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.
- By Colton Mason
- Jun 01, 2021
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.
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!
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.
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
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
- 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.
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/Jun 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 email@example.com, www.hmetv.com, or (251) 660-6000.