3m Health Care Model
CUSTOMERS
Hospitals $3.9M sales/month 350 hospitals by VARs Electronic Orders 1,650 orders/months $2.15 /order Manual Orders 3,900 orders/months $8.5 /order Direct Electronic Orders 419 orders/months $2.15 /order Manual Orders 654 orders/months $8.5 /order
3M CANADA
CS Distribution Center
2.25 FTEs, Fixed cost: $37,500 /month
Operated by 3PL Inventory level: $4.5M Storage costs: $6,750 /month
Out-of hospitals $1.7M sales/month 5000 organizations
Material Mgmt 2 Material management staffs
Picking cost: $30,000 /month Current volume: 45,000 cases/month Warehouse handling cost: $24,648 /month
Total: $5.6M /month $67M /year
Direct Sales PHCs
DISTRIBITORS
VARs - 8 VARs get VAR fees - Value-Added Services: storage, transportation, product handling, order processing, credit mgmt, billing, return, inventory mgmt - EDI for order processing &tracing - Small shipment, JIT (only ¼ deliveries are full) - Billing options (needed IT investment)
No Change
$10.7M/yr Increase
CUSTOMERS
Hospitals $3.9M sales/month 350 hospitals
3M CANADA
CS Distribution Center
Direct Electronic Orders 2,069 orders/months $2.15 /order
2.25 FTEs, Fixed cost: $37,500 /month
Inventory level: $5.63M Storage costs: $8,438 /month Picking cost: $65,625 /month (w/ subcarton)
Out-of hospitals $1.7M sales/month 5000 organizations
Manual Orders 4,554 orders/months $8.5 /order
Material Mgmt 2 Material management staffs
Current volume: 56,250 cases/month Warehouse handling cost: $30,811 /month ∆ Transportation costs: $857,686 /month
Total: $5.6M /month $67M /year
Can save $
Direct Distribution No VAR fees (assumed 8% of the sales through VARs, $52.1M)
$4.3/yr Save
● Total additional costs for Direct model is $6.5M/yr, and the variable cost of the new model is 21.5M /yr, mostly resulted from transportation costs. ● Additional saving opportunities: - Order shift from manual to electronic can save $100K to $350K. - Efficient trucking,
Hospitals $3.9M sales/month 350 hospitals by VARs Electronic Orders 1,650 orders/months $2.15 /order Manual Orders 3,900 orders/months $8.5 /order Direct Electronic Orders 419 orders/months $2.15 /order Manual Orders 654 orders/months $8.5 /order
3M CANADA
CS Distribution Center
2.25 FTEs, Fixed cost: $37,500 /month
Operated by 3PL Inventory level: $4.5M Storage costs: $6,750 /month
Out-of hospitals $1.7M sales/month 5000 organizations
Material Mgmt 2 Material management staffs
Picking cost: $30,000 /month Current volume: 45,000 cases/month Warehouse handling cost: $24,648 /month
Total: $5.6M /month $67M /year
Direct Sales PHCs
DISTRIBITORS
VARs - 8 VARs get VAR fees - Value-Added Services: storage, transportation, product handling, order processing, credit mgmt, billing, return, inventory mgmt - EDI for order processing &tracing - Small shipment, JIT (only ¼ deliveries are full) - Billing options (needed IT investment)
No Change
$10.7M/yr Increase
CUSTOMERS
Hospitals $3.9M sales/month 350 hospitals
3M CANADA
CS Distribution Center
Direct Electronic Orders 2,069 orders/months $2.15 /order
2.25 FTEs, Fixed cost: $37,500 /month
Inventory level: $5.63M Storage costs: $8,438 /month Picking cost: $65,625 /month (w/ subcarton)
Out-of hospitals $1.7M sales/month 5000 organizations
Manual Orders 4,554 orders/months $8.5 /order
Material Mgmt 2 Material management staffs
Current volume: 56,250 cases/month Warehouse handling cost: $30,811 /month ∆ Transportation costs: $857,686 /month
Total: $5.6M /month $67M /year
Can save $
Direct Distribution No VAR fees (assumed 8% of the sales through VARs, $52.1M)
$4.3/yr Save
● Total additional costs for Direct model is $6.5M/yr, and the variable cost of the new model is 21.5M /yr, mostly resulted from transportation costs. ● Additional saving opportunities: - Order shift from manual to electronic can save $100K to $350K. - Efficient trucking,