Tomorrow’s Independent Distributor

Dennis Clock
President
Clock Medical Supply
Winfield, Kansas
Co-chair, independent distributors council, HIDA

Journal of Healthcare Contracting: Describe the independent distributor of 2027. How will that distributor resemble – and differ from – today’s distributor?

Dennis Clock: The independent distributor of 2027 will be oriented towards servicing the products they sell.This is much more than the free in-service of the past; it is an ala-carte-priced services menu that allows materials managers to select the level of service appropriate to the product choice.

Pricing transparency is a given. In this relationship, pricing is tied to the ability to outsource labor and expertise on the setup, maintenance, use, and final disposal of a product.

Full integration will be a significant difference as well. Purchasing products from the independent distributor will be an experience in a cloud-based interface from your phone or other device, with full approval processes, accounting integration, pricing verification, and contracted guarantees and warranties tied out in back-end systems. If the product is tied to the IoT (Internet of Things), and all of the supply chain’s systems support integration, the supply chain executive will have visibility into the use of all of their products throughout the supply chain.

Today’s independent distributor is selling its customers on the product plus a cost markup that covers the basic services. The distributor of the future will actually back up this service claim with real, traceable, and ultimately accountable services, which customers are willing to pay for, because they see the value.

JHC: How are today’s independent distributors moving toward that vision for 2027? What obstacles do they face in doing so?

Clock: They are moving quickly toward that vision by enhancing and beginning to value the service experience. Many are working with partners in the EHR and EMR world toward interoperability, so information can flow between providers and their flexible, independent partners, who can assist them with the patient across the care spectrum. Finally, they are upgrading their systems and IT resources to be able to handle the flow of information and to turn it into usable and executable items.

An obstacle that they face is the lack of commitment on the part of some software companies to open, non-revenue-based transactions, which EMR/EHR adoption promised in the first place.

JHC: How will the supply chain executive’s (or department’s) relationship with that distributor of 2027 differ from the typical relationship of 2017?

Clock: The relationship will be a three-faceted one.

The first will be with the IT department of the distributor, which ensures that interoperability standards are being met and the highest level of integration is achieved.

The second will be with the sales representative. Currently, a supply chain executive sees the sales representative when needed, and annually at an executive level review. The very nature of this relationship will change. This change will be due to the sophistication of sales representatives in understanding and reporting on the activity between providers and distributors. Supply chain executives may seldom see distributor reps, but those reps will be “on demand” to answer questions, complete in-service and other training needs, and execute contracting compliance.

The third facet of the relationship will be with the distributor’s services team, which specializes in the products selected, monitoring IoT infrastructure, and servicing the product throughout its lifecycle.

JHC: How can/should supply chain executives be preparing themselves, their departments and their institutions for a mutually productive relationship with the independent distributor of 2027?

Clock: Supply chain executives need to value the service proposition that the independent distributor offers, looking at flexibility as “key” to positive integration in this new era. As pricing transparency occurs in the marketplace, with technology being the major driver, they need to be mindful not to lose these hard-won gains on inefficiencies created by the “buy everything commodity” national provider set. Look at the full bottom line, not the price on the invoice, when selecting and valuing your partnerships.

JHC: What is the biggest “wild card” in your prediction? In other words, what one or two factors or events could occur to cause your prediction to be dead wrong?

Clock: The foremost challenge to independent distribution is continued, unabated consolidation in all phases of the healthcare supply chain, from manufacturers to end user customers.

Another is one-stop shopping for all phases of the supply chain (“Amazonation”), which will drive many suppliers out of the business prior to making the shifts described above.

A third wild card would be full adoption of bundled payments/accountable care organizations (ACOs), which may lead to disintermediation throughout the supply chain, transforming ACOs into full-service entities, which self-procure and distribute throughout the system.