Owens & Minor

Market dynamics and the developing trends.

What is the Supply Chain continuum?


How to baseline & the benefits of moving
towards best practice.
Supply Chain as an Evolving Model.
• Health reform impact on Supply
Chain?
Model of the Future
• Future of Supply Chain?
• External ways to increase efficiencies
in our organizations?
Proactive Supply
Chains
• How to improve quality and reduce
costs?
Aggregation
• Optimize the different distribution
channels?
2
Market forces are accelerating industry-wide
change:
◦ Future driven by Payors and payment structure
◦ Margin pressures increasing significantly across all
trading partners
◦ Competitive lines are blurring
3
Supply Savings
Supply Savings
- Transportation
- Physician Clinics/
Supply Savings
Non-Acute
Labor Activity Savings
Labor Activity Savings
Labor Activity Savings
- Bill-Only
(Implant)
- Clinical Inventory Management
- JIT to the OR
- JIT / Totes
- Par Optimization
- 3PL model
- Bulk
- Pallet Architecture
- Cross Docking
Joint/Self
Contracting
Integrated Service
Center
ISC
6
How to Baseline
How to Baseline
Executive Scorecard - Summary
Descriptions
FTEs
Wages & Benefits
Overtime & Benefits
Wages, OT & Benefits
Inventory Investment
Cost of Capital
Inventory Shrinkage
Inventory Carrying Cost
Freight Expense
Additional Expense (AOP Par Ex)
Facility Expense
Other Facility, equipment
Base
33.00
$1,639,145
$5,150
Proposed
20.80
$1,032,850
1,725
$438,185
$200,000
$71,400
$1,363,250
$337,000
$4,373,738
$3,444,409
($929,329)
$1,644,295
$7,166,972
$430,018
$179,174
Total Expense
Distribution
Cost Plus
Activity Fee
Other Distribu.- Cost Plus
Other Distributors' - Fees
Distribution Expense
$609,193
$420,000
$0
$1,363,250
$337,000
Impact
(12.20) Expense
($606,295)
(3,426)
($609,721)
($1,324,510)
($79,471)
(91,537)
(171,008)
(220,000)
71,400
0
0
Expense
Expense
$1,034,574
$5,842,462
$350,548
$87,637
$475,000
$0
$128,250
$0
$660,000
$110,000
$228,250
$0
$185,000
110,000
100,000
0
603,250
998,250
395,000
Fully loaded customer &
distributor costs
$4,976,988
$4,442,659
($534,329)
One-Time Inventory Savings
$7,166,972
$5,842,462
($1,324,510
)
Ongoing process savings
$4,976,988
$4,442,659
($534,329)
Goal
Why
Transform from a reactive
supply chain to• a Reduced supply spend
proactive demand chain
• Optimized labor
Supply
Chain
Adjust
Patient
• Elimination of
inventory
Demand
• Chain
Improved profitability
per procedure
Schedule
Use
Assemble
Preference
Card
11
Supply Mode of
Distributor Model
•
•
•
•
High volume
<$800/unit
Low complexity
Nearly 100% - GPO
contracting
• Uncomplicated use
• Private label
• Minimal direct sales
Purchase
35%
65%
Manufacturer Direct
• Low to moderate volume
• >$800/unit
• High to very high
complexity
• Direct sales force
• High prevalence of local
contracting
• Complicated use
• Mostly sold direct
By volume: 75% Distribution / 25% Direct
2012 O&M research, estimates
AHA, Gartner Research, 2011
12
Distributor Model +
Fee for Service
• Manufacturers
increased reliance on
more effective supply
chains to service
providers
• Increase Flexibility
2013-2015
• Downward pressure on
revenues /margins forces
re-evaluation of SG&A
40%
60%
• Lower Cost
• Improve Visibility
2012 O&M research, estimates
Manufacturer Direct
AHA, Gartner Research, 2011
inventory & DSO
elements
• Address changing
customer needs
• Health reform impact on distribution?
• Future of distribution?
• External ways to increase efficiencies
in our organizations?
• How to improve quality and reduce
costs?
• Optimize the different distribution
channels?
Identify logistics service
partners; separate out
manufacturers/wholesalers
Invest in technology & interfaces
to connect schedule, care &
replenishment
Eliminate ownership as a
condition of management;
consider novel investments
13