Major Healthcare Product Providers*
Customer said: Some of our distributors also carry their own private label products; that’s the nature of our business. However, we think there’s a way to work more effectively with one of our biggest distributors to compete with the smaller firms. Help us find those efficiencies and revenue opportunities.
The engineers at Scott Sheldon said: We can do that.
The project involved two clients—one is a US multinational firm that manufactures medical devices and pharmaceutical and consumer packaged goods. Through a number of acquisitions, they found themselves in the distribution business which was not their core expertise. They wanted to regain focus on manufacturing and rely on distributors to handle the transportation of product.
The manufacturer’s big distribution partner is the nation’s leading distributor of medical and surgical supplies to the acute-care market. There would continue to be some amount of competition between the firms but the manufacturer thought there might be ways for the two companies to benefit by collaborating to improve their supply chain relationship.
The “Ah Ha” moment:
Recommendations from our analysis included both “future state” improvements that each partner could put into place to achieve cost savings, as well as eight short term projects that would provide fast ROI. Both customers realized it was possible to “move the mountain” by breaking down the changes into smaller, achievable projects.
The Scott Sheldon team conducted a thorough analysis to determine what an integrated network between the manufacturer and its large distributor would look like. The initial analysis focused on medical devices, to control the scope of the project.
With months of data from both firms in hand, our engineers evaluated the network tools being used, shipping points and distances between distribution centers, and looked for customers shared by both firms. One segment of the analysis revealed the true costs to the manufacturer to pack, manage and move smaller orders; it was clear that bigger shipments were much more profitable for them. The team continued the analysis with projections for time and cost efficiencies that could be gained by sharing facilities and transportation methods.
Both customers appreciated our providing long term strategic recommendations that would have big impact on their supply chain operations but take time to implement, along with smaller-scope projects that could be put in place quickly. Best of all, the short term projects would serve as proof of concept for the bigger improvements.
The manufacturer chose three to implement right away.
• Project one—The manufacturer was shipping medical devices from a production site in Mexico to a facility in Tennessee for sterilization, then to a US west coast facility. We suggested that by handling sterilization at the west coast facility, the company could eliminate transportation to Tennessee and remove eight days of supply chain costs from the equation.
• Project two—By performing the larger palleted/bulk shipment distribution efforts on their own and having their distributor handle the smaller shipments, our manufacturing customer saw significant savings.
• Project three—Both companies shared a customer in Boston so we suggested they establish an exclusive order arrangement with the distributor. In this way, the Boston customer continued to get the same high quality delivery they expected and because of the close proximity of the manufacturer and distributor’s distribution centers in the region, both realized cost savings.
For these major healthcare companies, consolidation drove more efficient operations that delivered cost savings and improved profitability. Our analysis gave them practical, short term solutions they could implement relatively quickly that served as proof of the potential our strategic consolidation suggestions would have on their overall operations.
Because both partners benefitted from the analysis, it strengthened the way they work together and improved their ability to compete in an increasingly complex healthcare product distribution landscape.
We Get It.
*Due to confidentiality, we do not disclose the names of healthcare companies