Three Distributors Rank in Top 10 of Healthcare Supply Chain Ranking

Gartner Announces Rankings of Its 2010 Healthcare Supply Chain Top 25

Owens & Minor Tops Second Annual Healthcare Supply Chain Rankings

STAMFORD, Conn., December 16, 2010—       
Gartner, Inc. has released the findings from its second annual Healthcare Supply Chain Top 25. The research focuses on the healthcare value chain's pursuit of high-quality patient care at optimal economic cost. The Top 25 ranking for 2010 identifies organizations striving for supply chain excellence and better patient care.

"Leadership in the healthcare value chain requires a laser focus on enhancing internal supply chain capabilities and a relentless pursuit of joint value with trading partners," said Wayne McDonnell, research director at Gartner. "Two themes emerged from our review of this year's Top 25: The time has come for value chain intermediaries to lead the extension of best practices across the value chain, and several health systems are illuminating a path to supply chain excellence for all value chain organizations to follow."

Mr. McDonnell said that healthcare value chain organizations must also expand their views of supply chain excellence, since many have historically held rather insular views. Life sciences manufacturers have measured success by the discovery and marketing of life-saving innovations, and distributors and wholesalers by the efficient utilization of working capital to preserve razor-thin profit margins. At the far end of the value chain, healthcare providers have measured success by the ability to balance cash out for treatments and cash in from reimbursements. "Granted, these achievements are critical to sustainable business success, but independently, they don't deliver value chain excellence when the measuring stick is marked by patient care, collaboration for value creation and continuous, end-to-end cost improvements," he said.

Owens & Minor is the new No. 1 of the 2010 Top 25 ranking (see Table 1), due to its solid financial performance and respect from value chain peers. The company is recognized for its work as an effective supply chain partner by manufacturers and hospitals alike. It is managing "self-distribution" for a few health systems' consolidated service centers (CSCs) and has bolstered its value-added services to hospitals in recent years. Also, Owens & Minor continues to grow its HealthCare Logistics business unit, providing warehouse and logistics capabilities for life sciences manufacturers looking for capacity or exceptional service to hospital customers.

Last year's No. 1 in the Top 25, Johnson & Johnson, fell one notch to No. 2 this year. The company continues to develop supply chain strategies that focus on patients as the end customers of their various business value streams. Despite some very public quality and compliance issues in its consumer business, its healthcare value chain peers still recognize Johnson & Johnson as having a resilient supply chain and as a leader that continues to drive internal supply chain excellence and external value chain collaboration. The company had a strong return on assets (ROA) and inventory turn performance.

At No. 3, Sisters of Mercy Health System, is the highest-ranked health system for the second year in a row. Mercy's relentless pursuit of excellence and value chain evangelism are beacons for supply chain innovation and leadership. Its recent progress on vendor collaboration and a strategic move into design and assembly of custom surgical packs put it on the leading edge of the healthcare supply chain. Future innovations in managing physician preference items (PPIs), strategic sourcing and how supply chain intersects with patient outcomes will likely keep it there.

Gartner advises companies aspiring to Top 25 ranking to seek out leaders and learn key value chain lessons from Top 25 organizations.

"Developing excellent supply chain capabilities within your own organization is the first step to achieving Top 25 recognition. Excellent supply chain capabilities reduce the time required to sense and respond to patient demand, and then produce a profitable, right-first-time supply response to that demand," Mr. McDonnell said. "Take the next step toward Top 25 recognition by realizing your organization is part of an interdependent and interconnected value chain. With this realization, develop patient-driven value chain strategies for future business success."

More detailed analysis is available in the report "The Healthcare Supply Chain Top 25 for 2010." The report is available on Gartner's website at http://www.gartner.com/resId=1472214.

About the Healthcare Supply Chain Top 25 Methodology
Consistent with Gartner's Top 25 research methodologies, the Healthcare Supply Chain Top 25 ranking is derived from two main analyses: quantitative measures and opinion. Quantitative measures provide a view into how companies have performed in the past. The opinion component offers an eye to supply chain leadership and demonstrated value chain collaboration, which is a crucial characteristic of the supply chain ranking. These two components are combined into a total composite score.

Health systems have vastly different operating models compared to manufacturers, distributors and pharmacies. Therefore, we utilized different quantitative measures for this segment of the healthcare value chain, and relied more on the opinion poll to identify health system leaders.