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© DKSH
Chicago
June 4, 2014
Dealer and Distribution Strategies in Asia
Medical Device Supply Chain Council
Andrew Frye, VP Healthcare, DKSH
© DKSH Page 3 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 Page 4 Strictly Confidential Information for DKSH client, not to be shared without permission
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)
© DKSH Page 5 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 7 Strictly Confidential Information for DKSH client, not to be shared without permission
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 Page 8 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
© DKSH Page 9 Strictly Confidential Information, not to be shared without permission
China is a huge and complex market place
> 13,000 dealers
20,918 hospitals
1,349 mn people
3,387,437 hospital beds
© DKSH Page 10 Strictly Confidential Information, not to be shared without permission
Are regulatory and QA requirements maintained?
Source:, April 2011
© DKSH Page 11 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 13 Strictly Confidential Information for DKSH client, not to be shared without permission
Evolving Emerging Markets
Options
1. Local Dealer(s)
Options
1. Local Dealer(s)
2. Multinational 3PL
3. Regional Distributor
(MES)
© DKSH Page 14 Strictly Confidential Information for DKSH client, not to be shared without permission
• 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
© DKSH Page 15 Strictly Confidential Information for DKSH client, not to be shared without permission
‘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?’
© DKSH Page 17 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 18 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 19 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 21 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 22 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 23 Strictly Confidential Information for DKSH client, not to be shared without permission
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 Page 24
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%
© DKSH Page 25 Strictly Confidential Information for DKSH client, not to be shared without permission
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
© DKSH Page 27 Strictly Confidential Information for DKSH client, not to be shared without permission
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 Page 28
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
© DKSH Page 29 Strictly Confidential Information for DKSH client, not to be shared without permission
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