Spencer King, vice president of alternate care for Midwest Medical Supply of st. Louis, Mo., reached a point of total frustration when he found himself at a Health Industry Distributors Association (HIDA) conference two years ago. Having considered a variety of commercially available collaborative software packages, he was close to concluding that there wasn't a single company that could offer an Internet-based order management solution tailored to his business: distribution of medical supplies.
"I'm in a very cutthroat, competitive industry," King explains. "All the other solutions out there were online auction-type sites. Our customers would log on to one of these, shop around for what they wanted and then see pricing from three different distributors. Basically, it was pitting us against one another in what was already a very competitive marketplace."
As a $90-million-a-year regional distributor of medical and surgical products and equipment, Midwest Medical serves all segments of the healthcare industry, including hospitals, nursing homes, surgery centers and homecare in Missouri, Kansas, central and southern Illinois, western Indiana, northern Arkansas, Texas, Oklahoma, Wisconsin, Nebraska, Iowa, Guam and Northern Mariana Islands. With such a wide variety of customers and more than 800 manufacturers, Midwest needed a solution to address the complexity of its business, with a focus on the distribution of supplies to its existing customers.
Model N Solution
For King, it was a stroke of luck meeting Zack Rinat, CEO of Model N, while researching e-commerce companies at the HIDA conference. Rinat was also researching the marketplace to develop his company, Model N, an inter-enterprise software company that allows partners to collaborate with each other in real time. The two of them sat down and talked about Midwest's need for a system that would allow customers to place orders online quickly and reorder those items easily by just entering the quantities they needed. King also wanted the site to look like it was Midwest's site. He discovered that Model N was designing a solution that addressed these needs. "We've been with [Rinat] and Model N since this was an idea on a cocktail napkin," King says.
Founded in 1999, Model N spent two years building a private business network platform that allows customers and partners to conduct business processes such as order management and contract management online. "The private business network is the unifying platform to enable interaction at the enterprise level," Rinat says. "It's about interaction between systems, people and processes in real time." The use of a single platform of communication among companies does away with the "spaghetti of phone [lines]," as Rinat refers to them. "The private business network really creates an order in this chaotic world," he says.
For King, improving existing relationships and cost efficiencies was his top priority. Prior to Model N, Midwest was taking orders from customers over the phone or via custom fax order forms. The forms were based on the idea that a customer would order the same 10 things over and over again. If the customer wanted something other than the 10 items on the fax form, he or she would either write it on the bottom of the form or call the customer service department. "The order would come in through the fax, someone would grab it off the fax machine, plug it into the system, then the customer would call in 30 minutes later and say, 'I need two other things added to that,'" King says. "We already had the order picked, pulled and invoiced, so it would create another order, which added expense, time and effort on our part, and if it generated another invoice for our customer it was another invoice to pay. So it was a hassle on [the customer's] end."
With Model N, customers can log on to the Web site and quickly reorder the items they need, thereby removing sales reps and customer service reps from the ordering process. "Anytime you take the human factor out of the equation, you reduce errors, you speed the process, and you take costs out of the system," King says. Now, orders are received by Midwest's computer and matched with what is in stock. The computer then generates and sends back an order confirmation so customers can go online and see if their order is in stock or on back order. At the same time, Midwest's warehouse printer automatically prints out a packing slip, which is used to locate the product in the warehouse. "Whatever our customers order today, they receive tomorrow," King says.
Kevin O'Marah, service director of supply chain strategies for AMR Research, feels that Model N caters to large enterprise customers who want to get started in e-business "without having to go top to bottom with a packaged app system that requires complete end-to-end implementation." The company is also responsive to feedback, he says, and recognizes when to modify the product. According to O'Marah, Model N offers one of the more sophisticated private business network platforms. "The main thing they do differently is business process modeling," he explains. "There are only a handful of companies that get into that. Model N does it in a pure, thin-client, Java-enabled way."
So far, Midwest's customers are happy with Model N, and many more are on a waiting list ready to sign up. King is committed to making his customers' transition to the new system as smooth as possible with 30-minute training sessions to familiarize them with the ordering process. "We really didn't look at this from the standpoint of a dollar ROI as much as [from] a customer satisfaction standpoint," King says. "I don't think any of us ever believed that the Internet or e-commerce was the be-all and end-all of the way business was going to be conducted, but we all thought it was going to be a very valuable tool for us and our customers to use. Model N seemed to feel the same way."