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Current Opportunity for Creativity and Growth

Hospitals and health systems continue to undergo consolidation, with some consultants estimating that the industry is only 10 to 15 years away from 800 or so health systems.1 As they’ve been consolidating, health systems are generating enough scale to warrant capital investment in their own consolidated service centers (CSCs) or, as it’s also known, self-distribution.

The number of CSCs operating in the United States exceeds 70, with an unknown number being considered or under development, according to the 2018 Health System Supply Chain Insights: Results of the Fourth Health System Consolidated Service Center Practitioner’s Survey; A report by: Jamie C. Kowalski, Jamie C. Kowalski Consulting, LLC & Lorcan Sheehan, PerformancSC Supply Chain Limited.2 The geographic scope of CSCs is increasing, there is no single definition or model for a CSC and, “like any supply chain, there is never a point where we can say that we are finished,” the survey reported.

“Supply chain leaders continue to look to and learn from third parties in the supply chain to provide assistance with developing the strategies, rationalization and consolidation opportunities; new models and other innovations,” the survey further noted. “And those business partners have worked hard to comply.”

For Suture Express, this has presented an opportunity and proven to be a source of enormous growth as self-distribution customers turn to the company for customized hybrid self-distribution models that offer the best of both worlds. “The saying, ‘If you’ve seen one IDN, you’ve seen one IDN,’ is true for a reason, especially with self-distribution,” says Jason Pedaci, chief commercial officer for Suture Express.

“There are so many variables to consider, including number of SKUs, number of manufacturers, number of locations, acuity, academic teaching status, research labs and geographic footprint. Add to that the economic factors, such as the cost of capital, real estate, labor and available storage space. That mix of variables is unique to each health system and that’s what, as a vendor, you need to understand. It’s not enough to say you want to partner with a customer; you have to mutually develop a valuable solution to demonstrate it.”3

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There are two endpoints serving a hospital supply chain — traditional distribution on the one end and manufacturer-direct on the other. A hybrid self-distribution model combines the efficiencies and benefits of a distributor with the economic advantages of a direct supplier. Steve Boyer, vice president of Operations for Suture Express, says there are four key components of the hybrid self-distribution model that, together, are a differentiator for the company:

  1. Part manufacturer-direct, part distributor
  2. Flexible order and delivery scheduling
  3. Emergency orders
  4. Data analytics

Depending on the customer’s operation, as high as 95 percent to as low as 40 to 60 percent of the customer’s volume can flow through the CSC. Suture Express works with the customer to determine which products are to be serviced through the CSC and which through traditional distribution. In so doing, the customer is able to build its sourcing logic accordingly, and Suture Express can anticipate the customer demand patterns to achieve its goal of 99.4 percent fill rates.4

“The real key to our model is collaboration and customization,” Pedaci says. “The model is very unique from customer to customer. Between each end point, there are a dozen shades of grey. That’s what makes what we do so unique and so valuable.”

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To learn more about what Suture Express may be able to do for you, visit us at sutureexpress.com or call 877-790-1873.

Sources:
1AHRMM19, “Collaborating to Drive Value: Using Data to Drive a Clinically Integrated Approach to Reduce Clinical Variation”
22018 Health System Supply Chain Insights: Results of the Fourth Health System Consolidated Service Center Practitioner’s Survey; A report by:  Jamie C. Kowalski, Jamie C. Kowalski Consulting, LLC & Lorcan Sheehan, PerformancSC Supply Chain Limited
3,4The Journal of Healthcare Contracting, October 2017

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