Mooraj AMRSupplyChainTransformation

The Healthcare Value Chain Transformation:
A Time To Learn, Unlearn, and Relearn

MDISCC Presentation
May 20th, 2009
Hussain Mooraj Vice President, Healthcare & Life Sciences
2009 AMR Research, Inc. | Page 1
Todays discussion
Challenges in the healthcare value chain
The Provider Environment
The Medical Device Environment
The Value Chain Transformation
Driving Change
The Three Habits of Effective Value Chains
AMR Research is an advisory and research

firm focused on global supply chain and
enterprise strategies.
Not consultants provide research based

advice
Industries we focus on:

Consumer Products (16 of top 20 firms)
Healthcare & Life Sciences (18 of top
20)
Industrial Manufacturing (13 of top 15
discrete manufacturers)
Retail (14 of top 20)
Retained advisory services and peer

networking forums.
AMR Healthcare Value Chain Coverage Model
Life Sciences
Patient
Pharma
Biotech
Med Dev
Generic
Healthcare
The Healthcare Value

Chain Overview
Todays Realitythe healthcare value chain lacks visibility

Suppliers,
CMOs
Manufacturers,
Assemblers
Distributors,
Wholesalers
Providers,
Retailers
Consumers,
Patients
New Product or Service
Manufacturer
Programs
Programs
Suppliers
Risk
Lack of
Visibility
Providers
Retailers
Patients
Consumers
Distribution
Materials
Manufacturing and
Mgmt
Risk
(Make-Pack)
Risk
Distributors
Risk
Inventory
Inefficiency
Waste
Lack of
Visibility
Risk
Cost
Supply chains designed with inside-out processes in mind sub-optimized,

constrained by silos
Lack of end-to-end visibility and a Value Network Operations Strategy
Integrated information but disconnected processes and visibility for trade offs
Is there a lack of trust with your trading partners?
2007
2008
The different industry segments in the healthcare value chain often do not
trust each other. This has been a hindrance to information sharing and
collaboration which drives significant cost and inefficiencies.
Source: 2008 AMR Healthcare Study
Who is the customer?

19%
Patients/Consumers
21%
21%
Healthcare Providers
19%
10%
Wholesalers/Distributors
17%
19%
Doctors and Clinicians
10%
5%
Pharmacies
10%
Drug or Device
Manufacturers
10%
7%
Who is the customer that

you serve?
4%
Government
6%
Inside-out focused
6%
Companies lack outside-in

vision not focused on
patient outcome-based
Moments of Truth
4%
Payers/Managed
Care/Insurers/Employers
5%
GPO
PBM
2007
2008
2%
2%
1%
Who is your PRIMARY customer?
Leaders are transforming strategies and business models

Game Changing
Patient-Driven
Outcome Based
Manufacturers
Collaboration
High
Increasing demand
visibility by leveraging
various forms of
downstream data
Redesign of supply chain
networks - segmentation
Improving collaboration
between internal and
external partners
Improving efficiencies and
lowering costs
Supply chain
management is moving to
integrated environment
away from procurement
orientation
Establishing closer links
to manufacturers.
Increased accountability
and control of services
and pricing standardization
Hiring talent from other
industries
Retailers
Technology
Vendors
Wholesalers / Distributors
Moving from reacting to
anticipating demand
Establishing networks
but with limited upstream
collaboration
Extending technology
investment to providers
Moving to an information
broker model.
Moments
Of
Truth
Wholesaler
Manufacturer
Retailer
Provider
Low
Inside
Out
Outside
Business
Orientation
Provider
In
Re-thinking role of
intermediaries in the
healthcare value chain
Potential to leverage
treasure trove of
information on patient
One stop shop for
nutritional, health and
wellness not just for
food and Rx.
Focus on proprietary
differentiators.
The Provider
Environment
Top issues confronting hospitals

59%
Financial challenges are top of mind for executives at smaller

systems and the pace of reimbursement is a major issue for the
larger hospital systems.
54%
51%
49%
34%
31%
All issues
32%
Most significant issue

27%
21%
22%
20%
15%
10%
5%
7%
7%
3%
3%
5%
Financial
Challenges
such as
profitability or
growth
Reimbursement
is not keeping
up with the rate
of expense
growth
Care for the

Uninsured
Costs of
supplies are
rising at an
unsustainable
rate
Patient
Satisfaction
Government
Mandates
Patient Safety
and Quality
Personnel
Shortages
Capacity
Physician
recruiting/
retention
N = [65, 2+ hospital systems]
Challenges to existing healthcare supply chain model

The rising cost of supplies and the ability to drive physician preferences are seen as the most
significant challenges. Most executives are focusing their supply chains to solve these issues.
87%
Quote from $2B+ Hospital System:

Seeing supply cost growing at twice the cost of
labor.in a service industry thats scary and requires
attention.
70%
We cut contracts in half and doubled spend - we want

fewer SKUs to make our supply chain more efficient.
41%
All challenges
36%
Most significant challenge

29%
28%
28%
26%
24%
13%
2%
Rising Cost of
Supplies
N = [121, Total sample]
Ability to drive Com plexity of

rationalization product and
of physician
inform ation
product
flow
preferences
3%
4%
3%
3%
2%
Contract
Process w ith
Suppliers
Lack of
Consistent
Service in
Supply
Lack of SC
partnership
and visibility
w ith specialty
areas (OR,
Cath, IR, EP,
Radiology)
Lim ited Best

Practice
Sharing
Lack of
leadership
vision,
m aturity and
control in the
SC
A formal supply chain organization

Q 67. Do you have a formal supply chain organization (e.g., a group that focuses on the optimum sourcing of materials as well as the coordination and planning for the delivery of
products?
Even though 61% of hospitals report

having a supply chain organization AMR
strongly believes that many of these
hospitals dont understand the true
meaning of supply chain.
No
39%
This however, is changing with the

incorporation of talent from outside of the
industry.
Yes
61%
Among hospitals that have a supply chain

organization 94% have had one in place
for 4 years or more.
Reporting structure of SC org is all over
the map.
Has the greatest potential to resolve challenges

35%
Manufacturers
12%
Distributors & Wholesalers

Service Providers
9%
Physicians
9%
GPOs
7%
Administration
7%
Especially amongst larger systems, the

manufacturers were deemed to have the
greatest potential to solve these challenges.
AMR sees this as a great opportunity to create
differentiation via supply chain services.
Quote from $500M+ Hospitals:

7%
The end user/patient

Government
Supply chain/purchasing
3%
3%
CEO/President
2%
Combination of all involved
2%
Were looking to the manufacturer to drive efficiency in

our SC. They have the knowledge, money and resources
to drive visibility solutions.
We're working closely with a manufacturer to drive down
costs in our supply chain. This has definitely translated
into more market share for them.
Manufacturer X sales reps can speak the operational
game/supply chain game vs. other manufacturers reps.
The Medical Device

Environment
Med Dvc Primary Product Supply Business Strategy

Improve collaboration in your enterprise with internal partners across
R&D, Manufacturing, Supply Chain and Sales & Marketing
9%
Replicating best practices across the enterprise using operational

excellence programs such as QM, Six Sigma, RFT
4%
Improve manufacturing performance visibility across manufacturing

sites
4%
17%
13%
Redesign of your supply chain networks
9%
Standardize manufacturing processes and systems
9%
Improve efficiencies and lower costs across the enterprise
4%
Manufacturing outsourcing as an opportunity to boost productivity

and efficiency
4%
Identify and eliminate waste in manufacturing using lean

manufacturing practices
4%
13%
13%
9%
Future:
Internal
Collaboration,
Visibility
Agility &
Profitability
9%
17%
13%
Detailed production scheduling, and adherence

Improve collaboration with your external partners such as Contract
Manufacturers, 3rd Party Logistics, Customers
22%
Today:
4%
Improve compliance across financial, manufacturing and quality

processes
9%
Increase insight into downstream demand using near real-time data

from the distributors and other intermediaries (e.g. PBMs)
9%
Cost &
Compliance
2007
Product authentication, track and trace, integrity of supply chain
4%
2012
Source: AMR Research Life Sciences Study 2007
Most important versus most challenging supply chain

operations capability today in medical device
companies
Most Important
Most Challenging
29%
Supply Chain has abdicated

joint value creation to the
commercial organization.
23%
19%
19%
16%
Leaders recognize this is a

lost opportunity!
16%
10%
10%
10%
10%
6%
6%
3%
Effective S&OP
process that
integrates
regional &
global
requirements
Global supply
chain network
that achieves
simultaneous
objectives on
quality, cost
and time-tomarket
Integrating
processes with
low-costcountry
suppliers
Effective go-tomarket strategy

for new
products
10%
10%
Effective
supplier
recruitment,
certification &
alignment
programs
Integration of
local market
needs within
global design,
research and
development
functions
Protecting
intellectual
property in
emerging
markets
3%
Retaining and
developing
supply chain
talent in key
markets
Tight links (joint

value creation)
with customers
to obtain
supply/demand
visibility
Which of the following is your companys most important operations capability today?
n= Medical Device Manu, 31
AMR Healthcare Survey Nov 2008
Which of the following is your companys most challenging operations capability today?
Most important versus challenging to enable manufacturers, pharmacies,

payers and providers to leverage patient outcome information
Most Important
23%
Most Challenging
19%
19%
19%
16%
16%
13%
13%
13%
13%
10%
10%
3%
3%
Good relations
with payers and
providers for
visibility to
patient outcome
information
Effective
planning
processes to
translate past
outcome data
into future
forecast
requirements
n= Medical Device Manu, 31
Efficient business
processes and
information
systems to
process patient
outcome
information
3%
3%
3%
Moving beyond
discussions of
price toward
discussions of
disease
management,
patient outcomes,
etc.
Development of
wellness
programs that
provide patients
and providers with
incentives for
maintaining
healthy lives and
preventing illness
or injury
Building trust
across the
healthcare
value chain
Elimination of
policies and
practices that
discourage open
communication,
joint value
creation, etc.
Linking patient
outcomes with
treatment and
payment plans
Legislation or
regulation to drive
collaboration
across the
healthcare value
chain to improve
patient outcomes
Which of the following is most important to enable manufacturers, pharmacies, payers and providers to leverage patient outcome information?
Which of the following is most challenging to enable manufacturers, pharmacies, payers and providers to leverage patient outcome information?
The Value Chain Transformation
The State of Supply Chain in Life Sciences

Supply chain processes are ever-changing. We need to learn, to
unlearn to relearnorganizational lobotomy? Generic shock therapy?
Teams are focused on the synchronization of demand and the most
profitable response. This is a significant shift.
Today, there is a recognition that there is not one supply chain, and
that supply chains need to be designed not inherited. As a result,
there is a shift to aligning supply chain strategy with business strategy
and designing the supply response.
A focus on cross-functional excellence is necessary to drive
improvements (S&OP, NPI, Commercialization, Supplier
Development, etc). The key is metric alignment to drive the right
response.
The Core Elements of the Demand Driven Value Chain

Business &
Risk Tradeoffs
Demand
Translation
Demand Visibility
Supply Visibility
Innovation
Commercial
Business
Implications (Planning)
&
Tradeoffs (Finance & Tax )
Customer
Segmentation
Model
Demand
Management
Supply
Supply
Capability
Capability
Sensed
Demand
Translation
Turntable
ERP
MES
Innovation
Shaping
Translations
Reliable
Reliable
Flexible
Flexible
Responsive
Responsive
Compliant
Compliant
Master Data
Analytics
Agility
Agility
by
by
Design
Design
Profitable
Profitable
Perfect
Perfect Order
Order
Demand
Visibility
&
Insights
Demand
Demand
Opportunity
Repository
Common Process Platforms

& Processes (eg S&OP)
Demand
Translation
3rd Party
Distributor
Forecast
Inv
Reliable,
Profitable
Response from
Supply Based
on Demand
Suppliers
The Downstream Data Architecture Model

Operations
&
Product Supply
Downstream Data/ Application Stack
Customers and Patients
S&OP
Takeaway: Visibility and collaboration are key,

but risk/opportunity tradeoffs are inherent
Value Chain Transformation/Change Maturity

Responsive to Demand Growth and Profitability
Cost to Deliver Cost to Deliver
Cost to Serve
Internally Focused
Externally Focused
Perfect Orders
Demand - Driven
Value Driven
Network
Build and Extend

Core
Demand Management
Processes
Customer / Brand
Driven Control
Integrate
and Consolidate
Business Process
Infrastructure
Cost Focused
III IV
II I
Growth & Market Share

Cost to Serve
Profitable Perfect Orders
Profitability (sku /shelf / account /
segment)
Joint Value
Outcome
Focused
Performance
Management
Markets
Focused
Acquire
Merge
Partner
Legacy Growth
Business Units and Functions
Revenue Focused
Value Chain Transformation Journey

Stage 1
Markets Focused
Metaphor
Focused on local markets and

products
Focused on consolidated &

standardized controls and
efficiency
Boxes & Lines
Life Sciences
Median
Local business unit
Inside internal metrics
metrics
Business /Geography Unit

performance
Market Share / revenue
Revenue
IT Strategy
Local IT organization,
governance systems and
standards
Stage 4
Demand Driven
Value Driven
Extended set of integrated lean,

business and supply chain
processes.
Integrated front office
Integrated back office
Focused on outward facing
demand and supplier management
efficiency
Joint Value Creation Profitable

relationships with upstream &
downstream network partners
Focus on outside in demand
translation into joint value
Synchronization
Ecosystem
Efficiency , costs,
Standards
Transaction platforms
Integrated core metrics
Centralized IT leadership &

standards, consolidated
platforms, data, and
infrastructure
LS
LS
Leaders
Leaders
Metrics
Consolidated and
standardized business
processes and
infrastructure
Boxes
Stage 3
Customer & Brand

Control
Distributed business units

and functions
Laggards
Laggards
Description
Stage 2
Inside out metrics
Outside in metrics
Transactional business
performance management
Speeds, feeds, cycle times,
service levels, adherence,
compliance
Collaboration metrics
Joint value creation

relationships and networks
Profitable perfect orders
Relationship process
management metrics
Business IT partnership
Governance of the distributed IT
organization
IT Operations Excellence
Business leadership of
enabling IT
Business-skilled IT resources
embedded in business
processes
Leaders Make The Link To Business Value Explicit

Business Strategy
What are the right things to do to increase company value?
Value Chain Strategy

What are the right ways to support the business strategy?
What are your companies priorities?
Align demand
relationships
Right product
Design the
Build
Supply chain strategy
platforms
supply
organizational
response
systems and
manage talent
Demand networks
Design networks
Joint value
creation strategies
Innovation
methodologies
Supply chain
network design
Continuous
Improvement
Capabilities required
Align supply
relationships
Effective supply
networks
Execution of
buy-side strategies
Business Process
How do I do the right things right?
Segmenting the Supply Chain Volume, demand

variability, technology and life cycle
Commoditized
High
Commoditized
6
Technology
Technology
8
Specialized
Specialized
Long
Short
Long
Short
Lifecycle
Volume
Lifecycle
Commoditized
Commoditized
14
13
Technology
10
10
9
9
12
11
11
Technology
15
15
16
Specialized
Low
Specialized
Long
Short
Long
Short
Lifecycle
Lifecycle
Low
High
Demand Predictability
The Hierarchy of Supply Chain Metrics:

Availability and Perfect Order to Patients
20%-65% Error
Demand
Forecast
77%-94%
Perfect
Order
Cash-to-Cash
125-325 days
Inventory
Total
AP
Supplier
Quality
Cost
Detail
SCM
Cost
Supplier
On-Time
Production
Schedule
Variance
RM
Inv
Plant
Utilization
37%-69%
Utilization
AR
Purchase
Costs
WIP + FG
Inventory
Dir Mtl
Costs
Order
Cycle
Time
Perfect
Order
Detail
Source: AMR Benchmark Analytix

The Key is Balance

SCM Costs
What Does Good Look Like?
Level 1
Level 2
Level 3
Level 4
Reacting
Anticipating
Collaborating
Orchestrating
Business Process
Consciously
Excellent
Organization
Consciously
Measurement
Consciously
Continuous
Improvement
Technology
Culture
Competent
incompetent
Unconsciously
incompetent
Inside out
Outside in
PharmaCo Example Unconsciously Incompetent?

Key:
Above par
On par
Below par
Demand
Forecast
Assess
Perfect
Order
Cash-to-Cash
Diagnose
Inventory
Total
AP
Supplier
Quality
Correct
Cost
Detail
SCM
Cost
Prdctn
Sched
Variance
Supplier
On-Time
Plant
Utilztn
Raw Mtl Purch

Inv
Costs
WIP
Inv
FG
Inv
AR
Dir Mtl Costs
New
Prod.
TTM
Order Perfect
Cycle Order
Time Detail
Example Company D: Orchestrating

Consciously Excellent
Key:
Above par
On par
Demand
Forecast
Below par
Assess
Perfect
Order
Cash-to-Cash
Diagnose
AP
Supplier
Quality
Correct
Cost
Detail
SCM
Cost
Inventory
Total
Supplier
On-Time
Production
Plant
Sched
Utilization
Variance
AR
Purch
Costs
WIP +
FG
Inventory
Dir Mtl Costs
Order
Cycle
Time
Perfect
Order
Detail
Improving business operations through better visibility

Better demand forecasters have..
24% less raw material inventory
22% less finished goods inventory
21% shorter cash-to-cash cycle times
32% shorter days sales outstanding
22% better plant utilization
9% lower SC costs representing approximately 5% of revenue
Source: AMR Research supply chain benchmark data from 70+ Fortune 500 companies
Leaders get benefits from visibility in life sciences

Level of change seen amongst better demand forecasters
in profitability performance over the last 12 months
Benefits realized as a result of

demand forecast accuracy improvement
67%
42%
Source: 2008 AMR Healthcare Study

Whats needed to move to the next level? Combine

process, technology and best practices
75th percentile
and above
25th percentile
and below
Management Practice +
Lean
+8%
+20%
+2%
Intensity of IT Deployment +
25th percentile
and below
Business
Transformation
Enabled by IT
ERP + MES +
EMR + Etc.
75th percentile
and above
Source: London School of EconomicsMcKinsey survey and analysis of top 100 companies in
France, Germany, United Kingdom and United States / AMR Analysis
Roadmap to the Demand-Driven Transformation
Capabilities
Value Network Performance Management
Demand
Visibility
Automatic / Responsive Replenishment

and Demand Shaping
Global Product, Supply, and Network Optimization
Value Network Redesign
Downstream Customer and Consumer Capabilities
Segmented Channel Management, Cost to Service
Responsive
Supply
Demand Intelligence, OperationsSales Planning Process and Collaboration

Value Chain Performance Metrics, and Master Data Management
Costs to Deliver, Operations Excellence, Measurement Strategy, Cycle Time
Harmonizing Core Business Processes, Leveraging IT Investments, Costs to Deliver,
Strategic Governance, Value Chain Continues Improvements Strategies
Predictable Supply (Right First Time) and Costs (COGS); Waste and Loss Elimination, Lean
Time
Driving Change
Whos going to drive change?
How will changes occur to build trust and collaboration

within the healthcare value chain?
2007
2008
Sentiment favors government intervention

But the healthcare industry is divided as to
level of involvement
Source: 2008 AMR
Healthcare Study
Supply Chain Model for Life Sciences
Supply Chain Talent /Organizational Evolution

Maturity mapping to the Demand Driven maturity model
Strategic Partner
External Integration
Internal Integration
Fiefdoms
-
-Synchronized Activities
-Focus on organization
creating collaborative
opportunities with
customers and suppliers
- Visibility, Collaboration
and Planning Tools
Invoked
- Beginning connections
Between stations
- Leadership established
- Development of internal
- Metrics and system
- Focus on reducing self inflicted wounds
- Focus on (3) or (4) key stations
-Organization viewed
as strategic
differentiator
-Broad station span of
control
- Tightly integrated into
technology and NPDI
activities
- Expected to deliver
game changing
product and service
offerings
Standalone departments
Functional Independence
Separate Metrics
In-Fighting
Focus on one or (2) key stations
Reacting
Anticipating
Collaborating
Orchestrating
Demand Driven Stage

Are you building collaborative practices or developing

collaborative relationships?
Collaborative
Relationships
Relationship and process driven
Continuous improvement to drive
joint value creation
Redesign for value
Aligned metrics to the shelf
Performance-driven business
networks
10
9
8
Enablers
Aligned metrics to serve the patient
Shared savings
Joint business process innovation
Cost-to-serve improvements
7
6
Collaborative
Practices
One off projects
Suppliers and hospitals have
different goals
Not integrated into hospital and
supplier workflows
5
4
3
2
Enablers
CPFR
VMI programs
Data sharing: EDI, B2B, and portals
Cost to Deliver
Takeaway: Develop the vision that moves your organization

towards collaborative relationships
Questions to Ask
Provider to Manufacturer
Manufacturer to Provider
1. If I give you data, how

will you use it?
2. How do you give
incentives to your
sales team to drive
value?
3. How do you measure
effectiveness?
4. What matters the
most: cost to serve or
cost to deliver?
5. What differentiates
your brand, and how
committed are you to
innovation?
1. How good is your data

today? Where are you
going in the future?
2. What is your gap
between planning and
execution? How are
you closing this gap?
3. How do you measure
performance?
4. How committed are
you to driving
innovation for the
patient?
JVC Discussions Must Transcend Costs

Cost to Deliver
GPM = Price-Commission-COGS
Distribution costs expensed separately
Sales Reps commissioned on full price

GPM appears to be maximized
What about write-offs?
Cost to Serve
What impact could JVC efforts have on write-offs?
Could expedited freight costs decrease?
Could decreased commissions be supplemented with process
incentives, service incentives?
Basic Cost to Serve

Cost Factors Considered
Data Source
Basis of Calculation
ERP + model
ERP + model
ERP + model
Product mix with Bill of Material

Production line utilization from model input
Production line mix
Simulation output
Simulation output
Simulation output
ERP + model
Modeled
Frequency of LTL, TL, CL shipments

% and Frequency of orders processed
% of total activity annually
Quantity x cost per transaction, DSO comparisons
Promotional rules and order data by customer
Simulation output
Simulation output
Simulation output
Inventory investment x carrying cost rate

Number of orders processed
Number of orders processed by warehouse
Model input
Model input
Model input
Special orders separated in demand data

Separated in demand data analysis
Separated in demand data analysis
PRODUCT COSTS
Raw Material
Conversion Costs (direct overhead)
Energy
SG&A COSTS
Transportation
Customer Service
Order Handling
A/R processing
Promotional Discounts on Price
ASSET RELATED COSTS
Inventory carrying cost

Production Change over
Warehouse costs
SPECIAL HANDLING COSTS
Special requests
Returns
Deducts
Source: OnPoint Group

Profitability Conventional Contracting View of the Price Waterfall
Price/Cost Index
Off Invoice Discounts
Standard Costs
Performance Based On-Invoice

Discounts
Missing Granular Insight into true Cost to Serve

Courtesy 2009 Model N, Inc. Model Performance Analytics
True Profitability View of the Price Waterfall

Extended Price/ Cost Index
Market Driven Price

Reductions
Base
Price
Product and
Market Value
Adjustments
Performance Based Rebates, Admin Fees,

Channel Settlements, Promos
Negotiated On and Off

Invoice Discounts
Asset Related Costs

Special Handling Costs
Unrecovered
Cost to Serve
Courtesy 2009 Model N, Inc. Model Performance Analytics

Three habits of effective value chains

Focused and strategic investments in trading partners
o
o
o
Aligned incentives for collaboration

Enhance understanding and know-how of partners business
Development of trading partners
Effective management of knowledge and information

flows amongst trading partners
o
o
Sharing of information in a timely manner

Product and process improvement initiatives
Building trust amongst trading partners

o
o
o
Reduces transaction cost

Monitor and measure performance
Evaluating relationships on more than just cost
Questions?
Hussain Mooraj
hmooraj@amrresearch.com
Cell: 617 823 9219

Mooraj AMRSupplyChainTransformation

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The Healthcare Value Chain Transformation:

A Time To Learn, Unlearn, and Relearn

Hussain Mooraj Vice President, Healthcare & Life Sciences

2009 AMR Research, Inc. | Page 1

2009 AMR Research, Inc. | Page 2

AMR Research is an advisory and research

Not consultants provide research based

Industries we focus on:

Retained advisory services and peer

2009 AMR Research, Inc. | Page 3

AMR Healthcare Value Chain Coverage Model

2009 AMR Research, Inc. | Page 4

The Healthcare Value

2009 AMR Research, Inc. | Page 5

Todays Realitythe healthcare value chain lacks visibility

New Product or Service

Supply chains designed with inside-out processes in mind sub-optimized,

Is there a lack of trust with your trading partners?

Who is the customer?

Doctors and Clinicians

Who is the customer that

Companies lack outside-in

Who is your PRIMARY customer?

2009 AMR Research, Inc. | Page 8

Leaders are transforming strategies and business models

2009 AMR Research, Inc. | Page 10

Top issues confronting hospitals

Financial challenges are top of mind for executives at smaller

Most significant issue

Care for the

N = [65, 2+ hospital systems]

2009 AMR Research, Inc. | Page 11

Challenges to existing healthcare supply chain model

Quote from $2B+ Hospital System:

We cut contracts in half and doubled spend - we want

Most significant challenge

N = [121, Total sample]

Ability to drive Com plexity of

Lim ited Best

2009 AMR Research, Inc. | Page 12

A formal supply chain organization

Even though 61% of hospitals report

This however, is changing with the

Among hospitals that have a supply chain

N = [65, 2+ hospital systems]

2009 AMR Research, Inc. | Page 13

Has the greatest potential to resolve challenges

Distributors & Wholesalers

Especially amongst larger systems, the

Quote from $500M+ Hospitals:

The end user/patient

Combination of all involved

Were looking to the manufacturer to drive efficiency in

N = [65, 2+ hospital systems]

2009 AMR Research, Inc. | Page 14

The Medical Device

2009 AMR Research, Inc. | Page 15

Med Dvc Primary Product Supply Business Strategy

Replicating best practices across the enterprise using operational

Improve manufacturing performance visibility across manufacturing

Redesign of your supply chain networks

Standardize manufacturing processes and systems

Improve efficiencies and lower costs across the enterprise