Businessmodel of Owens & Minor

Customer Segments

Owens and Minor provides distribution, kitting, outsourced resource management and consulting services to thousands of customers operating within the healthcare sector. These customers principally include integrated health networks, multi-facility networks of healthcare providers that offer a broad spectrum of healthcare services to a particular market or markets, as well as smaller, independent hospitals in the US.

The Company also serves various other healthcare providers – including surgery centres, physicians’s practices, and smaller networks of hospitals that have joined together to negotiate terms – as well as certain units of the US federal government and various pharmaceutical and biotechnology companies. Owens and Minor additionally serves a range of group purchasing organisations within the medical sector, including leading companies Novation, MedAssets, Premier, and HealthTrust Purchasing Group, with which it has multi-year distribution contracts.

Owens and Minor’s principal market is its native US, which accounted for more than 95% of the Company’s revenue in 2015. The Company also serves customers across the UK, Germany, France, and other European countries.

Value Propositions

Owens and Minor provides value to its customers in the following ways:

• The breadth and quality of its products portfolio, with the Company offering an extensive range of distribution products and services tailored to the needs of each clients, as well as providing ancillary services such as supplier management, analytics, and inventory management;
• Its expansive distribution infrastructure, with the Company operating a network of warehouses, distribution centres, vehicles, and equipment across the US and Europe, enabling it to serve customers quickly and efficiently;
• Its custom delivery services, with the Company offering customised delivery methods and delivery schedules to customers, in order to increase the efficiency of its customers in receiving and storing products;
• Its international reach, with the Company serving customers not only in its domestic market, but also across Europe, notably in the UK, Germany, and France ### Channels

Owens and Minor operates a website at www.owens-minor.com, through which it provides information to customers on its products, services, and locations. The Company also provides various online tools and portals to its customers that are available via its website, including its web-based product information and online ordering tool OM Direct, its online donor tissue tracking platform, and its analytics platform Wisdom Gold. These channels require a customer login.

Owens and Minor makes its sales through its dedicated in-house sales teams, which are organised by geographic region. The Company takes responsibility for the majority of its distribution services, operating a network of distribution centres and equipment, as well as its own fleet of delivery vehicles and delivery personnel.

This includes 42 distribution centres across the US, which are strategically located to efficiently serve customers, and two kitting facilities for the production of custom and minor procedure kits and trays, as well as 22 logistics centres and one kitting facility in 11 European countries, including Belgium, Czech Republic, Denmark, France, Germany, Ireland, Netherlands, Slovakia, Spain, Switzerland and the United Kingdom.

In some cases, Owens and Minor utilises the services of third-party distribution and delivery service providers to support its own operations.

Customer Relationships

Owens and Minor provides a range of self-service offerings through its website. This includes an online ordering portal through which customers are able to place orders and schedule deliveries, a tissue tracking platform through which hospitals can track the delivery of donor tissue, and an analytics platform through which customers can access data on its supply chain, all without interacting with members of the Owens and Minor sales and support teams.

The Company’s sales staff work closely with its customers, often agreeing long-term distribution contracts and arranging customised delivery solutions. Owens and Minor has independent relationships with most of its hospital customers through separate contractual commitments that may or may not be based on terms of agreement with the group purchasing organisations. The Company seeks to establish lasting relationships with its customers.

Owens and Minor offers support to its existing and prospective customers through its website, which publishes contact details for the Company’s general enquiries service and head office. The Company also operates social media accounts, including with Facebook and LinkedIn, through which it is able to interact with customers directly.

Key Activities

Owens and Minor operates as an international healthcare services company, providing supply chain services to customers within the healthcare and medical manufacturing sectors, and distributing medical supplies and devices across the US and Europe.

The Company organises its activities into two operating segments: Domestic, which comprises the Company’s medical supply logistics operations across the US; and International, which comprises the operations of the Company’s European units Movianto and ArcRoyal, which provide procurement, inventory management, delivery and sourcing services to the European healthcare market. Owens and Minor’s customers primarily include hospitals, integrated healthcare systems, group purchasing organisations.

Key Partners

Owens and Minor works alongside a number of third party companies and organisations in order to provide its customers with the highest-quality service. These partners include:

• Supplier and Vendor Partners, comprising suppliers of various medical products, devices, and equipment that the Company distributes to the healthcare sector, and suppliers of various services that support or supplement the Company’s logistics activities;
• Technology and Software Partners, comprising a range of integration and development partners that provide technology solutions to support the Company’s operations and provide assistance in developing and maintaining its online platforms; and
• Distribution and Delivery Partners, comprising a range of third party delivery, distribution, and logistics providers that support and extend the Company’s own distribution activities. Owens and Minor has a number of branded supplier partners, including 3M Health Care, Kimberly-Clark, Covidien-Mallinckrodt, Cardinal, and ConvaTec. The Company has also recently partnered with Dell Services to align its IT strategy.

Key Resources

Owens and Minor’s key resources are its supply chain and product portfolio, its online portals and IT infrastructure, its distribution and logistics infrastructure, its sales channels, its partnerships, and its personnel.

Owens and Minor owns and leases a number of properties across the US and Europe that are key to its distribution activities. This includes 42 distribution centres – all but one of which are leased from third-parties, as well as office and warehouse space and two kitting centres, across the US. The Company also leases offices in China and Malaysia. The Company also leases 19 and owns three logistics centres across Europe, owns one kitting facility, and operates seven transport depots, of which six are leased.

Cost Structure

Owens and Minor incurs costs in relation to the procurement of supplies and the management of its supply chain, the development and maintenance of its online platforms, the maintenance of its IT and communications infrastructure, the operation of its logistics infrastructure – including fuel costs associated with its fleet of vehicles, the management of its partnerships, and the retention of its personnel.

In 2015 Owens and Minor recorded cost of goods sold in the amount of $8.56 billion, including the cost of the products and all costs incurred for shipments of products from manufacturers to its distribution centres. The Company’s selling, general, and administrative expenses – including labour and warehousing costs associated with its distribution and logistics services, as well as shipping and handling costs- totaled $933.60 million for the year.

Revenue Streams

Owens and Minor generates revenue through the distribution and sale of various medical products and devices, as well as through the provision of various ancillary services, such as customised kitting solutions. The Company’s portfolio of medical and surgical supplies includes branded products purchased in large volume from manufacturers, as well as its own proprietary private-label products, which are internally sourced.

In 2015 Owens and Minor generated annual net revenue of $9.77 billion, up on the $9.44 billion recorded by the Company in 2014. Of this revenue, $9.36 billion was recorded by the Company’s Domestic segment, with international operations accounting for around 5% of net revenue.