3M HEALTH CAREBY NIVEDITA SUBBARAMVARUN BALAKRISHNAN

ANSH AGGARWAL

The case study talks about Viola Hoo, a summer intern and Kevin Higgins, vice president 3M Health care analyzing the current method of distributing products of 3M.

3M business features founded in 1902

CASE SYNOPSIS

3M

Consumer &

Office

Display &

GraphicsE & TC Healthca

reIndustria

l Safety & Security

Transportation

Animal Care products Medical Markets Products Dental Products Health IT System Microbiology Pharma

Product Line

Value of VARs Provides value added services for an agency

fee based on sales. Around 75% of medical market division's

sales was contributed by VAR Offered services like small lot shipment

quantities and JIT deliveries to the hospital (no cost to 3M)

Value of VARs

Competition between VAR’s benefitted 3M. The hospitals were free to choose their

channel to purchase products directly from 3M or through VARs

VARs also provided EDI services to 3M for order tracing and order processing .

Should 3M healthcare change their Distribution Model?

Current Distribution Model to Direct Distribution Model.

Problem Definition

Pros & Cons of Current Model

Pros Value added services to 3M Value added services to hospitals at no cost by 3M Lesser hassles of order processing

Cons Extra cost of agency fee Less scope for direct relation with customers

Pros & Cons of Direct Distribution

Pros Cost savings for hospitals (perceived) Direct relation with clients

Cons Increase in all costs Current VAR services to hospitals might be eliminated Change in traditional logistics services

RECEIPTS $3,392.27 PUT AWAY $2,130.41 LET DOWN $835.58 MOVEMENT $308.72 LEGISLATIVE LABELING $25.37 SERIAL NUMBER $43.41 LOT NUMBER $17,875.97 BILL 101 RE-LABEL $37.17 TOTAL $24,648.9

CASE INFERENCESCURRENT MONTHLY COSTS FOR WAREHOUSE

CASE INFERENCES

Province No. of locations to be served

Avg. transportation rate per site($)

No. of shipments received per location per year

Manitoba 21 15 87

Quebec 77 18 96

Ontario 87 21 109

Alberta 71 27 86

Yukon Territory 1 24 18

Northwest Territories

2 162 67

Estimated Transportation Costs-Direct Distribution Model

Cost Savings: Hospitals prefer directly from 3M instead through VAR’s.

Manual orders : 3M-654 monthly orders. VARs – 3900 monthly orders.

Cost to process manual is high $8.5, hence these should be converted electronic orders which is around $2.5.

RECOMMENDATIONS/CONCLUSIONS

Variable costs should be limited to 10% of Sales.

For Direct Distribution method to be successful 25% of Inventories should increase in Warehouse.

To attract more customers more Customer services should be provided.

RECOMMENDATIONS/CONCLUSIONS