Med-SurgDistribution.pptVIP

Med-Surg Distribution Is it the ugly stepsister or Is it Cinderella or Is it one and the same? Medical-Surgical Distribution Overview About 25% of the dollars purchased by Materials Management flows through Medical-Surgical Distribution Medical-Surgical DistributionEconomics Purchasing costs related to supply channel Hospitals typically buy med-surg products from one or two distributors – average cost $1.31/line Hospitals typically buy direct from 442 med-surg manufacturers – average cost $5.43/line Medical-Surgical Distribution Economics Distributors need to generate a minimum gross margin of 10.5 – 11% Distributors average about 7–10% for SGA Distributors operating margin is about 1-3% Distributors net after tax profit is about 1–3% Medical-Surgical Distribution Economics… Source of gross margin 65% sell side (provider) cost/plus activity based private label self-manufactured non-contracted Medical-Surgical Distribution Economics… Source of gross margin… 35% buy side (manufacturer) payment terms (e.g., 2% if pay within 15 days) tracing fees (e.g., 1%) forward buys buying through secondary sources annual growth/efficiency rebates (3.5% small mfg; 1% large mfg) EDI, full truck loads distributor/manufacturer relationship products selling cost (upwards of 15-20%) BVP, Focus, Max Impact Medical-Surgical Distribution Economics… Medical-Surgical Distribution Economics… 3M Bard Baxter BD Cardinal DeRoyal Hospira JJ Kimberly Clark Tyco/Kendall Medical-Surgical DistributionEconomics… 2005 Distributor Financial Performance Survey Tracks physician/alternate site; hospital; long-term care Median revenue growth 2003 10% 2004 7% 2005 projected to rise HIDAThe Distributor of the Future Industry thought leaders demanding integrated relationship focus on across-the-board cost reductions with greater transparency data sharing assistance in product standardization general expertise in procurement, products, logistics HIDAThe Distributor of the Future… Key conclusi