The closing of Metro Label’s four locations in Atlanta; Santa Fe Springs, Calif.; Colorado Springs, Colo.; and Garland, Texas, is one of the latest casualties in an embattled industry, and further evidence of mounting pressures facing manufacturers and distributors. Joining forces is at least giving some industry professionals a fighting chance. In 2002, nine distributors established International Business Solutions Alliance (IBSA) to better position themselves for the future.
IBSA isn’t your typical distributorship. The Indianapolis-based network of more than 130 fully independent distributor affiliates and 119 suppliers isn’t competition for the DMIA either. “We are members of the DMIA,” asserted President Mark McKinney. “The DMIA is an educational organization that does not get involved with contracts. IBSA is a group selling organization that helps distributors sell accounts—that is our number-one goal.”
As a GSO, if you will, McKinney explained IBSA secures the national contracts, and coordinates the supplier pool to benefit both distributors and suppliers. He likened the company’s model to a GPO (group purchasing organization) such as Novation—currently IBSA’s largest national account. “Novation coordinates contracts for various hospitals and non-acute care facilities. IBSA coordinates sales for distributors,” McKinney observed.
Thus far, IBSA has secured four national accounts, and expects to announce a fifth contract by springtime. Besides Novation, IBSA is serving FirstChoice Cooperative, a health-care GPO headquartered in Tyler, Texas, representing more than 20,000 non-acute care facilities and rural hospitals. There is also the FordStar program, which is currently being redesigned to bring more value to the FordStar customers and more success to the IBSA affiliates. A Xerox partnership has been in a test phase for the past two years, but IBSA is currently working with Xerox personnel to roll out a larger partnership covering several states in 2007.
It takes patience to work with national accounts. Multiple players are involved in time-consuming decision-making processes, and disseminating contract information to end-users throughout the enterprise can be frustrating. For instance, in the health-care sector, McKinney observed communication between the GPOs and large hospitals is fairly effective, but getting the word out to vast numbers of non-acute care locations—the rapidly growing segment IBSA prefers to target—has been problematic. Unaware a contract even exists, office managers will continue to buy from vendors they’ve dealt with in the past. However, IBSA is implementing a three-month plan to capture more of this business.
McKinney acknowledged a national account for a group of small business owners is like suddenly being faced with a 400-pound gorilla, and IBSA needed support in fine-tuning its strategy. Consulting firm Normandy Group International has recently begun assisting IBSA in developing a long-term plan addressing separate affiliate, supplier and customer issues in order to create more synergy between all three groups. Two full-time regional managers are already in place for coordinating selling large accounts with affiliates, and staff is being added to the accounting, sales and marketing departments as IBSA builds a dedicated organizational infrastructure.
McKinney said top priorities include developing a more effective way to reward the best suppliers and affiliates, and looking for new suppliers to increase product and service offerings, such as promotional marketing items, innovative patient identification systems and software companies specializing in electronic medical records (EMR). He went on to say the group is finalizing a deal with the supplier of a med/surg product which he could not reveal, but IBSA is anxious to begin offering it to customers.
Another 2007 goal is an IBSA branding initiative showcasing the group’s contract-winning strategy. It will emphasize the local expertise of individual affiliate distributorships combined with the nationwide strength of the IBSA organization in bringing value to national account networks. “We also need to do a better job of informing affiliates and suppliers about what we are doing for them,” added McKinney.
And, plans are in the works for building a comprehensive systems platform enabling direct communication between IBSA, affiliates and suppliers. “Currently, our affiliates can upload orders from TopForm, Quantum and Xetex to our system, but then a lot of what we do is manual in communicating that to...supplier[s],” McKinney explained.
What IBSA looks for most in affiliates is a strong desire to work national contracts. “When an updated Novation listing showing thousands of members is handed out, we want distributors who [will] take that list and hit it hard—not those interested in simply maintaining the status quo. It sounds like an old cliché, but we want the hunters, not the farmers,” McKinney said. By hunters, he means progressive distributors interested in different ideas and growing their businesses through new solutions. “Products such as EMR and promotional marketing items will be a very large part of IBSA in the future,” stressed McKinney.
Geographically, IBSA is fairly well represented, although it seeks to increase affiliates in the Northeast and Central Plains, particularly Boston. Warehousing capabilities are a plus, but not a requirement, and IBSA looks for overall drive and growth when considering an affiliate. “A lot of smaller companies still buy a lot of printing. Just look at the non-acute side of the health-care industry,” noted McKinney. “The smaller guy is often better at calling on the smaller facility, and the big guy is more effective in the 250-bed hospital. Some affiliates are non-acute care monsters, selling everything from business cards to filing products, and others don’t want anything to do with calling on doctors’ offices.”
Affiliates receive special training and certification to work the Novation and Xerox accounts, and post-certification “boot camps” are conducted by suppliers for specialty products, such as advanced filing systems, as well as EMR, where commissions largely come from selling the maintenance programs. “There are hundreds of thousands of physicians’ offices across the country, and roughly 8 percent are using EMR—there is a lot of potential out there,” noted McKinney. For the moment, however, IBSA’s top three products sold into national accounts remain traditional forms, marketing collateral and labels.
“We’re doing great, even in what some describe as an ‘overly mature market,’” offered McKinney. “A supplier recently remarked he never thought the industry would get to a point where his raw costs would be going up, while his prices on goods going out the door were going down.” McKinney reminded one supplier concerned by flattening sales, that in this difficult market, flat sales are actually a sign of growth. Another supplier jokingly reported to McKinney it’s easier than ever to prepare his budget—simply slash 15 percent on everything from the year before. “Also, a distributor was saying he is finding less and less competition out there,” continued McKinney. “In a mature industry, when it starts to bottom out, a lot of players fall out. There will be those who survive, but who’s it going to be?”
IBSA plans to be among the survivors, especially given its success in beating the odds to unite independent distributors who openly share ideas and work together toward a common goal. “For years, people have tried to pull distributors together, and it was never very successful,” McKinney said. “We actually developed a plan to sell national accounts and it’s working.”