medical device supply chain council andrew frye, vp ... · medical device supply chain council...

© DKSH

Chicago

June 4, 2014

Dealer and Distribution Strategies in Asia

Medical Device Supply Chain Council

Andrew Frye, VP Healthcare, DKSH

DKSH Introduction

© DKSH Strictly Confidential Information for DKSH client, not to be shared without permission

DKSH in healthcare

No. 1 partner for healthcare companies seeking to grow their

businesses in Asia, covering a wide range of Market Expansion

Services from product registration, marketing and sales to

physical distribution of healthcare products

150 business locations

160,000

customers

9,050 specialized staff

14 countries


DKSH and Medical Devices

Integrated Regional

Proven

> 14,000 > 75 Direct Customers clients

Commercial

Logistics

Distribution

Hospitals

Clinics

Specialty Retailers

Source: DKSH internal data (2013)


Market Expansion Services (MES) Medical Devices

DKSH / Healthcare / Medical Devices

Commercial value

Professional Tender Administration Customer Care Center Distribution

Credit & Collection Management Headcount Hosting (HR)

Custom

Clearance &

Importation

Redressing Warehousing Order

Processing Transportation Reporting

Logistics

Regulatory & Reimbursement Marketing & Sales Technical Service

“After-Sales Support”

Commercial

Value Add

Commercial

/ Logistics Kit Assembly

Sterilization

Loan Set Coordination

Urgent Delivery

CIM

Dealer

Management

Emerging Markets - Asia


A fast-growing Asian market

28% of world

population

Rising middle

class

Aging

population 82.8 94.1 104.1 116.2 140

170.92 185.07

200.1 201.19

208.69

0

50

100

150

200

250

300

350

400

2011 2012 2013 2014 2015

APAC Rest of the world

Global & APAC Medical Device Revenues In USD billion, 2011-2015

Source: Frost & Sullivan - Asia Pacific Overall Healthcare Outlook, Espicom, BCC Research

(2010), Big Emerging Market Report 2011, DKSH internal data

CAGR 5.1%

CAGR

14.0% 26.3%

36.6%

© DKSH Strictly Confidential Information, not to be shared without permission

33.8

30

10

4 3

2

Market Size 2011

Japan

China

SE Asia / ASEAN

South Korea

Australia

India

Medical Devices market size by country

36.2

69.5

20.5

6.1 4.9

2.8

Market Size 2015

$82.8bn $140bn

Source: Frost & Sullivan - Asia Pacific Overall Healthcare Outlook, Espicom,

BCC Research (2010), Big Emerging Market Report 2011, DKSH internal data


China is a huge and complex market place

> 13,000 dealers

20,918 hospitals

1,349 mn people

3,387,437 hospital beds


Are regulatory and QA requirements maintained?

Source:, April 2011


1. Frugal Innovation is the Way Forward, High Tech Does Not Mean High

Cost

2. Aggressive Cost Cutting of Pharmaceutical Drugs and Transparency in

Pricing

3. Strong Movement Toward Value Chain Consolidation to Increase

Efficiency

4. High Penetration of Mobile Technology is Enabling Transition of Care to

the Home

Four Asia Healthcare Predictions

Forbes 2014

Emerging Markets - Market Evolution


Evolving Emerging Markets

Options

1. Local Dealer(s)

Options

1. Local Dealer(s)

2. Multinational 3PL

3. Regional Distributor

(MES)


• Why Change?

1. Market Access Sales Growth

2. Risk Mitigation

• Current Model

1. Distributor / Dealer

2. 3PL

• Changes Considered

1. 3PL

2. Distributor / Dealer

PRTM Emerging Markets Study

SE Asia, China Distribution - Top 2 Reasons Cited

Source: PRTM Medical Device Supply Chain Priorities in Emerging Markets,

April 2011


‘How do I ensure

compliance?’

Going more direct considerations

‘How do I ensure

proper delivery KPIs?

‘Are regulatory and QA

requirements maintained?’

‘How can I track my

devices?’

Case 1 – Vietnam

Planning a dealer transition


Pain points in dealer business model

Market data & knowledge Customer Service

Lack transparency

Risk of Compliance

Hospitals 20+ local dealers

Inconsistent service levels

Supply chain traceability

Product integrity

Med Device

Multinational

Company


Timeline

Screening & identifying new/replacement dealers (Match needs

with dealer pipeline)

Establish priorities

segment dealers based track record,

business risk, territory relevance

Pilot

Evaluate pilot opportunity and phased-

out approach by region

Communication plan

Internal and external

(new margins, policies, SOPs)

Termination & training

Conduct termination, Selection and

training of new dealers

Kick-off

Meeting with full national platform for

alignment

National Service Platform

Action Plan


Overall Roadmap Example

National Service Platform

Scope of service Baseline Phase 1 Phase 2 Phase 3

Customs / Import Dealer

Warehousing Dealer

Order Taking Dealer

Delivery to hospitals Dealer Dealer

Tendering & Invoicing Dealer Dealer Dealer

Collection and credit risk Dealer

Reporting end user level Dealer

Demand creation Dealer MNC MNC MNC

Case 2 – China

Managing Dealers Longer Term


Demand for a new approach to dealer management

Traditional dealer model National service platform

Dealer

Brand owner

Manufacturer Import /

Customs

Central

Warehouse

Dealer Sub Dealer Hospitals

Manufacturer National Service

Platform Hospitals


Importation Warehouse Delivery Customer Service

Customs Pre-

declaration Lead Time

Inbound Goods

Receipt Timeliness On-time delivery Order Processing

FTZ Customs

Clearance Lead Time Labelling Accuracy Good condition Call answered

Customs Clearance

Lead Time

Returns handling

Timeliness

Timeliness of POD

Collection Complaint handling

Outbound Order

Processing Timeliness

& Accuracy

Inventory Accuracy

Core Logistics KPI Examples


On-going dealer KPIs beyond logistics Monthly multi-dimensional Balanced Scorecard (BSC)

Sales

Sales achievement

Tender support

Finance

Margin compliance

AR overdue

Customer

Hospital order fulfillment

Customer satisfaction

Cooperation

Field cooperation

Reporting accuracy

© DKSH

Optimizing distribution while boosting growth

Case study (China)

Starting Challenges

Fragmented Distribution network

• No IT integration

• Limited or zero traceability

• Limited KPIs, SOPs, Excellence guidelines

• Consistency across dealer base

• Potential compliance risk

Success Factors

• Top management buy-in

• Strategic, long-term agreement (5yrs+)

Direct Hospitals Sales

+ 133%

+ 492%


Opportunities in a dealer management model

Hospitals

Distributor/Dealer

Single Point of

Contact

Increased

customer

visibility

Transparent

sales and

inventory reports

QA standards

elevated

Manufacturer

Scalable

network

Case 3 – Developed Asia Market

Advanced Solution Options


What is CIM?

Consignment Inventory Management is a value add service

for DKSH clients to manage their inventory for their customers

Client HP

Consignment

CIM

© DKSH

Inventory Management Services in Different Business

Models

Activity

Options

CIM service only Stock Count + 3PL CIM + 4PL

Warehousing & Delivery

Collections and Credit Risk

Cycle count

Expiry date management

Real-time stock taking upload

Reconciliation

Return & replenishment

Housekeep Hospital Inventory Customer management


Wrap Up - Go Direct Journey in Asia

• Customized models

• 3PL, 4PL

• Value Add Services

• Dealer Management

• Visibility across country value chain growing

• Logistics KPIs and QA standards

• Customer satisfaction insights

• Increasing focus on compliance

• Integrated Approach - Sales & Marketing activity alignment

medical device supply chain council andrew frye, vp ... · medical device supply chain council...

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