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
Top Related