NDC Exhibition

Edition: July 2010 - Vol 18 Number 07
Article#: 3493
Author: Repertoire

National Distribution & Contracting Inc. weathered a storm of epic proportions to carry off its Xtreme International Exhibition in early May.

No, the storm wasn’t healthcare reform. Rather, just as Nashville, Tenn.-based NDC was ready to kick off its annual meeting, Tennessee experienced the worst rainfall in recorded history – more than a foot of rain fell during the weekend the event started. Parts of the downtown area, where the conference was held, as well as surrounding areas, were underwater.

Despite the adverse conditions, NDC pulled off the meeting without a hitch, though its staffers did have to change venues for some events. More than 900 people were on hand for the event.

Recapitalization

NDC’s recent recapitalization through private equity firm Silver Oak Services Partners, Evanston, Ill., was a topic of discussion from the opening of the meeting. “Last year, I talked about a new NDC,” said Chairman Ted Almon of Claflin Co. “One of the most significant things we needed to do was recapitalize, so we could [carry out] the aggressive growth strategy and plans the board had made. That required us to find an equity partner to invest in this plan, this dream. I’m happy to tell you we accomplished that goal several months ago.”

Indeed, in February, NDC closed a deal with Silver Oak, leaving that firm as well as several NDC members as owners of the company. The sale to Silver Oak “is really a commitment to do the things we promised we would do,” said Almon.

Those initiatives include offering a low-unit-of-measure program to members; expanding the breadth of products in NDC’s warehouses in La Vergne, Tenn., and Sparks, Nev.; and rolling out a master distribution model for veterinary products distributors.

Low unit of measure

“We want to free up the working capital of our member distributors, so they can use their resources as sales and marketing companies, and lean on us in an increasingly relevant fashion as the fulfillment arm of their business,” said NDC President and CEO Mark Seitz, speaking with Repertoire. “We want them to count on us to do fulfillment on their behalf to their accounts,” he said. That way, NDC members can carry less inventory while depending on NDC to provide products to their customers.

Through its warehouses, NDC acts as an aggregator of products, particularly slower-moving items, said Seitz. “We hope to expand our position as a channel utility.” Offering a low-unit-of-measure program is one way to do so.

At press time, NDC had moved 1,900 high-velocity physician-office SKUs to a portion of the La Vergne facility and had created an e-commerce platform allowing members to order products on a low-unit-of-measure basis. The program will run in La Vergne first, then will be expanded to Nevada, though no specific time has been established for that.

“We’re traditionally a case-pick model,” explained Seitz. In other words, members order caseloads of product from the NDC warehouse and receive shipments on a weekly basis. But in order to protect their competitive position, the typical physician office dealer must adjust to different service level requirements, he said. “They might need a particular suture for an eye procedure tomorrow, and it might not be one of their A or B items.”

The low-unit-of-measure program will give the NDC member the ability to electronically order small quantities of products. NDC will then ship the product – e.g., an ophthalmic suture – directly to the provider in a box that has the local distributor’s name on it. “[The distributor] maintains ownership of the account relationship, and [the program] improves the service level and responsiveness of the med/surg distributor,” says Seitz.

What’s more, the low-unit-of-measure program can help distributors expand their geographic territory, said Seitz. “Distributors have a certain radius where they can effectively distribute products,” he explains. “Most are running trucks from a distribution center. [The low-unit-of-measure program] will allow them to expand their service area on a family of high-velocity SKUs, so they can recruit business on the fringes of their service area and allow us to do the fulfillment.” The program will be made available to NDC’s dental members as well.

Expanded breadth of products

In addition to the low-unit-of-measure program, NDC is planning to broaden the breadth of products it can offer its members through its warehouses, said Seitz. “Our strategy is to present unique product opportunities to make the independent distributor more competitive in the med/surg and dental markets,” he said. One example is an advanced wound care offering that has achieved wide acceptance in Europe, but which has yet to make an impact in the United States.

Another product area that NDC intends to explore in the year ahead is that of physician office pharmaceuticals, a segment that can comprise 30 percent to 40 percent of a physician’s office spending. “You can expect us to overhaul the way NDC offers pharmaceuticals in the physician office space to our distributors,” said Seitz.

Veterinary market

NDC is also considering expanding into a new market area. The last time the company did so was in 1999, when it acquired American Dental Cooperative. It followed up with its 2003 acquisition of United Dental Dealers. Today, NDC offers dental dealers the same master distribution model it offers its med/surg members. Now, it is evaluating whether to do something similar for veterinary products distributors. Such a move would “support the competitive position

of independently owned and operated veterinary distributors,” said Seitz.

Several NDC members already distribute to the veterinary market, and Seitz estimates there are about 30 viable independent veterinary distributors in the country today. Creating a master distribution model “would more likely be done through acquisition,” he said. “It would be more of a ‘buy’ than a ‘build.’” In other words, NDC will probably look into acquiring an existing network or association of veterinary distributors. “We wouldn’t force [them] through our model, but we would bring master distribution to the veterinary distribution space.

“In any industry where there is a need for full-line distribution because of the number of part numbers necessary to be a full-line distributor, there’s an opportunity for us to support independently owned and operated distributors. First, medical, then dental, and now animal health is a logical space for us to evaluate opportunities for expansion.”