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3M Healthcare Services and Consulting

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GE GAO

on 5 December 2013

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Transcript of 3M Healthcare Services and Consulting

3M Healthcare Services and Consulting
Background
Motivations & Step
Good Evening Everyone
We are Group 5
Feifei Wang
Ge Gao
Kyle Boelsen
Heng Wang
Xiaotian Wang
Zhi Qiao
Kaitlyn Henn
Vincent Sofield

Some numbers about
3M
$30 billion
88,000 people
55,000 products
65 countries
29 international companies
35 companies
196 countries

3M
Canada Company
Based in London
What is HCSC:
Health Care Services and Consulting

Ship to 3M’s Toronto distribution center

Materials management staff order

Place order

How does it work
3M
Hospital
&
Out-of-Hospital
VAR
3PL
Directly
1. VAR is value-added resellers.

2.Services to hospital: storage; transportation; product handling; transaction and older processing; credit management; billing; returns and inventory management.

3. Services to 3M: EDI for order processing and order tracing.


VAR

Clinics

1. VAR


2. PHC(Professional Health Care Dealers)
For their unique use.



3M to out of hospital

Project Highlights: Kevin Higgins (VP of 3M healthcare) asked Viola (MBA intern) to analyze the health care division’s logistics
system and to prepare a report on her findings. Give recommendations regarding proposed changes to the existing method of distribution products to Canadian hospital.

Top management involvement


Top management support on project vs. divisions logistics system
Senior Management support is not required for the project itself but for the entire affect the method of distribution will have on an organization as a whole.


Successful analysis based on divisions logistics system
Successful analysis projects are not about the project they are about understanding the affect that one change in one part of the distribution system affects all other parts of the chain

Top Management Support on Project

Management supports project and any needs MBA intern needs (time, assistance in right direction)
Stated outcome,
unclear how to go about it, many answers, little influence

Clean slate – dive deep into industry and current method
Analyze opposing methods for potential improvements

Results – can used as a starting point

Challenge recommendation/potentially implement

Unbiased Feedback/Time constraint



Deming Wheel: example of how analysis can contribute to improvement

Difficulties of implementing the project

1.Start- up cost

2.Customer relationship management



1.Invest in IT (billing preference of customers)

2.Storage, inventory management( carrying cost)

3.Transportation cost

Start-up cost

1. Hospital customers(8 VARs =350 hospital customers)

2. out-of-hospital market(VARs+PHCs= 5000 orgs)

3. VARs and other distribution channel (Less information capital)

relationship management

Advantages & Disadvantages
Advantages

Achievement of 3M healthcare
Committed to supplying innovative and reliable products.

More than 10,000 medical, surgical,consumer,
dental, orthodontic, pharmaceutical
and animal care products in its catalogues.

Gain credibility with customer user groups.

5000 organizations comprised the out-of-hospital market.

scale

70 percent of the medical markets division’s revenue.

revenue

What 3M Could Do Better
All Electronic Orders $2.15 vs. $8.50

Change in the Supply Chain
Reduce VARs and work Direct

"A strong perception by hospital material managers that major cost savings could be achieved in the supply chain if hospitals bought product directly from 3M.”



Benefits to 3M Healthcare
1.Direct distribution should be considered if variable costs can be limited to < 10% of sales.
2. Obtain complete control over distribution by eliminating use of VARs.
3.Can increase profitability by implementing agency fees usually collected by VARs.
4.Increased focus on electronic orders will decrease costs.

5.Major competitors, like Johnson & Johnson, already maintain direct distribution models.



What is
3M

Minnesota Mining and
Manufacturing Company

1.Operational autonomy of business units within market.

2.Support from Canadian laboratory.

3.Encouragement from clinicians.

4.The company’s sales strategy.

5.Health care professional sales and technical staff.

6.Centralized materials management and customer services team.

7.Global logistical support.

8.Widely distributed of VARs selling in Canada.

9.Cross-dock shipments arrangement.

Disadvantages
1. Hard to respond to unique sub-segments market.

2.Value-added services agency fee.

3.Low level full cases deliveries.

4.Small percentage of sales to hospital.

5.Low percentage out-of-hospital customer.

6.High manual order cost.

The End

Thanks for your listening

Remember we are

Group 5
Full transcript