PSS World Medical is a…Survivor

Edition: July 2001 - Vol 9 Number 07
Article#: 1003
Author: Repertoire


Speaking at the recent Spring Conference of the Healthcare Manufacturers Marketing Council, President Dave Smith said the company is relying on four key initiatives to propel it forward: SRx, a disease management approach to selling;, the company's electronic ordering system; i2, an automated system to coordinate the distributor's and manufacturers' selling efforts; and the creation of six strategic business units in the company's imaging business.


Wearing an outfit straight out of the recent ''Survivor'' reality TV show, Smith recounted PSS's troubles of the recent past.

For the past five to six years, PSS allowed the wishes and whims of Wall Street to direct its strategy, he said. Unfortunately, the company focused on short-term profit growth instead of long-term strategy.

''Morale deteriorated, the company was unstable,'' said Smith.

Then in late 1999, the company was dealt three potentially lethal strikes:

•The bankruptcy of 70% of its Gulf South subsidiary's long-term-care chain customers and a loss of $25 million in revenues.

•The Abbott Diagnostics consent decree, which resulted in approximately $30 million in lost revenues for PSS.

•The manufacturing failure of Trex Medical (a Thermo Electron company) imaging equipment, resulting in another $30 million of lost sales in PSS World Medical's imaging business.

In the face of these adverse events and pressure from Wall Street, PSS Founder and Chairman Pat Kelly sought to sell the company. Fortunately, the acquisition was scuttled, said Smith.

Kelly left, and PSS management developed a plan to set the company right again. Rather than attempting another sellout, the company's board decided that PSS's own management team was the one to implement the plan to recover the business, said Smith.

''When we took over, we were at risk of losing 20 to 30 percent of our sales force,'' he recalled. That sales force – which Smith called the ''best in the country'' – had face-to-face relationships with 150,000 customers. Knowing that such a massive loss of reps would have been disastrous for the company, Smith, Doug Harper and other PSS executives began ''reversing the bad decisions'' the company had made in past years and undertook a goodwill mission of epic proportions, making an effort to visit every PSS employee in the country.

The effort worked. PSS lost only a handful of veteran sales reps in 2000, said Smith. ''We were able to stabilize the company.''

While surveying and interviewing 5,000 customers about their distribution needs, the company implemented four initiatives to help PSS and its customers regain their stride.


The company's physician business wrestled with the challenge of how to treat its customers like niche players rather than some kind of ''generic'' doctors' practices, said Smith. The result is SRx, a disease management approach to selling.

Beginning with family and general practitioners, PSS identified five diseases, which represent approximately 40 percent of the typical practice's caseload. The company then put together educational and information packages on each of them.

The diseases are hyperlipidemia, diabetes, upper respiratory, anticoagulant therapy and hypertension/cardiovascular disease.

These packages, which are available to sales reps on their laptops or via the Internet, give information on the disease's origin, diagnosis, CPT code, patient education, treatment and recommended drug regimen. Naturally, the rep can use the package to direct the customer to disease-related products available through PSS.

''All the legwork done by the reps is now gone,'' such as hunting down reimbursement information, said Smith.

Furthermore, the system lets the reps approach their customers from a consultative and educational standpoint instead of a ''What can we sell?'' basis.

In its family practice pilot group, the program has produced 14 to 15 percent growth in revenues and gross profit dollars.

The company will add more specialties as time goes on. ''This is the platform we'll use to launch new products for the next three to four years,'' said Smith.

Supply Chain Initiative

Stating that PSS doesn't want to be in the purchasing or inventory business, Smith said that the company will soon finish implementation of its supply chain system with one of its biggest manufacturers.

''Historically, we have been a very inefficient distributor,'' said Smith. ''But those days are coming to a close.

''To our high-volume vendors initially, we will offer automated purchasing, demand forecasting and rebate-free transactions, in addition to being their sales and marketing interface.''

PSS will offer between 10 and 15 weeks forecasting data, as well as ''real-time visibility'' into sales of the vendor's products to end users. ''In the past, we may have ordered 200 times a month, but in the future, we will order one to four times a month,'' he said.

The system will eliminate rebates with selected manufacturers within a few months, said Smith.

Strategic business units

The company's Imaging business has completed the reorganization of its salesforce into six business units focusing on: commodities, women's health, surgical, imaging, technical service and telesales. ''The SBU initiative aligns leadership, marketing, and sales compensation with resource channels that maximize our product capabilities,'' Smith said.

PSS's e-commerce offering,, has information on more than 8,000 products, which together make up approximately 75 percent of the company's revenues, said Smith. The customer can see whether the item in question is in stock, if it has a special offer attached to it, and how much it costs. Naturally, he or she can place the order, too.

For the customer, offers ''a wealth of information'' and convenience, said Smith. For PSS, it frees up the reps' time to do more selling.