Exchange for Medical Devices Suppliers

Through pioneering business model innovation, INHX offers unique and compelling solutions to simplify the healthcare supply chain. We support med-device suppliers to overcome the grand Indian challenges tangled in complex market realities (explained below). Our approach delivers measurable efficiency gains and recurring savings. We remove the constraints of scale, maturity, focus and risk (explained below) through our path-breaking network design and proprietary automation tools. We coordinate collaborative leverages through aggregated scale; and facilitate end-to-end real-time-visibility of the healthcare supply chain for better decisions faster. The healthcare exchange catapults operational efficiencies and growth factors through the unified trunk line distribution network and the integrated supply chain automation cloud.

Consider these facts:

1. Medical devices market size is estimated at $3.7B in 2013 (INR 20,000 crores). Growing at a CAGR of over 20%. Projected to reach $9.4B by 2018 (INR 52,000 crores).
2. Barring a handful, majority of med-device suppliers in India are small businesses with revenues below INR 50 crores per annum (<$9M).
3. There are ~350 MNC med-device brands with direct presence in India. Estimated 4x-5x of these supply into India through indirect distribution arrangements.
4. Every supplier has 30-100 distributors. Adjusting for multiple distribution arrangements, there are between 10,000 to 15,000 unique med-surg distributors. Distributors are mostly local parties - majority from the unorganised sector with average business sizes ranging from INR 20 lacs to 2 crores per annum. Mostly their background does not qualify for good creditworthiness and the trust deficit looms large.
5. Cost of capital of an average distributor is very high - generally in the range of 14% to 18% (in some cases this may go up as high as 24% if overly leveraged through unsecure open-market debts). Most MNCs deploy capital with costs ranging from 0% to 2% with no or low local leverage.
6. Most of the revenue is concentrated in the top 20-25 cities - max going up to 30-35 in some cases. For many suppliers, many of these locations barely meet the criteria to justify a permanent sales headcount and/or feasibility levels for a profitable distribution point.
7. With newer investments pushing hospitals to go local, tier 2/3 markets are increasingly becoming active healthcare destinations. This is opening another 150-200 locations for market coverage. This dispersion is further spreading the business thin. Hence increasing the challenge to generate sustained ROI from investment in demo sets, loan sets, market development etc.
8. Barring the top few, all suppliers work with one central national warehouse. All billings done from there - mostly to distributors. Sales tax on central interstate billings is not allowed for input credit on intra-state local end-customer sales. Hence it attracts double taxation which becomes an additional cost in the P&L. Treated as a better compromise compared to administrative hassles of statewise sales tax registrations and returns; plus obtaining and maintaining a drug license for every stocking point.
9. Inventory replenishments from central warehouse poses constrains on turnaround time. Hence forcing more inventory holding with local distributors (even for the relatively slow-moving items) - who deploy expensive capital and in turn expect fatter margins.
10. Many segment of med-devices are commoditized by copycats either selling counterfiets or cheaper workaround alternates. This dilutes the value perception hence challenging the price point of the device.
11. Over 85% of healthcare spends are patient paid - hence price sensitive. Socio-economic indicators of the larger demographic creates serious affordability challenges. Medical insurance is rising rapidly but still lagging far behind inflationary trends.
12. Over 80% of hospitals are below 30 beds - over 95% physician owned. None to negligible process orientation and screaming trust-deficit. Manual processes and paperwork consume substantial coordination efforts and make the operations slow and inefficient. Standalone small providers expect sales staff to support more time than usual in administrative matters.
13. Over 50% of sales force time (two-thirds in many cases) is lost in administrative activities involving sales support, order management and supply chain support. Only residual time focused on sales and customer relationships.
14. Distributors work in an adhoc manner. They sparingly follow standard processes and largely maintain unorganized records. This adds to the interface requirements and transaction processing costs.
15. Incoherent spurts of information flows through the layers. It gets so opaque that many suppliers do not even know who their end-customers are. Mostly data capture is compromised even for purposes like UDI (unique device identification) accountability, traceability and recall. Business intelligence for decision-making, trending, forecasting or predictive analytics is generally driven by experience, rule of thumb, gut-feel and guess-work.

It is not that the fixes to the grand Indian challenges are not evidently clear to the med-device business leaders. But the feasibility of such fixes is mostly constrained; foremost by the size and maturity of the business in India. Mostly, it does not offer the requisite economies of scale to justify investment in elaborate structures and business automation.

With over 70% of devices being imported, the value chain in India is largely focused on sales. As the price sensitive business struggles to make limited sustainable margins, beyond the bare minimum (must-have) staff and compliance requirements, headcount for additional capabilities needed to achieve higher levels of operational excellence is seen as a non-core luxury (good-to-have rather avoidable). Likewise, the use of latest information technologies customized for Indian ground realities is seen as a non-core activity (not a priority) - more so when it goes beyond own business entity and involves electronically bridging the dealings with trade partners.

Given the uncertainities on realisation of business potential, expansive regulatory exposure in every state and/or designing elaborate structures/automation plans with significant upfront or recurring fixed cost commitments does not qualify the test of business prudence. Moreover, given the wafer thin margins in India, justifying ROI for many of the business improvement projects is virtually impossible - more so when it involves long-term lock-in. Consequently given the scale, maturity, focus and risk, an extra cautious approach is adopted by most med-devices companies.

Overcome major hurdles even for small suppliers to avail advanced supply chain innovations that virtually match those of much larger enterprises - even comparable to the most advanced supply chains in FMCG or pharmaceuticals. Standalone even the large med-device enterprises, are unable to find feasible distribution models to penetrate coverage into smaller sub-million markets. Global trends and studies reflect collaboration to be the only solution. It is evident with the fact that both FMCG and pharma converge their go-to-market journey into the retail sector. Medical devices despite being relatively smaller businesses, go standalone all the way into the last mile on to the end-customer. This makes it expensive and unviable in many cases and places. INHX has innovated to resolve this deadlock without the suppliers compromising their way of doing business nor their competitive business advantage.

FREEWAYS ACROSS TAX BOUNDARIES: Freedom of nationwide interstate transfers under common sales tax registration. Hassle free regulatory compliance (related to local taxes, drug licenses etc) lets you focus on your core business and spend time with your customers. Instead of bearing CST as an added cost in your P&L, the structures optimize taxes for your business to deliver ongoing substantial savings starting immediately.

EXTENDED REACH FOR FASTER TURNAROUND TIME: Our unique network design leverages shared warehousing to expand coverage faster. With our partnership with leading 3PL-providers, we activate stocking points across India - even covering tier 2/3 markets. With aggregated space requirements, stocking point viability is both faster and sustainable for the suppliers. With this, the supplier may need to only commit to a small fraction of the otherwise required 200-odd square feet per location. This enables all participating suppliers to maintain local stocks for faster replenishments to their distributors or end-customers. For non-elective critical devices, every moment counts in life saving logistics.

GROUP LOGISTICS CONTRACTS & COMBINED SHIPMENTS: The collective leverage from aggregation of space requirements is extended to other supply chain areas as well. Every participating supplier can avail logistics contracts negotiated for the group at large. Further they gain from combined shipments for hub-to-hub trunk line transfer of goods. Recurring savings accrue from lower freight charges, secondary packing costs, stock insurance and more.

INDEPENDENT LAST MILE: Our network design does not overstep into areas that can even potentially affect the competitive advantage of one supplier vs the other. From the trunk line distribution network the goods move to your distributor staying away from any conflict in your market interfaces or customer relationships. Moreover, this structure opens possibilities for suppliers to dynamically adopt newer business models with more optimized business terms with channel partners.

Significant business efficiencies accrue when trading parties linkup, interface and transact on 'one' online exchange. It substantially reduces cycle times and related overheads/errors. Moreover, non-core areas that otherwise are compromised are upgraded to robust processes with adequate checks and balances. INHX specializes to make this hassle-free for trade partners; and lets them focus on core business of patient care.

MASTER & CONTRACT SYNC: Gain higher trade partner satisfaction as you get aligned with secure and encrypted 121 contracts. Convenient onboarding enables speedy expansion of both primary and secondary trade networks - even for remoter and smaller trade partners. Proactive validations control exceptions. Product data pools, besides reducing administration efforts and errors, create brand visibility and makes it easier for customers to find and discover products. Changes and additions to the item masters are updated in a common data pool for everyone to use the latest version.

ORDER-TO-CASH E-COMMERCE: Increase your rate of perfect orders with process standardization and workflow automation. Electronic Data Exchange (EDX) replaces loads of paperwork, phone calls, faxes, emails and posts. Also this minimises administrative duplication, lapses and issues. It helps avoid delays, back-orders and part-shipments. We pay attention to detail when designing our automation platform - for instance to transcend scanning to documents, or capture of shipment status at transit trackers and more. Many more features and plugins are viable on a ecosystem level cloud. 

STREAMLINED INVENTORY: Live visibility of location-wise inventory levels (be it company-owned or dealer-stock) enables closer monitoring of inventory levels to ensure availability while optimizing holding levels and related working capital costs to avoid both shortages and excesses. Moreover the end-to-end real-time visibility strengthens just-in-case preparedness. Live trending and analytics helps slash holding levels with iterative refinement of shuffle-n-rotate routines, auto-replenishment alerts etc. Automatic identification and data capture (AIDC) tools ensure information completeness and hygiene for traceability, UDI, recalls, counterfeit protection and more.

LIVE BUSINESS ANALYTICS & ALERTS: With connected big data across many trade partners, it becomes possible to undertake correlation at multiple levels. Predictive analytics, trending, variance analysis, watchdog alerts, automated responses and many such tools support in making better decisions faster. Visibility allows you to know your end-customer, perform sales analytics and study the revenue mix to formulate more informed market strategies. With time, these live dashboards can be furnished with numerous options that monitor performance on a variety of dimensions.

Working with INHX enables med-device suppliers to gain both through top line acceleration and bottom line improvement. Recurring savings from tax optimisation, shared warehousing, lower freight and packing costs, staff productivity, sales force efficiencies and more. Some more direct and indirect benefits are:

• Pay-for-use arrangements with no unreasonable commitments.
• Staff productivity enables more work with less headcounts. Aim for over 60% reduction in order processing time.
• Reduce cycle times and eliminate duplication.
• Digitized capture saves time and prevents errors. 
• Field efficiencies: Shorten sales cycle. More time for sales with no supply chain hassles. Anytime anywhere live info increases coordination capabilities while in the field.
• Customer focus and satisfaction: Higher responsiveness strengthens relationships.
• Better decisions faster: Advanced capture of market intelligence available on live dashboards.
• Enhanced distribution performance: More alignment with distributors with process standardization and workflow automation.
• Independently facilitated collaboration sustainably leverages collective scale.
• No conflict with existing structures as we split the channel into trunk-line and last-mile.
• Distributor-friendly approach as no interference in last mile service and relationships.
• Go-to-market effectiveness: Faster time to market for new launches with inventory flushed closer to the market at your own discretion.
• Real time visibility of secondary sales data.
• Reduce revenue loss with faster turnaround time.
• Combat counterfeiting.
• Compliance with UDI guidelines.

Interested to explore upside for your business? Write to us at inhx@inhx.com. Undertake a supply chain assessment to define measurable goals and link it to overall growth strategies for your business.