Only in Chicago

Edition: September 2002 - Vol 10 Number 09
Article#: 1303
Author: Repertoire

Call it Midwestern stubbornness or downright resistance to change. (Why else would 38,000 people watch the Cubs play every day even though the team hasn’t won a pennant since 1945?) But the fact is that the Chicago medical market is unlike other markets in the United States.

For example, with some exceptions, Chicago-area hospitals resisted the urge to buy physicians’ practices, as many others were doing 10 years ago. In addition, although metropolitan Chicago has its share of IDNs and hospital groups, not one of them dominates the scene. Independent hospitals still exist, and some are pretty well off financially. And few of the big national distributors, including Owens & Minor and McKesson Medical Surgical, have penetrated the city to the extent that they have other markets. (Hometown companies Allegiance Healthcare and The Burrows Company remain strong.)

Maybe that explains why, after 60 years, Harris Hospital Supply in suburban Broadview is still going strong.

His First Choice Was Teaching

Harris was founded during World War II by William Harris, a former sales rep with Burrows. He and another ex-Burrows rep opened up a downtown shop and began calling on hospitals in Illinois, Wisconsin, Indiana and Michigan. They sold equipment, reusable supplies, floor coverings, sheets, towels, just about anything a hospital could use.

In 1949, Harris was joined by his son, William Harris Jr., who remained active in the business until 1987.

But third-generation Tom Harris had other ideas. Several summers of working in the Harris warehouse had acquainted him with the business and the products. But he had little interest in running a distribution company. Instead, he wanted to be a college professor. In the mid-1970s, while pursuing a graduate degree in social psychology from Texas Christian University, he became a teaching assistant. “It wasn’t what I thought it would be,” he says.

That’s why, in 1976, he went to his father and asked if the company had any openings for him. “He said, ‘If you want to try to develop something, have at it,’” recalls Harris. And so, with zero sales experience, he picked up a bag and started developing a territory.

Even with sales experience, the young Harris would have faced a tough time. The company’s service area had shrunk to metropolitan Chicago, northwest Indiana and southwest Michigan. “We had to expand geographically,” he recalls.

What’s more, the better-established distributors enjoyed exclusive relationships with the medical powerhouses, such as Sherwood and Kimberly Clark. “I knew we needed to expand the number of lines we carried,” he says. So, first as a rep, then as sales manager, Harris began building the company, as his father and grandfather had done before him.

Gamble on the Future

In 1983, Tom and his father, William, took a gamble on the company’s future growth. Like others in the business, the two had watched with interest two well-publicized industry trends – stockless purchasing and the rise of non-hospital care. Then, John Strong, who headed materials management operations at Parkside Associates (a subsidiary of the Lutheran General Hospital system in metro Chicago), approached the Harrises about forming a joint venture. “We jumped in,” says Harris. (Today, Strong is CEO of Consorta Catholic Resource Partners, Rolling Meadows, IL.)

The plan was to form a new distribution company – Health Care Materials – to provide products and even outsourced materials management services to hospitals throughout Chicago and adjoining states, beginning with the facilities in the Lutheran system. The joint venture assumed the lease and employees of the offsite Lutheran General warehouse and established relationships with manufacturers as Health Care Materials.

The joint venture lasted for five years, with mixed results. Hospitals weren’t as eager to embrace stockless purchasing as some had thought. (“We never thought stockless purchasing was what it was cracked up to be,” says Harris today.) What’s more, sales reps for the joint venture found that even the physicians employed by Lutheran General were reluctant to fire their current suppliers and buy from Health Care Materials.

Still, the experience aided Harris’ growth. “We learned some new services,” says Harris. For example, because of a less-than-optimum loading dock, the University of Chicago’s materials management team had difficulty getting products up to its OR. So, Harris began doing it for them, every morning. Ultimately, the company became the OR’s offsite warehouse.

“Because of the flexibility of a company our size, we could customize programs. And we learned some of that from Health Care Materials.” The company began offering custom palletization and flexible delivery schedules as well.

City of Loyalty and Personal Ties

The ability to do things like that plays well in Chicago. “We became – and still are – a problem-solver,” says Harris. “Our product line has grown because hospitals are reducing their standing inventory, and manufacturers selling direct can’t provide the services that hospitals demand, like next-day delivery.”

The company has built a niche picking up business that the big guys either can’t service or don’t want. “We get our fair share of prime vendor relationships, but much of our growth has been as a secondary supplier,” says Harris.

“The hospitals want options,” adds Harris General Manager Paul Lutgen. “We’ve been able to pick up small chunks of business, and then build on them.”

Although Tom Harris recognizes the strengths of big companies, he also sees weaknesses at the individual customer level. In Chicago, that can hurt a company.

“If you look at the customer base here, there’s strong loyalty and personal ties,” says Lutgen. “If a new materials manager comes in, eventually we’ll get some of that business.”

That’s due in part to Harris’ strong and steady workforce. The $25 million company has five field reps with an average tenure of 20 years. Director of Sales Joel Jaffe has been onboard more than 30 years has marked Treasurer JoAnn Winters 28 years, and Warehouse Manager Scott Harris (Tom’s brother) has logged more than 20 years in the warehouse. Like the field reps, the customer service reps average 20 years on the job. “So when you call here, not only do you get a real person on the phone, but you get someone who knows what they’re talking about,” boasts Harris.

Membership in IMCO, the Daytona Beach, FL-based distributor buying group, has yielded Harris better pricing, promotional programs and incentive dollars, he says.

If there’s a wild card in Harris’ future, it is the company’s close ties with St. Louis-based MMS (formerly Midwest Medical Supply). Harris Hospital Supply and several individuals in the company are part owners of MMS, along with MMS President Gary Reeve and others, as a result of a transaction that occurred in 1996. At present, Harris and MMS have no plans to join the companies together.

At the same time, MMS’s acquisition earlier this year of Paragon Medical Distribution Group (April 2002 Repertoire), with its wide geographical base and multiple markets served (long-term-care, specialty sales, physicians) could push Harris in new directions.

But even if that takes place, Harris plans to stay vital in a deliberate, Chicago-style way. “We’re faster on our feet than other companies,” says Harris. “And we’re in touch with our customers. We know what reality is. Sometimes you can get distant.”

Don’t count on Harris ever getting distant from its roots in Chicago and as an independent distributor.