaired and send back right away to reduce downtime for the customer.

 

So service is really an opportunity to continue to build trust with your customer outside of just the sale of the device. 

 

Julia

You’re continuing to build the relationship.

 

Britt

Right! You want them to be confident that if something happens you can get it fixed quickly.

 

At my previous company, I both built and repaired machines. Once, I had a client whose machine went down at 8pm, and they had customers lined up the next day to use their medical device starting at noon. So, I got on a plane that night and got to their site by 8PM. I fixed their unit and then jumped right back on a plane and returned home. But I had a customer at that point for life because they were happy that I understood that they had scheduled customers lined up at noon. They understood that they were asking a lot of us and we were able to meet their needs. And from there on out, they were spreading the word about our medical device and how great we were.

 

So sometimes I think people think of service as a negative, but it actually can be a positive and it can actually build that relationship if you’re prepared for it. Our team was always prepared to fly in the split of a second because we knew that we were field service engineers, but we also had the ability to overnight units for depot repair, and made sure that we were on top of that to build those relationships.

 

Julia

So where did you fly to? 

 

Britt 

Albuquerque, New Mexico. 

 

Julia 

Wow. 

 

Britt

Yeah, I flew in that night, Got there at 8AM the next morning, fixed their unit, and was back at the airport at 10AM the next day.

 

Julia

That’s a fast trip!

 

Britt

Very fast trip. Not much sleep either. 

 

Julia 

But I’m sure it really helped that customer feel confident and know that they were taken care of. 

 

Britt

Yeah, definitely. I was happy to do it.

 

Julia

So what are your tips on helping people really change their perspective on service? Not seeing it in a negative light, but seeing it as just another business opportunity and another way to build trust with their customers? 

 

Britt

I’d say the first step is to do research. When I first got into service and units were failing, we found ourselves repairing parts constantly. I wanted to figure out a solution to this problem. 

 

So I went to Lowe’s. I already needed to buy a washer and dryer for my home, so I went and spoke to a Lowe’s representative, I asked them, “What’s the failure rate on these?” I didn’t think they would have the answer. But instead, he gave me a full report card that showed me every device there from dishwashers to washing machines and the failure rate.

 

And it was eye opening to me. It made me realize that failing products is normal. And he also went ahead and told me about service agreements and options to make me feel more comfortable with my purchase. 

 

It’s the same thing with medical devices. You need to prepare that, and ask yourself some questions: 

 

“What is going to be my failure rate?” 

“What is the mean time to failure?”

“What are the most likely components to fail?”

“And then what are people willing to pay for a service agreement to have peace of mind?” 

 

So you need to know your market. Start lining out those service agreements and figuring out what was going to make you profitable, because you need to understand what’s your highest cost item that could fail. This will help you incorporate that into the cost of the service agreement while also ensuring it’s a rate that people can afford. You also need to ensure the cost of repair is not more than the cost of the device, because then clearly they’re not going to buy the agreement. So you’ve got to be smart and tactful.

 

And I’d also say that you need to prepare your sales people in the field to go ahead and start selling these right away. I recommend you build a service team who can call customers once they’re at the one or two year mark and ask them if they want to renew their service agreements. And the agreement should also be part of the original point of sale. 

 

Julia

Yeah, just ready to go right off the bat. Right?

 

Britt

Yep! If I am a customer receiving a medical device and I get all the information upfront, I would be grateful, and see it as a point of assurance that if something goes wrong, I know who’s there to help me, I know who to call and what my options are. 

 

Julia

Like you were saying earlier about Geek Squad, you know they’re there if your computer breaks. So it’s just a point of comfort rather than a point of distress. 

 

Britt

Right. Yeah. It makes them feel prepared, it makes the process easier and that’s the goal.

 

Julia

Awesome. Well, that was some really good information, not just service, but also how to change your mindset and turn service into a positive rather than a negative.

 

Coming up, we will dive deeper into service and different aspects of manufacturing.

 

Thanks for talking with us, Britt! 

 

Britt

Thanks for having me! I can’t wait for the next chat to share more information and stories. And if anyone out there has any further questions, feel free to reach out to me. I’m happy to talk about any topics really to service.