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American, IBSA Move to Implement Novation Contract
Independent Management Report
A Management Newsletter Exclusively for DMIA Member Company Principals
Issue: September 30, 2004
Now that Novation, the large health care GPO, is working to finalize contracts with American Solutions for Business, Glenwood, Minn., and International Business Solutions Alliance, Bowling Green, Ky., officials of those entities are preparing for a January 1, 2005, implementation date. (For detailed information about the Novation contracting process, see the special issue of DMIA's E-Weekly on this subject.) For both distributor organizations, winning an endorsement from Novation could translate into tens of millions of dollars in annual sales volume. First, though, salespeople must be trained, employees may need to be hired, and accounts need to be allocated.
IBSA, the national marketing alliance consisting of nearly 120 distributor companies, kicked off the first of several training sessions in Dallas September 19-20. The training was attended by 175 owners and salespeople, which represents about two-thirds of the organization's distributor affiliates, according to IBSA's Paul Keith. These reps are now health care-certified by IBSA and are qualified to call on Novation facilities, says Keith, who is IBSA's founder, owner, president and CEO. Before attending the training in Dallas, everyone was required to score 80 percent or higher on an online test administered by IBSA that covered topics related to the health care field. IBSA has scheduled three additional training sessions before the end of the year, Keith says, and will ultimately offer on-site training for its larger affiliates.
| American Solutions for Business plans to roll out an online training program related to the Novation contract by mid-October, according to Craig McLain, chief operating officer for American. Once reps complete the training, they will be certified by American to sell to Novation facilities. In addition, American officials have added an extra day to the company's February 2005 sales conference to offer detailed workshops about the contract and the needs of health care facilities,according to McLain. |
Craig McLain, COO,
American
Solutions for Business |  |
Barry Campbell, senior product manager for Novation, will speak at the conference. He also talked at the recent IBSA training session in Dallas.
IBSA was created two years ago to help distributors sell large national accounts. Since the Novation contract is the organization's first, IBSA officials are working quickly to expand the number of affiliates, its supplier network and its staff. By the end of this year, IBSA plans to sign on at least 85 more affiliates with an estimated sales volume of $200 million, says Keith. If this happens, affiliates' total sales volume will range from $500 million to $550 million when implementation of the Novation contract takes effect, he says. The organization also plans to add 30 suppliers to its current list of 60 "the sooner the better," he notes. In addition, IBSA will add several people to its staff. The first new hire started work this week at the organization's headquarters.
McLain says American is "very interested" in adding sales associates, just as it always is. However, he says the company does not need to expand to serve Novation. He notes American has "wonderful coverage" in rural states such as New Mexico, North Dakota, South Dakota and Wyoming. Because of that, he thinks the firm will "have a phenomenal opportunity to focus on 150 to 200-bed hospitals," which distributors say has not been a priority for those currently serving Novation.
American, which has 500 associates, adds a minimum of 65 to 70 associates annually, says McLain. In the last few weeks, American has received more calls than usual from people interested in learning about the company. As a result, American may hold its "Discover American" meetings twice monthly in the short term, instead of only monthly, he says. It is "very reasonable to say that our sales force will grow to 750 to 800 over the course of [this] contract," says McLain. The average American sales associate sells a little more than $500,000 annually.
IBSA is in the process of assigning Novation facilities to its affiliates, says Keith. The complex process is based on several factors, he says, including the amount of business the affiliate has done with IBSA suppliers, the size of the Novation facility, the total annual sales of each affiliate, and geography. He says affiliates "for the most part" are located within 60 miles of the facilities to which they are assigned.
In Dallas, Keith underscored with affiliates the importance of using IBSA-approved suppliers. Doing so does more than generate revenue for IBSA in the form of monthly fees paid by suppliers, he says. "It is a strategic position as far as what we are building," says Keith, who believes that developing an approved supplier base--and relying on it when serving national contracts--will allow IBSA to offer uniform quality to large accounts.
McLain says "anybody and everybody" within American is invited to participate in the Novation contract. At this point, he says he has no way of knowing how many associates will choose to do so, although he estimates 70 percent to 80 percent will. In large metropolitan areas, American plans to use a team approach to selling Novation facilities. In less populated areas, geography will certainly play a role in deciding who will call on which Novation facilities. McLain notes, however, that American's No. 1 focus will be choosing the rep who can best serve Novation. American's Health Care Group, a group of reps with health care backgrounds that got things rolling with Novation, as well as the company's 22-member sales steering committee and executives from the corporate office, will work together on contract implementation.
American also is adding an online contact manager so it can report to Novation on activity by associates within the GPO's facilities. The firm will continue to allow associates to make their own buying decisions. However, McLain says it will encourage associates to use vendors who helped put together pricing and programs for the Novation RFP. Since American is structured as an ESOP, McLain says associates realize the value of supporting preferred vendors who return rebates to the company because those payments in turn help the bottom line. Says McLain of the Novation contract, "The bottom line is that we have a huge job ahead of us, and we're really excited to have the opportunity."
"It's a very good time to be a distributor," says Keith, who has worked with nine partners to make IBSA a reality. The partners include four managers besides Keith: Mark McKinney of Celtic Marketing Inc., Centerville, Ohio, executive vice president; Mike Luckett, Luckett Communication Papers Inc., Columbus, Ohio, who handles affiliate issues; John Heybach, Bold Business Graphics & Systems Inc., Chicago, national account sales manager; and Mark Musgrave, Promotek Inc., Danville, Ill., finance manager. The company's five other partners are: Terry O'Brien, CFC, O'Brien Solutions Inc., Carol Stream, Ill.; Roger Courson, Cortan Industries Inc., Redmond, Wash.; Steve Wessel, SWC Enterprises Inc., Canton, Ohio; Vic Losure, Elm Press Inc., Thomaston, Conn.; and Dan Schroeder, CFC, of Promotek.
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