Owens & Minor is well-suited to meet the complex demands of today’s IDNs, says Frank Martin
As hospital systems and IDNs grow larger and more complex, so too do the demands on their supply chain teams. Owens & Minor is prepared to respond to those demands, says Vice President of Business Development Frank Martin.
“We decided several years ago that the sweet spot for Owens & Minor and our service portfolio and approach to the market is providing solutions to the large IDNs around the country,” says Martin, who spoke at this winter’s Health Industry Distributors Association Acute Care Conference in Coral Gables, Fla. “The large IDNs are obviously growing and becoming a more dominant factor in the healthcare market. Consequently, these large, sophisticated healthcare delivery systems are the most efficient users of our advanced processes and systems.
“We think the large IDNs and the large amount of consolidation we’ve seen in the marketplace will continue,” he continues. “We think that will hold Owens & Minor in good stead, as 62 of the top 100 IDNs are Owens & Minor customers.”
Total delivered cost
Owens & Minor works with many IDN supply chain executives to reduce total delivered cost, says Martin.
“‘Total delivered cost’ is a combination of product cost, external fees and internal costs,” he explains. “A typical large IDN performs thousands of procedures each year, usually across multiple ‘facilities, and they are actively seeking access to logistics and supply chain solutions, such as just-in-time product delivery, transportation management, low-unit-of-measure services, and unitized delivery services, to enable them to achieve an overall lower cost on their product/supply chain spend. Because they are spending millions each year, they want to make the most of that spend.”
An effective way to reduce total delivered cost is to move from bulk distribution to low-unit-of-measure, says Martin.
On the face of it, low-unit-of-measure looks more costly than bulk delivery, he says. “There’s more handling, more unitized delivery; and it costs more money to put products in totes for delivery direct to the point of care.” However, low-unit-of-measure eliminates the need for the materials staff to sort and re-sort product. In fact, Owens & Minor’s low-unit-of-measure program has helped IDNs redeploy as many as 40 percent of the materials staff, says Martin. “The ability to have the right products in the right place at the right time is increasingly important. It’s not just a matter of paying more for low-unit-of-measure; it’s a matter of taking cost out of the supply chain on the IDN side.”
The clinical team – and their patients – benefit too, he says. In the typical IDN, nurses spend valuable time looking for products, ordering products, finding the things they need and, in some cases, hoarding products. If those products arrive at the IDN in a more organized manner, they can spend more time on patient care.
Continuum of care
Servicing the supply chain needs of today’s IDN means following the patient out of the hospital into the community. That can present challenges for the materials team and the IDN’s distributor.
“We absolutely have IDN customers with large physician practices, and who ask us to help serve these doctors’ offices,” says Martin. “We are happy to help the IDN by serving this business.”
Physicians’ offices demand different supply chain solutions than acute-care hospitals, he says, among them, the ability to order and receive products in small quantities. “Obviously, the physician office doesn’t want tractor-trailer-loads of material delivered to them.” Adapting low-unit-of-measure processes for the physician office is one way to service these sites, he says, adding, “we can enable the IDN to fold the physician practices into their overall contract with us, so they can access the pricing, volume, and product selection that benefits the overall IDN.”
It’s true that physicians’ offices typically lack the purchasing and materials expertise found in the acute-care setting. That’s why they have traditionally looked to their distributor rep to help with selecting, purchasing and stocking product, says Martin.
“This is another area where our investment in technology has helped us. We have the capabilities to allow physician practices to order from the Owens & Minor portal.” The portal gives the office an “Amazon-like experience,” in that the office manager or staffer in charge of purchasing can log onto the site, select and order products. The system requires very little training, he adds, because most consumers are used to buying products online.
Strategic logistics centers
Many of today’s IDN supply chain executives are happy to outsource logistics to their distributor, while some want to self-distribute. Still others are seeking some sort of in-between solution. Martin says that Owens & Minor has been able to accommodate the last group by setting up what it calls strategic logistics centers for select IDN customers around the country.
“Our strategic logistics centers are generally designed to serve a specific customer with specific needs,” he says. “The needs can go well beyond traditional distribution, to include third-party logistics as well as the ability to handle physician-preference items.”
Very few organizations have the appetite or financial wherewithal to invest in the infrastructure required for self-distribution, he says. That infrastructure includes the physical building, IT and labor. “What many [IDN executives] want is more control over the contracting piece. They want more input in price negotiations; they want a seat at the table in terms of how some of these deals are set up.”
Investing in a distribution center, then outsourcing the logistics to Owens & Minor, allows them to get that without making a heavy investment in something that’s not central to their mission, he says.
Physician preference items
Increasingly, Owens & Minor is using its logistics expertise to facilitate the flow of physician-preference items, to the benefit of the manufacturer, the IDN and, ultimately, the patient, says Martin.
He offers this scenario: The IDN buys products from direct-ship manufacturers. As a result, the materials team receives hundreds of packages on the dock, then employs several people to make sure those packages get to the right clinical user. Meanwhile, there’s little ability to track lot and/or serial numbers or expiration dates – a serious problem in the event of a recall.
Over the past three years, Owens & Minor has made significant investments to allow it to handle not just traditionally distributed products, but also products that are owned by a manufacturer or IDN and handled by the distributor, he says. “The infrastructure improvements and the technology we have deployed allow our operations people to handle any product, whether it is owned by us, or consigned by a partner. Our IT systems handle the necessary behind-the-scenes work.
“Because we can handle inventory that is owned by a customer, manufacturer, or a traditional buy-sell arrangement, we are now able to service some of the PPI items that customers want, and take cost out of the supply chain at the same time. This flexibility in our network benefits all parties.”
And that expertise can be applied beyond PPI, he adds. “There is a very broad range of manufacturers that are looking for us to provide solutions that we haven’t traditionally provided years ago. It’s not just the PPI items; it’s really any manufacturer-centric product that they’d like us to handle in our warehouse.”
Owens & Minor’s “forward deployment” offering allows manufacturers to avoid shipping from a single location or a small number of locations, he says. “We have 40-some distribution centers throughout the United States, and we can reach most major markets within a four-hour time frame. Our access and reach are very broad. We can offer manufacturers the opportunity to move their products from that single manufacturing location into our distribution centers, so their total cost to get those products to the ‘final mile’ is reduced.
“We’re taking cost out of their supply chain to allow them to leverage our network, so they can do the things they’re experts in,” that is, developing, marketing and selling innovative products.
Future
Martin anticipates that Owens & Minor will increasingly be called on to service regional purchasing coalitions. In fact, they have been doing so for some time, he says.
“Actually, these ‘regional purchasing coalitions’ have been around for a number of years in one form or another,” he says. “Provider customers are always trying to find ways to reduce costs, and if a regional purchasing coalition works, then we are pleased to work with them to achieve their goals. Therefore, we work with these regional contracting groups in the same way that we approach any large contract negotiation.
“I think we would all agree that the healthcare market is changing. The setting for the delivery of healthcare services is not necessarily just the hospital anymore. Patients are more cost-conscious and are shopping for services in a way that we have never seen. At the same time, new treatments, new devices and products are coming on to the market every day.
“It is an exciting time for healthcare, and we believe that by working closely with our business partners to identify solutions, we can provide our customers — both IDNs and healthcare manufacturers — with improvement to the ‘total delivered cost’ in their medical supply chains.”