Recently, I found myself engaged in an energetic conversation with a midsize medical device manufacturer. This determined executive was adamant about pursuing a direct distribution strategy, eschewing the idea of leveraging the value of a solid third-party distributor relationship. As a long-time executive entrenched in the manufacturing side of the industry, I couldn’t help but feel a tug-of-war between their enthusiasm for independence and the tried-and-true benefits of distributor partnerships.
Reflecting on my experiences navigating distribution channels within the medical device industry, I’ve often found myself in a similar tug-of-war. On one side, there’s the allure of direct distribution, driven by a desire for independence and control. Yet, on the other side, lies the undeniable value of solid distributor partnerships, honed through years of industry insight and collaboration.
Let’s break it down, focusing on those strategic 3rd party partnerships and drawing from the lessons learned through these experiences:
Growth: Picture this scenario – you’ve developed an innovative medical device that has the potential to favorably impact patient care. But how do you get it into the hands of those who need it most, quickly and efficiently? Enter distributors. By partnering with them, organizations can streamline the distribution process, allowing the manufacturers to focus on what they do best – marketing and selling their products. It’s like hitting the fast-forward button on growth.
Efficiencies: Logistics can be a nightmare, especially in a post-pandemic world where supply chain disruptions are par for the course. But distributors? They’re logistics wizards. They’ve got the expertise and resources to navigate even the trickiest of shipping challenges, freeing your staff from the staggering details behind delivering your quality product to the customer. It’s a win-win – you get to focus on new clients and further innovation, while they handle the heavy lifting.
Presence: In the complex world of healthcare, staying top-of-mind is crucial. And distributors? They’ve got that covered. With their extensive networks and frequent interactions with healthcare providers, distributors have the kind of influence and frequency within the healthcare client that your company will likely not achieve on its own. Plus, having extra reps out there in the field, singing the praises of your products? That’s like having your own personal army of brand ambassadors.
Accounts Receivable: Let’s not forget the financial aspect. By entrusting a large portion of accounts receivable responsibilities to the distributor, the manufacturer can offload a significant organizational burden. This transition not only minimizes bad debt scenarios but also liberates human talent within the organization to focus on core business functions rather than administrative tasks. It’s a strategic move that simultaneously enhances operational efficiency and financial stability.
Now, let’s circle back to that energetic dialogue I mentioned earlier. This ambitious manufacturer asserted that distributors were taking too much of the profit in the client/manufacturer relationship. And while I understand the allure of maximizing profits, the reality is far different. Distributors operate on razor-thin margins, with industry reports pegging operating income at less than 2%. That’s right – far less than what most device manufacturers enjoy. So, the notion that distributors are cashing in at the expense of manufacturers simply doesn’t hold water.
So, there you have it – partnering with distributors isn’t just about convenience or outsourcing. It’s about unlocking growth, streamlining operations, and expanding your presence within key clients and prospects. It’s about working smarter with your available dollars and resources. And in today’s competitive landscape, that’s more important than ever.
To leverage the full potential of distributor partnerships in the medical device manufacturing sector, engaging with a strategic partner like SIXPOINT Advisors can be transformative. Our team offers unparalleled expertise and access in cultivating these essential relationships to ensure mutual success. If you’re looking to streamline your distribution process, expand your market presence, and drive growth efficiently, let’s connect.
