Decentralized Distribution

Medical device companies entering the European market, usually commence their commercial activities in Europe, using a network of exclusive distributors across various countries. In this initial phase, distributors place purchase orders with the principal, and distributors are subsequently replenished individually from the principal’s manufacturing site or warehouse, located outside of Europe.

Although this highly decentralized supply chain strategy is an adequate solution for the initial European market penetration phase, when sales develop fruitfully and volumes increase, this strategy also comes with several disadvantages :

• As distributors organize international freight on an individual basis, overall cost related to freight & customs are relatively high
• Distributors will try to optimize incoming freight cost, by placing larger orders, causing peaks in their procurement cycle towards the principal
• Distributors are confronted with cash being tied-up in import VAT payments, for periods up to three months or more
• Distributors may be unaware of customs options, and may therefore be paying unnecessary import duties

European Distribution Center

When European sales volumes increase, it can become attractive for the principal, to establish a European Distributor Center (EDC). The EDC becomes a central warehouse location for the European market, and distributors are being replenished from the EDC.

An EDC can be established using a Third-Party Logistics provider (3PL) in Europe. An EDC allows for products being positioned closer to the market, without the principal having to establish a legal presence in Europe. The EDC becomes an additional storage location for the principal, which is managed from the home location, while the principal continues to invoice from the home location.

Establishing an EDC provides a multitude of advantages for both principal and distributor :

• Shipping in bulk into Europe, results in reduced freight and import clearance cost
• EU Import duties can potentially be avoided, in case of medical devices
• Distributors don’t have cash tied-up in VAT declaration processes
• Distributors benefit from reduced lead times and lower safety stocks
• Distributors can reduce cash tied-up in inventory in transit, due to shorter lead times
• The principal will benefit from a more balanced ordering pattern by distributors

 

Fiscal Representation

The establishment of an EDC, without a legal presence in Europe, requires the establishment of a Fiscal Representative in the EU-country where the EDC is located. There are various service providers, such as tax consultants, customs agents or specialized companies, who offer Fiscal Representation services. However, usually the 3PL partner is the most logical choice to provide these services.

The Fiscal Representative will register the principal for VAT purposes with the local tax authorities, and the principal will therefore obtain its own EU VAT-number. The principal will have to adapt its invoicing process, by reflecting both the VAT-number of the EU distributor, as well as its own VAT-number on the invoice. The Fiscal Representative will take care of the VAT declaration in the respective country.

With an EDC in the Netherlands, payment of import VAT can be deferred through a so-called Article 23 license.

Shipping & Pricing

The establishment of an EDC requires also an adaption of the principal’s shipping and pricing conditions regarding the European market. Usually, the principal applies pricing based on shipment from the principal’s manufacturing site or central warehouse, outside of Europe. The transition to an EDC will require pricing for the European market, to include incremental cost associated with transportation to Europe, as well as storage in the EDC.

Centralized European Distribution

From an EDC located centrally in Europe, the major European markets can be served with a one-day lead time. Depending on product characteristics, market dynamics and customer requirements, the principal can decide to centralize European distribution, and thereby eliminate warehousing with distributors or other local warehouses and storage locations. The advantage of this approach is an even further optimization of the supply chain, by eliminating one more layer of transportation & storage, thereby further reducing overall supply chain cost and decreasing lead times, while increasing supply reliability.

Conclusions

Although the EU single market provides certain operational advantages, there still is abundant complexity associated with operating on the European market. Taking this into consideration, supply chain strategy choices can have a significant impact on the effectiveness and efficiency, and therefore also the profitability, of a European distribution structure.

For more information, please visit also:

https://investinholland.com/business-operations/logistics-distribution/

A traditional definition of Leadership is an interpersonal influence directed toward the achievement of goal or goals. Interpersonal meaning between persons; Influence is the power to affect others; and Goal is the end one strives to attain. It basically says that a leader influences more than one person toward a goal. That is what leaders do every day. Where management is the process of setting and achieving goals of the organization thru functions of management (planning, organizing, directing, controlling), leading really deals with the interpersonal aspects of managers job (change, inspiration, motivation, influence). That is what makes leading tough and why good leaders are hard to find.

During my career, I learned there is no specific reference available to ensure you apply proper leadership techniques in all situations. It will vary on circumstances and normally requires calling on past experiences to arrive at the right conclusion. I learned a lot from previous leaders I had worked for as well as observations from leaders I either read about or was exposed to. I learned that leadership was about setting vision, direction, offering support and giving advice to meet the needs of employees, customers and stakeholders. It’s about being personally accountable for the areas you lead and setting the tone for your organizations. It’s about building relationships to get work done through others. It’s about developing and empowering your employees to excel. But in the end, it’s about RESULTS because that is the true measure of a great or poor leader.

I developed my leadership style by thinking through my experiences as an individual contributor and what I wanted in a leader. Be empathetic, help employees with problems, both personal and work related. Avoid politics and backstabbing. I wanted a leader that trusted me when I earned that trust. I wanted a leader that was both fair and demanding. Someone who I could have a beer with yet confide with in tough times. I wanted a leader who was a friend with a mutual understanding of when the line had to be drawn between friendship and work. Think through some of the poor leaders you’ve worked for or have been exposed too. I knew of one leader who would actually confront his employees in front of others to embarrass them into better performance and belittle them to get to that end. There are others who actually think they are better than you due to their education, affiliations, or work experience yet have never shown results to justify their position of leadership. You can learn a lot about being a good leader from the environment around you and your past experiences. Turn that experience into becoming the leader you want to work for.

Following are some specific “tips to be an effective leader” I’ve learned over the years:

Watch out for “A” players. They can be disruptive if not careful. Many of them worry more about their career then the team. Focus on your “B” players. They represent 80% of your employees and are probably getting most of your work done anyway. They are becoming the forgotten ones who will leave the company. As for “C” players, you shouldn’t have them anyway and if you do, make them solid “B”s.
Do not accept mediocrity. It spreads like a disease.
Work on your speaking ability and presentation skills. It separates some of the best leaders.
Be competitive but not a poor loser
Know your employees and treat them all with respect.
Be systematic, organized & fair
Coaching and Teamwork is your primary duty. I heard a good quote from a football player on a division leading team recently: “When we win together, we all eat”
You won’t need to worry about meeting financial objectives if you lead a high performing team. In fact that becomes the least of your worries
Study leadership. Two books on leadership I’d recommend are Patrick Lencioni’s “The Five Dysfunctions of a Team” and “The 4 Disciplines of a Healthy Organization”.
Good Luck moving forward.

• 59% of your customers will leave if dissatisfied with your service support
• 78% will repurchase when high quality service support is delivered
• 53% will tell others about bad service
• 16% will file a complaint
• 82% will recommend you to others if service quality is high
• A 5% increase in customer retention = 100% increase in profits
• A 1% improvement in customer satisfaction = 3% market value increase

All of these validated metrics illustrate the importance of providing a World Class Service Operation for your customers. The competitive pressures facing equipment manufacturers signal more tough times ahead:

• Most service executives will experience a decrease in their operating budgets
• Decreases in travel, staffing and compensation can be expected
• Contract renewals will become less “automatic” and more scrutinized in detail
• Customers may look to “downsize” contracts and take on more risk
• It will be more difficult to add incremental business
• Almost all customers will expect the same level of service quality at lower cost

Considering the upside to Best-in-Class Post Sale Support, while understanding the issues faced, is critical to success. The following are a few of the key factors that should be used to transition your service organization and achieve many of the metrics listed above:

 

Focus on the Customer

The Service organization has a unique relationship with the customer. Customers are not threatened by their presence. They are not there to “sell” something. They are there to help the customer to utilize an expensive asset. They can gather intelligence like no other resource in an organization. They typically communicate with the customer more than anyone in the business. Utilize regular surveys for feedback and commit to follow-up and improvement. It leads to results as mentioned above.

 

Commit to Service Excellence

Most organizations give this factor “lip service”. They don’t have a real strategy to drive service performance. Spend the upfront time to derive a Vision for Service Support. Utilize Benchmarks to see how others drive success and performance. Ensure it’s consistent with the overall corporate strategy. Then implement an operational strategy using specific and measurable objectives to execute the plan. Use of Key Performance Indicators (KPI’s) will be critical to measure success in implementation especially when compared to Best-in-Class Benchmarks. Set goals for these indicators and drive achievement.

 

View your Service Operation as a Profit Center vs. a Cost Center

Many organizations will look at Service as a necessary evil. They understand that Customer Support is required post sale, but tend to focus more on the next new product introduction, marketing and sales strategies. Budget pressures will force businesses to compromise on resource allocation leading to the chance Service Support is short changed. Data shows that high quality service support can drive increased revenue and high profit margin when service is operated in this way.

 

Utilize Technology

There are exceptional tools available to take care of the customer. Service velocity is key to improved customer satisfaction. Remote support tools to interface with equipment is becoming common place. Predicting equipment failure prior to it occurring is becoming the norm. Access to that equipment remotely decreases diagnosis and response time. Recovery time in today’s environment demands to be measured in hours versus days. Additionally, field support tools to improve field engineer productivity have improved immensely. Wireless smartphones and PDAs, Cloud based Maintenance Management packages to communicate and log data, and integrated GPS services to improve efficiency are essential. Invest in technology to drive your performance.

 

Invest in Your People

In the past, customer facing support personnel were viewed as call handlers and technical experts. Driving a World Class service operation demands more… Field Technicians must be considered Field Professionals. They must dress and act professional. They require superior communication skills. They should to treat their role as if it was their own business. They must work as a team with their Field Sales and Marketing colleagues to communicate the needs of the customer. Investment in robust and effective training programs is essential to performance. In service, the product is your people, the quality of your product will lead to a Best-in-Class support operation.

The five high level objectives were used each year to align all business units, department, and individual objectives to the corporate goals. These are the five objectives:

1. Exceed financial objectives
2. Grow the company
3. Improve quality and productivity
4. Improve customer satisfaction
5. Improve employee growth and satisfaction

Each year specific SMART (specific, measurable, achievable, relevant, and timely) goals were attached to each objective and were measured, monitored, and reported on a monthly basis by senior management. We referred to this as our “Balanced Scorecard”. These goals were used to develop our corporate strategic plan which would then “waterfall” down to business units, to departments, and to individuals in the development of annual plans, objectives and goals at each level of the organization. The end result was a well aligned organization with all parts of the company working toward the same goals.

• Selecting the most impactful and most relevant subject. This is confirmed by soliciting suggestions from the members – they know their current pain points or emerging opportunities.
• Recruiting the best member experts for each subject. These can be “Star” retailers that have overcome specific obstacles and are willing to share their experiences. It can also be industry experts that have specific subject matter expertise.
• Providing guidance on presentation content and format. Making sure that each presentation addresses the specific topic and offers real value. It is also important to ensure that templates are consistent and the length meets the time requirements. Additionally, it is critical to work through any special audio or video requirements to avoid the dreaded “technical glitch”.
• Efficient facilitation of each session. Making sure presenters get on stage in time, that everything needed is present and working and that the presenters finish on time.

A critical element in ensuring you understand the effectiveness and impact of the Best Practice program is surveying participants after each session to measure the value and satisfaction of the subject, content, and presentation. The results can be truly enlightening, especially when comparing across different sessions and year over year. Using this information effectively is the key to understanding how to drive continuous improvement and making sure next year’s sessions are even better than the last.