1 + 1 = 3PL
Edition: December 2003 - Vol 11 Number 12
Two industry veterans form an outsourced logistics company.
With a combined 40 years in healthcare distribution, Tom Seliquini and Greg Swanson think they have a shot at parlaying their experience to help drive costs out of the healthcare supply chain.
Formerly McKesson and Owens & Minor executives, the two have formed National Medical Logistics, a Richmond, Va.-based third-party logistics company offering warehousing, transportation and logistics consulting to medical products manufacturers, distributors and IDNs. The company offers just about everything except sales. That’s still best left to distributors, they say.
Seliquini had been vice president of operations support for McKesson prior to forming National Medical Logistics. He had been at McKesson (and its precursor, General Medical Corp.) for 27 years, most recently with responsibility for providing strategic and tactical support to distribution operations and logistics services for the $3 billion Medical-Surgical business. He began his career as a material handler and eventually managed one of McKesson’s distribution centers. He headed up a $20 million distribution network optimization project designed to reduce the number of distribution centers that McKesson owned and operated. In addition, he was at one time responsible for the corporate transportation function, which included the procurement and maintenance of more than 300 private fleet delivery vehicles as well as negotiations for corporate contracts on LTL and truckload services.
Swanson, meanwhile, is another McKesson graduate, having served as vice president of operations for the south region, a role in which he managed the business activities of 15 distribution facilities. Prior to his five-year stint with McKesson, he served as division vice president for Owens & Minor, leading a financial turnaround of the Salt Lake City-based Rocky Mountain region. Prior to that, Swanson held a variety of supply chain and management development positions with consumer company Philip Morris.
“We’re trying to partner with manufacturers who have their own sales force or network, and are focused on taking costs out of transportation and warehousing,” says Swanson.
He and Seliquini have no intention of competing with distributors. They won’t buy products or put a sales force on the street. Instead, they offer a distributor-neutral logistics option for direct selling and direct-shipping manufacturers. They also offer an option to small manufacturers who use distributors but who either can’t afford in-house logistics expertise or who are losing their distributors’ interest because their products are sold in small quantities.
“About 52 percent of products do not go through distributors,” says Swanson. “The core competencies of these manufacturers are patents, production and sales,” he says. “To them we offer order fulfillment, order management, warehouse and transportation management.”
They admit their model is not for everyone, such as manufacturers who are looking for an outsourced sales force to help them gain market share. “Distributors have a vital role,” says Swanson, adding, “We will not have a sales force.”
It is Swanson and Seliquini’s goal to remain transparent to the healthcare provider. “In essence, the medical manufacturer is outsourcing warehousing, transportation, order fulfillment and management to us,” says Swanson. And although the company will handle and warehouse products, it will not take title to them.
Seliquini and Swanson intend to aggregate supplies in a handful of distribution facilities around the country. Already, their company operates one such facility in Richmond. It is powered by a warehouse management system built by Grand Rapids, Mich.-based Provia Software, which manages the movement of product through the warehouse all the way to the customer.
Swanson and Seliquini recently built upon their transportation via an exclusive partnership with Richmond-based Riverside Logistics, a transportation management company. Riverside has software that does route analysis, identifies cross-docking opportunities as well as opportunities to consolidate shipments.
“This allows us to do freight brokerage, freight payment, freight audit,” says Swanson. “And we can consolidate shipments, negotiate and buy freight rates with carriers.” National Medical Logistics does not own its own fleet of trucks, but rather, brokers out the business.
“We offer an option for companies that can’t afford their own in-house transportation director to stay on top of all the variables of freight management programs.”
National Medical Logistics’ consulting arm advises clients about – what else – transportation and warehousing. Swanson and Seliquini have buttressed their expertise by forming a strategic alliance with the Veracity Group, a Miami-based healthcare supply chain consulting group.
Swanson and Seliquini have brought their consulting expertise to bear in an ongoing project with Miami-based Pharmed and University Hospitals Health System of Cleveland. (See “Pharmed Lands IDN Contract Far Away From Home,” July 2003 Repertoire.)
The two helped design and lay out a 60,000 square-foot warehouse in suburban Cleveland to house products for UHHS as well as direct-ship manufacturers. The project has included setting up racking, a conveyor system, a pick-pack operation and a warehouse management system.
More representative of the type of projects in which National Medical Logistics intends to get involved is its arrangement with Avid Medical, a sterile custom pack assembler in Toano, Va. National Medical Logistics has set up a warehouse right next to a sterilization company, and manages transportation as well. “They have outsourced their supply chain to us,” says Swanson.
In addition to attracting more manufacturers to their distribution facilities, Swanson and Seliquini hope to leverage their experience in planning and operating efficient warehouses to develop and sell an automated warehouse slotting system to handle industry-unique needs. Everyone in the supply chain, including medical products distributors, they say, could use such a system.
They plan to develop software programs that take into account the cube and weight of products and the speed with which products move, to determine the optimal warehouse location and quantity for each.
The two also anticipate filling a need for small manufacturers, who need to aggregate volume and improve their logistics capabilities in order to maintain a spot with the big distributors. “The distributors are saying, ‘We need someone to aggregate our C and D items,’” says Seliquini. “We can consolidate some of those products and make them A and B movers.”
What’s more, Seliquini says that NML can accompany smaller manufacturers to the table when they visit distributors. “When questions come up about fill rates, we can answer them, because we speak their language,” he says.
“Our mantra is ‘helping take costs out of the healthcare system,’” concludes Seliquini. “And we do it for everyone – manufacturers, providers and distributors.”