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One-stop shopping: cultivating a good relationship with your distributor pays big dividends.

Good things can happen to the facility that has a friendly, exclusive relationship with its medical supplies distributor.

You need supplies. Enter the distributor: You order, they ship, you pay. So the distributor with the best price on any (given supply gets the order. Simple?

Sure. But spreading out supply orders among several distributors in pursuit of the best bottom line for specific products may actually be keeping you from a better overall bottom line.

Dealing with a single distributor for medical supplies can reduce procurement costs in a variety of ways--not all of which show up on a purchase order, says Tony Oglesby, president and CEO of Gulf South Medical Supply of Jacksonville, Fla.

A continuing facility-distributor relationship certainly makes it more likely that a facility will receive pricing not available to the one-shot client. But a single order also reduces hack office costs by consolidating paperwork, including cutting one check instead of several, as well as receiving shipments in ways that make it easier to handle.

"All supplier, are the carne in getting products from A to B," says Steve Harris, senior vice president of Medline Healthcare Co. in Dallas. "The relationship and communication to the customer's needs is what sets a supplier apart.

"The best way to work together is to identify problems and help solve those problems with our products and programs."

An example, says Oglesby, is Gulf South's "Partners in Efficiency" program, which encourages clients to consolidate orders in exchange for better pricing. "When we bring to a client's attention the number of [purchase orders] they're placing, most of them are like, 'Yeah, I'd rather order one time a week rather than four times a week.'"

For example, the distributor's cost of shipping a single $1,400 order can be less than sending multiple $50 orders. "We share that savings with the customer," says Oglesby.

A typical customer can see a savings of 3 percent to 5 percent on a specific order, Oglesby adds. "But working with us on an exclusive basis can mean savings of 15 percent to 30 percent over time."

The larger savings generally come when a facility commits to a particular product line. Depending on the order size, manufacturers will write contracts based on that commitment, rewarding customer loyalty with discounted pricing.

A continuing relationship with a distributor can mean assistance in ways that are less traditional. Storage problems plague many facilities, especially smaller ones. Distributors may deliver orders in less-than-bulk quantities for loyal customers. Just-in-time shipments--in which supplies don't arrive at the facility until they are needed--can further ease storage concerns. (Both less-than-bulk and just-in-time shipping also improve cash flow, since a facility isn't paying for goods to sit in a storage closet for weeks or months.)

Or, "a supplier can 'bend the rules' for good customers," says Harris. "For example, when cash is tight, a supplier can continue to ship because of the relationship."

Paul Weinstein, president of Colonial Medical Assisted Devices, a Nashua, N.H. distributor that bills itself as a "fall safety specialized company," says good relationships lead to personal attention. "If a customer has gotten hit with a state inspection, we have hand-delivered products to solve some immediate need. That gets them out of hot water with the state."

Communicating needs

The heart of an amicable, ongoing relationship between a long term care facility and a distributor begins with the facility manager being open about his or her needs with his distributor rep. Making a month's worth of invoices available for reference is a good starting point for discussions.

"Our guys can sort through it pretty quickly," says Oglesby. "From those we can compile a formulary and a plan for consolidating purchases."

"We visit facilities to show them products and to build relationships," says Weinstein. "We problem solve."

Technology has made it possible for distributors to solve problems in ways not possible until recently. Online and fax order forms can be created to simplify ordering. Hand-held computer technology, such as a Palm Pilot, allows customers to scan their inventory and then drop the computer in its cradle. A hot sync sends the order directly to the distributor's computer, and the supplies arrive at the facility the next day.

Online ordering allows for further efficiencies by tracking supplies to individual patients. Not only can the supplies themselves be packaged together and tagged for the patient at the distributor, but bridging the ordering and accounts receivable software means the charges can be added automatically to the patient's account.

"The nursing home industry is adapting quickly to electronics," says Oglesby. "Sixty-five percent of our business comes in electronically now. When that's an automated procedure, you're looking at lowering your procurement costs."

Oglesby adds that the larger the chain, the more sophisticated they are in their purchasing--despite using only a single vendor. "As you move down to mom-and-pop facilities," he says, "you don't see that discipline."

Single facilities can also recognize significant savings through a continuing relationship, even if they aren't ordering in the bulk that will merit a manufacturer's discount. Consolidation programs offered by distributors can bring competitive pricing even to small clients. Plus, there's the time savings in not having to deal with multiple companies--a major factor when the procurement manager may have two other titles as well.

Demand and supply

The best facility-distributor relationships are a partnership, Harris says. "Customers need us and we need them."

Oglesby agrees. Distributors "are service organizations. But we sell organization secondarily."

Recently, Oglesby received a call from the procurement manager of a 55-facility chain. The manager had been ordering housekeeping supplies from six to 10 vendors and decided the flood of purchase orders, invoices and checks was no longer worth the effort. "Within 48 hours," says Oglesby, "we had put together a complete formulary for him.

"And I would be surprised if our competitors wouldn't have reacted in the same manner."
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Title Annotation:Operations
Author:Clark, Thomas
Publication:Contemporary Long Term Care
Geographic Code:1USA
Date:Sep 1, 2003
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