embrace the hybrid distribution model

Third-Party Logistics (3PL) ServicesEmbrace the Hybrid

March 7, 2011 | 11:15 am-12:15 am

Jeff HeathDirector Distribution Operations

Overview• Present an alternative to managing an internal distribution

center or contracting Third Party Logistics (3PL)

• Identify OMP objectives

• Factors in reaching decision

• Fit and connectivity

• Challenges, monitoring and measurements

“Embrace the Hybrid”Biology- An offspring resulting from cross-breeding

Automobiles- A vehicle using more than one power source

Hybrids - Giving these clubs the wood's long distance with the iron's familiar swing.

Hybrid Distribution Model

OMP Carson, CA Memphis, TN

Objectives

Mitigate single source site failure =Reduce Shipping cost

Reduce Transit time

Why Hybrid?

Flexibility

Factors to Hybrid• OMP investment in WMS (Navision)

• Hybrid allows OMP to Maintain Control

• Hybrid allows testing of partner with reduce risk

• Hybrid facilitates gaining experience and confidence with 3PL

• Hybrid allows scalability with low capital investment

Factors to Hybrid

• Hybrid facilitates introduction to technology advances

• Hybrid may make sense when growth is sudden or unplanned

• Order pattern experiences frequent swings (spikes)

• Hybrid may make sense when business is declining

When Not to Hybrid• Make versus Buy decision

• In house technology is robust/scalability

• Fixed cost can be absorbed easily

• Firm Demand/ Contracts exist for 3-5 years

• Maintain complete control of business

• Labor is abundant, cost is low

• Training is not complex

• Warehouse space exist

Partner Selection/Defining Fit

Defining Service Criteria by first looking at ourselves , specifically, how we enter and ship orders.

Who are our customers?What’s attributes are important to them?

EngagementExpectationsExchange

Culture/ Uniqueness

Develop Supply Load Plan

Define Requirements and Data Exchange

Identify scope, volumes, frequencies and peak periods

Challenges• Reconciling Inventories• Timing of daily order receipt and cutoff• Sharing OMP’s products nuances and

distinctiveness, UOM & non barcodes• Inventory management at two sites• OMP unit of measures • Symptom of back orders

Monitor

• Are Inventory Supply levels accurate?

• Are the customers satisfied with deliveries?

• Are transportation savings as forecasted?

• Are shipping cost in line with financial forecast?

• Are we making money? Adjust volume ratio’s?

Scorecard

Peace of Mind

99.99% Inventory Accuracy

100% Recognize Revenue

99.99% Fulfillment Accuracy

Initiatives 2011

• Track and Trace 2D Bar code• Expand Drug Pedigree • Cost reduction through technology and

efficiencies

Conclusion• Review Hybrid alternative

• Objectives- basis for decision of maintaining internal DC and 3PL

• When not to Hybrid 3PL

• Fit and Engagement

• Identified challenges for OMP and 3PL

• Monitor/ Scorecard

• Assessment of partnership

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