3M Health Care
Prof. P M Shingi
• Founded in 1902.
• Headquarters in St. Paul, Minnesota.
• Leading developer, manufacturer & distributor of
consumer & industrial products.
• Revenue of $17 billion in 2003.
• 40 business units organized into 7 “Big
• Operation in 60 countries and served customer in
Canadian Health Care System
• Services funded by govt. & delivered through
• Primary responsibility lied with provinces &
regulatory authority with federal govt.
• Fiscal pressure faced by policy makers led to -
closure & merger of hospitals.
• RHAs creation led to changes in delivery of health
• Formation of larger group purchasing
organizations and warehouse operations
consolidation (reduced cost & inventory control).
1.What value do VARs provide and
how much money can be saved by
adopting a direct distribution
Values provided by VARs
• Only 8 VARs were handling 350 hospitals.
• Provide value added service like transportation,
product handling, transaction and order processing,
credit management, billing, returns and inventory
• Special services to 3M like EDI for order processing &
• Acted as intermediary (cross docking).
• Value added services to the hospital like small lot
shipment quantities & JIT.
• Investment in IT to satisfy billing preferences of the
2.How does 3M’s distribution
network help position the company
against the competition?
VARs Distribution Network
• Health care professional for sales & technical
• The doctors and nurses were educated about
the superior benefits of 3M’s products.
• Flexible distribution system (VARs or Direct) -
unit price remained same.
• VAR distribution channel offered small lot
shipment quantities and JIT deliveries.
• It supported Cross-Dock shipments
• Low inventory required.
• Can provide JIT deliveries.
• Offers small lot shipments
• Provide value added
• VARs were handling full job
of serving 350 hospitals.
• EDI services
• Serves more customers
• High supply chain cost
• Dependency on VARs
• Less market information
VARs (90%) Direct (10%)
VARs & PHC’s
• Saves supply chain cost
(Agency Fee, Transportation
• No dependency on resellers
• Close proximity with
• DC handled full case shipment
• More inventory required
• Unable to serve JIT
• No value added services
• Difficult to serve the different
350 hospitals and ‘out of the
• No EDI service available
• Serves less customers (Full
• High Storing Risk
Recommendation – VAR
• VAR’s network reaches more number of
customers. 350 Hospitals and surgical centre’s
long term care facilities
• VARS provides value added services
(transportation,billing,order processing etc.)
• Small lot shipment, JIT deliveries.
• Due direct distribution, costs increase by 25%
• Direct - Unable to sell small(loose) shipments
• VARS – possible to manage inventory.
• Risks are divided.