Strengthening the Supply Chain

Bob Mages, RRT, purchasing manager, watches out closely for RSVP Homecare's children. Located in Covington, Ky., RSVP specializes in pediatric respiratory chronic needs. Reimbursement is tight, and each child's requirements are extensive.

A $5 million business operating from one location, the provider has built its service niche in a highly competitive market, so Mages also carefully manages purchasing activity by incorporating a combination of wholesalers and manufacturers. Currently, 20 to 25 percent of the company's purchases are made through distributors including AmerisourceBergen, Gulf South Medical Supply, Invacare Supply Group, Medline Industries and McKesson.

With these suppliers, Mages explains, “I can order in quantities that I can turn over and not tie up cash in inventory … I save time in the number of calls, number of vendor relationships and by ordering online. I would like to consolidate even further with one wholesaler, but none yet can supply all I need.”

And that's how wholesale distributors have built a significant role in today's HME supply chain. Ramping up their own businesses to add value in response to market needs, many wholesale distributors now offer competitive pricing, smaller order quantities and quick delivery as well as additional services like online ordering, purchase tracking, custom reports and direct-to-patient home delivery. As a result, many providers have firmly linked such companies into their supply chain to optimize operations and profitability.

Tammy Pruitt Prentice, owner and manager of Pruitt Care in Ada, Okla., conducts about 30 percent of her purchasing through Dedicated Distribution. Her reasoning is pragmatic: “I don't want to lose any money or tie up money because I need to make a manufacturer's minimum order.”

In business for 12 years serving a 60-mile radius around Ada, with six competitors nearby, Pruitt Prentice explains, “We are vigilant in cost analysis. If I have a pricing concern, I contact my [Dedicated] rep; he either matches or says ‘no.’ I respect their role in my business and the contact I receive.”

According to Steve Cole, Dedicated Distribution president and chief executive officer, “Channels are maturing. Providers and suppliers are shifting away more and more from the ‘I buy direct’ mentality. Operations optimization is key.

“Plus, manufacturers are increasingly determining which accounts they can profitably handle on a direct basis, and then routing others through wholesale distributors.”