2021 HME Business Handbook: Strategy

Saving Space, Time, and Money by Partnering with a Distributor

HME sees seismic shift after seismic shift of market changes, but you can still control how you manage your business. Your purchasing strategy should be a top-of-the-list item when it comes to your management priorities.

Competitive bidding, managed care, the explosion of e-commerce, COVID-19 — it seems like every time you take a moment to look up, another dynamic shift is occurring within the HME industry.

Successful providers are seeking out ways to streamline their operations to meet these ever-changing market conditions. As part of your 2021 game plan, let’s investigate how consolidating your purchasing through a distributor can help you serve more patients more profitably.

Many providers today are still putting substantial amounts of time into sourcing products from dozens of manufacturers. Purchasing agent time worth on average $30 per hour is being expended to pursue nickel and dime price differences on products. Can your organization afford that?

Once you’re aware that the cost of time (and depending on your company, this very well might be your time of which we’re speaking) outweighs the savings realized through price shopping, many forward-thinking providers that are focused on growth and scaling their businesses are electing instead to partner with a distributor that specializes in home healthcare.

This allows you to bundle your purchases from multiple manufacturer lines into one highly efficient relationship with a distributor.

SAVE SPACE

When products sit on the shelf, your cash is in the wrong place. Take a glance at your inventory today. See any dust on those boxes? Slow sellers, dead inventory, and expired merchandise are what hurt providers the most. By taking advantage of distributors that offer just-in-time (JIT) inventory and drop-ship programs, you can eliminate many of these headaches on your balance sheet.

It costs a lot of money to bring products into stock, so why not use a distributor’s warehouse as your own? Think of it as a storage building with no monthly fee. You’ll be able to utilize regional warehouses and receive your DME orders in one to two days and at the same time outsource the fulfillment of disposable supplies by drop shipping those orders direct-to-home from the distributor’s warehouse.

We’re not just talking about CPAP resupply – product lines such as urological, incontinence, wound care, ostomy, and enteral nutrition are all ideal fits for outsourcing to a distributor for fulfillment. Many distributors even offer a white-label service at no additional charge where the packing slip is customized with your company name, address, and phone number. When the patient receives the package on their front porch, it appears it came directly from your company. Now that is what I call smooth!

SAVE MONEY

A common mistake providers make when weighing the option of utilizing a distributor versus buying direct is that they fixate on acquisition price without factoring in all the carrying costs and overhead that distributors are removing from the equation. Have you ever thought about all of the invisible costs your business incurs by sourcing products direct? Every time your folks pick up a phone, cut a payables check, receive merchandise into stock, and place a PO, there is a cost associated with that business function.

The latest estimate from the Center for Advanced Procurement Strategy pegs the true cost of each purchase order you cut at $50 at the bare minimum! Think about how many purchase orders your locations are cutting each day to bring products into stock. If you operate a single-location HME store that orders from just five manufacturers per day, consolidating that purchasing down to a single distributor could easily save your business close to $50,000 per year in overhead costs. Have five stores? You can see how quickly the match can add up here.

PERSONAL TOUCH

The HME industry seems to be full of billion-dollar behemoths today. It seems we can’t go one week without reading about the latest merger and acquisition being rolled up by private equity. While this is not necessarily a bad thing, it can sometimes make you feel like you are just an account number.

Another great thing about regional distributors is many are family-owned and focus on creating an awesome customer experience. Imagine having a live person answer on the first ring. There’s really something to be said of good old-fashioned customer service.

POINTS TO REMEMBER

  • Distributors offer one- to two-day rapid delivery of DME, allowing you to operate on a JIT model and reduce the amount of cash you have tied up in inventory.
  • Drop-shipping disposable medical supplies by utilizing a distributor’s home delivery program can eliminate carrying costs, overhead, and deadstock/expired merchandise.
  • Regional distributors offer a personal touch that large national corporations may not be able to provide. By doing business regionally, you can support family-owned companies that live and work in the communities you serve.

LEARN MORE

Interested in learning how a distributor can help your HME business become more efficient? Visit www.suprememedical.com for additional resources and information.

This article originally appeared in the May/June 2021 issue of HME Business.

About the Author

Colton Mason is the senior vice president of Supreme Medical Fulfillment, a distributor focused on serving HMEs and pharmacies in the Southeast. Reach him at colton.mason@suprememedical.com, www.hmetv.com, or (251) 660-6000.

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