O&M Case Analysis Essays

1460 Words Apr 9th, 2014 6 Pages
Case Analysis - Owens and Minor,

1.1) What are the services rendered by the distributor to manufacturers and hospitals?
Owens and Minor Inc. is a dominant distribution company that distributes medical and surgical supplies to hospitals, integrated health care systems and group purchasing organizations. It takes on the financial risk of owning and managing inventory for customers. It tracks and verifies their customer’s prices. In addition, O&M supplies customer usage and sales numbers, market trends, buying patterns and product penetration to manufacturers.
1.2) How has the nature of distribution changed over time?
In the mid1980s hospitals joined together to gain more control of supply costs. They began carrying less
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They only bought inexpensive products from distributors. In this situation distributors made low margins from sales and expensive supplies could get lost or damaged without the handling of distributors. Also, customers were often tricked into paying a higher percentage than they originally agreed to because distributors had higher percentage plus for certain products which customers didn’t track as closely. Moreover, since product prices under the costplus system were not directly related to the activities that customers’ orders resulted in, hospitals which used a stockless system usually asked for more small deliveries without paying more shipping fees. Finally, because service were not tied to the price, distributors only maintained the lowest level of customer service needed to keep the customer from switching to a competitor.
3) What effect will ABP have on customer behavior?
O&M hoped that by tying their distribution fees to activity levels customers would be more motivated to become more efficient and save O&M’s money in processing, delivery, and product handling. This would then weed out O&M’s unprofitable customers by aligning the fees with their services. However, most of the customers presently using costplus would have to change their internal systems to use ABP. The associated high cost might offset the distribution fees customers save from the ABP system.
4.1) Explain

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