Medical Device Manufacturer Streamlines Operations, Boosts Profits with Standard Costing Customisation

Posted by Mark Woodhams, NetSuite EMEA Managing Director

Every morning, Simon Talbot, managing director at P3 Medical Ltd., a Bristol, UK-based medical device manufacturer, looks at a NetSuite dashboard with real-time key performance indicators (KPIs) of the company’s manufacturing facility in Bristol measuring total output vs. input, the number of hours the facility is in production as well as a financial valuation of the work being done at the plant on a macro level.

Meanwhile, his colleague Ian McEvoy, a director at P3 Medical and the manufacturing counterpart to Talbot’s accounting role, has a similar dashboard, showing him facility production on a job-by-job level.

Those dashboards, and some customisations the two created working with the NetSuite platform, now allow the business to track the full cost and profitability of every item and sale. The change to the business has been truly transformative for the company that operates two factories in the UK and both manufactures and assembles products, and sells directly and through private labels into 50 countries via distributors and sub-contractors.

For example, they now know at the time of taking an order for the Bristol facility if the sales order will be profitable (the Preston manufacturing location does not have the same requirements). Additionally, they can include the labour costs which vary significantly by product.

“We actually produce less than we used to but the revenue per hour has increased significantly. We have better quality margins,” Talbot said. “Essentially, we work less hard but make more money.”

So far, Talbot estimates the business is earning an additional £100,000 annually thanks to the improvements.

A NetSuite customer since 2010, P3 Medical had already reaped the benefits of replacing a hairball of multiple manufacturing software systems with the cloud-based business management software. It saved £75,000 vs. the cost of installing an equivalent server-based system on premise, and is saving £25,000 yearly on administration and maintenance. NetSuite also reduced monthly financial close from two to three weeks with the previous manual system to two days and reporting became faster, easier and more powerful.

But about a year ago, when NetSuite rolled out some new standard costing functionality, Talbot and McEvoy saw a new opportunity.

Since the company bought the Bristol plant in 2006, they had been struggling to achieve the right costing information. Many processing costs essentially amounted to guesswork.
With the new costing functionality and the flexibility of NetSuite’s platform, allowing customers to adapt it to their needs, Talbot and McEvoy figured they could now get a better handle on how much an individual job might cost.

“We’re quite fortunate in that there are two of us with a fair amount of experience in running ERP,” Talbot said. “My background is in accounting and I’ve done a lot of time in cost accounting. Ian is a manufacturing and operations guy. We were able to figure out what we wanted, what NetSuite could deliver, where the gap was and how we could fill that gap.”

P3 Medical is now able to track the total hours spent in the factory, the number of hours captured as productive time against work orders (jobs) and the financial impact of those two data points.

“It’s changed the way we approach pricing,” Talbot said. “Our pricing of jobs and products is now calibrated much more closely with the true cost. That’s something we’ve been chasing for 10 years.”

In the past, P3 Medical might have delayed more profitable work in the factory at the expense of work that was actually done at a loss or chase sales at the expense of a true margin. Those mistakes don’t happen now. In fact, the real-time updates of NetSuite, allow sales reps to see, as their putting together a proposal, if the project might not be profitable. Questionable projects turn red and are flagged for review.

It’s also changed the way P3 Medical schedules its work. The plant had generally been under capacity but back orders were still an issue. Now, the company hasn’t made production perfectly efficient, but “we’re a lot better than a year or six months ago,” Talbot said.

Additionally, the customisations have helped the company get a better understanding on its international business. Since it works with distributors, which require their own margin, P3 Medical can be smarter about expansion.

It’s been a steady evolution of working though the solution with NetSuite rather than a eureka moment, Talbot said.

“As people become accustomed, it helps to highlight whether something makes sense in taking new business or prioritising business,” he said.


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