George Minor and Owens created Owens & Minor in 1954 to supply medical and surgical products. By 1981, it became the second largest company in its field in the US. However, in 1995 it lost $11 million due to decreasing gross margins and rising expenses. It was using a "Cost Plus" system that only considered the direct cost of products, not delivery costs. To win a $30 million per year contract from Ideal Systems and avoid financial ruin, Owens & Minor developed a new CGS+ system that properly accounted for shipping, handling, and other order fulfillment costs. This new system helped return the company to profitability.

1. Owens & Minor , Inc.
Case Study
ININ 4086
Profesora Alexandra Borja
Integrantes
Clariermy Rosario
Irving Rivera
Ivaniss Burgos
Vivian M. Vidal Otero

2. Agenda
 Introduction
 Problem
 Solution
 Results
 Recommendations

3. Introduction
 George Minor y Owens, were men that both
has a health background.
 They decided to bond and buy two
companies to supply medical and surgical
products.
 In 1954, they create their own orders
system, and with this they become the
second most biggest company in United
States by 1981.
 This company in 1990 was generating a
billion dollars a year.

4. Problem
 Ideal System announce an offer of 30 million dollars a
year to supply medical and surgical products.
 In 1995, Owens and Minor lost 11 million dollars
because of the diminishing in Gross Margin and
increment in the company’s expenses.
 They were using a system called Cost Plus. This
system was based only in the actual cost of the
product. What was happening was that they were not
including the real cost of delivering the product from
the warehouse to the clients.
 Owens and Minor were seeking of gaining that
contract, because with it they have an opportunity of
getting out of the financial ruin.

5. CGS+ Shipping and
handling
O&M Deliveries
Order Cost,
Line Cost,
Interest,
procurement
and Labeling

6. Results
Owens & Minor
Monthly Profitability Statement
Revenues
Product Sales 150,000.00$
New Cost-Plus Margin 9,000.00$
159,000.00$
Net Sales
Cost of Good Sold 150,000.00$
Vendor Discounts (4,035.00)$
Cost of Good Sold 145,965.00$
Gross Margin 13,035.00$
Intrest (Holding Cost) 2,160.00$
Fixed Costs
Occupancy 1,007.00$
Group Fee Expense 750.00$
Total Operating Expense 3,917.00$
Net Operating Profit 9,118.00$

7. Results

8. Count
Percent
Activity
Count
22.0 20.5 13.0 5.8 1.9
Cum % 36.9 58.9 79.4 92.3
9900
98.1 100.0
5914 5491 3477 1560 500
Percent 36.9
O
ther
S&H
Other Cost
O&m
Deliveries
Total O
rder Cost
Total Line
Cost
30000
25000
20000
15000
10000
5000
0
100
80
60
40
20
0
Pareto Chart of Activity

9. Recommendations
 Make less orders of a higher quantity
of products.
 Ideal is not going to commit because
they find that with Cost-Plus they can
resolve the problem. The problem was
cause of the bad distribution of the
costs.
 Ideal can plan ahead the orders to
diminish the distribution costs.

10. Questions ???