As a distributor and retailer, our business is buying products from manufacturers that can be successfully and profitably resold to end-user healthcare professionals and consumers. To meet the needs of those customers, Grogan's deals with over 600 manufacturers on a routine basis. While we are always open to consideration of products that meet new needs or better address old needs, we have learned to be realistic about what it takes to establish new products from clinical, financial, and marketing perspectives.
The more our current or prospective vendors know about our business, the better we can mutually determine if there is potential for beneficial partnerships. The information below should give vendors a better understanding of what we try to do, the philosophies and approaches we use in those efforts, and the individuals that vendors should contact at Grogan's to pursue a partnership with our company.
Aside from the typical business objective of making a profit and satisfying our customers, one of our objectives is to be an enjoyable and easy distributor with which to do business. We think we can accomplish that in several ways: streamlining or eliminating cumbersome policies, emphasizing the personal side of vendor and customer relationships, and genuinely welcoming visitors to our place of business.
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- Primary Care, Physicians, and Clinics - 45%
- Alternate Care, Veterinary, Rehab - 15%
- Home Health Care consumers and resellers - 15%
- Acute Care and Hospitals - 15%
- Long Term Care (nursing homes, hospice, home health agencies) - 10%
Geographically, our service area covered by field sales representatives and our own delivery trucks is the eastern two-thirds of Kentucky. Through the Internet and our experienced Customer Service Department, we do business in all 50 states with both professionals and consumers.
- NDC - Grogan's was a member of the Central Independent Dealers Association (CIDA) from 1980 until CIDA was absorbed by National Distribution & Contracting (NDC), and has consistently maintained a high level of contract utilization and program participation with the organization. NDC is a medical, dental, and rehab member services and master distribution organization consisting of over 300 distributors and reflecting an annual buying power of over $5 billion.
- HIDA - Grogan's has been an active and supportive member of the Health Industry Distributors Association (HIDA) and its predecessor American Surgical Trade Association since the early 1960's.
- MED Group - Grogan's is a member of The MED Group, a home health care and rehab contracting and consulting organization that offers a broad range of purchasing, human resources, accreditation, and other services for their clients.
- EW (Essentially Women) - Grogan's is a member of EW, which is a contracting and member services organization for Women's Health and Mastectomy shops in the U.S.
Grogan's seven (7) Account Managers have primary responsibility for virtually all customer types within their defined geography and devote approximately 60% of their time to account management and penetration, with 40% devoted to product detailing and new customer development.
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Grogan's customer relationships and the product preferences of those customers drives our vendor selection. While we do have Preferred vendors that receive the bulk of our sales and marketing attention, we have not concluded that "inventory rationalization" that denies our customers the products they want is the best way to service those customers. Presently, we do not charge extortion-level annual fees to become a Preferred Vendor.
There are a number of important factors considered in our choice of "Preferred" vendors:
- Access To Best Available Acquisition Costs: There is no future for us in promoting products from manufacturers that offer our competitors arbitrary advantages in acquisition cost. Without efficient access to the lowest available acquisition costs (including access to all Group Purchasing Organization contracts), our interests will be limited to filling orders rather than stimulating demand for the products.
- Compliance with Robinson-Patman: Section 2(a) of the Robinson-Patman Act guarantees "similarly situated" and competing resellers access to equal cost from the manufacturer when competing for the same business. The law does not make any exception for GPO contracts, and "authorizations" from unrelated third parties are immaterial to this legal but sadly forgotten requirement.
- Distribution Model: Manufacturer strategies that segment any of Grogan's targeted markets and restrict our sales and marketing activities within or among them are usually impractical for our consideration. Manufacturers that want maximum effort from our sales and marketing resources must be prepared to limit competitive distribution activity. "Multi-Level" or network marketing approaches are consistent with our interests.
- Removal of Costs: A commitment to effective participation in the removal of costs from the healthcare supply chain should be demonstrated through innovative programs, clear support and rapid adoption of progressive industry standards, and practical policies which promote channel efficiency.
Grogan's extends preferences to local, state, and domestic suppliers in that order, with the degree of preference to be determined on a case by case basis.
- Payment Terms: Properly capitalized and well-run firms will take advantage of available prompt payment discounts and deserve competitive advantage over under-capitalized firms. Prompt pay discounts have never been about the cost of money, they are about protecting nominal distributor profitability while minimizing vendor credit risk. Grogan's will take advantage of all prompt payment discounts offered. Monthly or bi-monthly payment cycles reduce administrative overhead and unnecessary costs and such payment terms are preferred over 10-day or 30-day due dates (2% 10 or 2% 30).
- Representation: Qualified, professional sales representation, incorporating end-user sales calls, assistance with in-services, provision of samples, product demonstrations and promotion, and prompt follow-up on all inquiries is a major asset to full development of business opportunities. In the absence of such representation, if necessary we can perform these functions, provided we are adequately compensated.
- Pricing and price changes: With our market mix, "net invoiced costs" present advantages over rebate-based competitive pricing. Cost-containment pressures make it imperative that our vendors minimize all cost increases. For administrative efficiency, and to reduce expenses throughout the system, we strongly urge our vendors to implement unavoidable price changes on even calendar quarters (the first of January, April, July, and October) only, with a minimum of 30 days advance written notice. In the event that vendor price reductions create the net effect of lowering the average value of our on-hand inventory from that vendor, or if significant decreases occur for an item of substantial monthly volume, a credit memo in the amount of that net reduction will be expected. This is necessary so that we can pass those reductions to the market and not be at a competitive disadvantage simply as a result of having purchased adequate inventory of that vendor's products.
- Returned Goods: Good faith efforts to promote vendor products and maintain high customer service levels on those products occasionally are unsuccessful. The ability to return such merchandise for credit without onerous penalty is a critical component of mutually addressing current customer expectations and managing company investments. Vendors may be contacted by our Buyers or Returns Coordinator from time to time to initiate the return for credit of limited merchandise. Communication of authorization and necessary documentation to accomplish the return within 30 days is expected. Lack of prompt attention to this area will result in directives being given to our Purchasing and Sales staff to delay new product or promotional activity until the situation is resolved to our satisfaction.
- Freight Policy: We recognize that everyone "pays freight" whether it is obvious or not. While there is some administrative efficiency in "prepaid freight," there is also the potential for low-freight regions subsidizing buyers in high-freight regions. Our objective is to obtain the lowest total delivered cost, regardless of FOB point or freight charge policy. Prepaid freight levels must be reasonably attainable given potential volume in our markets or we are put at a competitive disadvantage when freight is a significant percentage of the product value.
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These days, with the national distributors aggressively promoting their own brand over national manufacturer brands, many of our major brand-name suppliers whine while simultaneously developing and administering policies which put those national distributors at a competitive advantage over our company when competing on the branded product. Most of those national brands then scratch their head about how they can get more "support" from their independent distributors. Come on, get a clue. To separate the gutless whiners from the more pragmatic, take the Distributor Equity Index
We recognize that if we don't have it on hand, we aren't likely to sell it. At the same time, the financial risk in bringing additional products into our inventory can be substantial. The following factors will be considered in deciding whether to introduce and promote a new product:
- Extent of similar, competitive products already stocked and promoted
- Comparison of features, benefits, price, expected profit margin and customer satisfaction
- Potential for generation of incremental unit sales
- Demonstrated or expected end-user demand for the product
- Minimize risk from "worst case" scenario ("guaranteed sale")
- Track record of the vendor and the vendor representative for avoiding the worst case scenario
- Level of investment necessary for success (inventory, training, promotional, detailing)
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Our wide selection of products often limits the ability of our sales force to concentrate efforts on particular products or product lines. The priorities we have defined for our sales force are:
- Retention and expansion of current "prime vendor" customer relationships
- Development of new "prime vendor" customers
- Sales that may generate substantial incremental revenues
- Selling items in stock from "preferred vendors"
Unfortunately, there are many fine and cost-effective products that do not mesh with these priorities. In those cases, the manufacturer may be advised to develop end-user demand via end-user sales calls to attract our interest and support to their product line, or propose marketing activities that do not require selling time from our field sales representatives. There is nothing that will get our attention more than a vendor actually bringing us some business.
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Perceived opportunities for cost savings and/or margin enhancement through the conversion of sales of current products must take into account the significant costs and risks inherent in any change. We are open to consideration of product conversions that meet the following objectives:
- Support the efforts of our "Preferred" vendors
- Reflect our "Vendor Preferences" as outlined above.
- Provides demonstrated (not purely speculative) equal or greater customer satisfaction
- Cost Savings for our customer
- Improved operating margins
- Long-term product line stability (no deal of the month)
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Sales meetings are held on the second (2nd) Friday of every other month. Vendor segments of the meetings generally run from 10am until 12 noon. Presentation time at sales meetings must be scheduled in advance by our Sales Manager. Sales meeting time is allocated several weeks in advance solely based on likely value to our sales force. We suggest that vendors submit requests as far in advance as possible and confirm their attendance during the week prior to the meeting. Time on sales meetings will be extended based upon:
- Introduction of products or programs that meet the guidelines discussed under "New Product Introductions" or "Product Conversions"
- Substantial educational value to sales personnel
- Introduction of an approved promotional program
- Timely updates on product or program changes
Presentations at monthly sales meetings should be brief (less than 30 minutes), on-time, well-organized, and focused and limited to what we need to know, not what the vendor representative needs to know. Emphasis should be on basic clinical background for the product and qualification of prospective customers. There are no restrictions on information we make available to our sales force, including product acquisition cost.
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It is in our best interest to limit ongoing promotional efforts to those with the greatest potential to meet our sales priorities. Yet, we strongly encourage innovative, customized programs which can drive sales and profits while meeting other strategic objectives of Grogan's and our vendors. All promotional programs should be proposed in detail to our Sales Manager (for outside sales) or Homecare Manager (for consumer sales) and approved in advance. Payment of any promotional monies to Grogan's personnel must be approved in advance.
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- Co-Operative Advertising Programs: We attempt to make efficient use of performance-based vendor co-operative advertising funds that are made available.
- Direct Mail/Flyers: Many items can be adequately marketed or introduced with promotional materials mailed or inserted in outbound shipments.
- Newsletters: Grogan's produces a range of internal and customer-oriented communications that provide an opportunity to convey detailed product and/or industry information at nominal or no cost.
- Customer Events/Programs: We conduct a variety of product and educational events directed towards specific customer markets for which we solicit vendor support and participation.
- NDC Advertising and Promotional Programs: NDC provides high quality, promotional materials on targeted product lines to Grogan's at reduced cost and coordinates customer, sales rep, and company incentive programs throughout the year. Contact NDC for additional information.
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- Expectations: In addition to the normal functions of problem resolution, introduction of products, programs, and promotions, vendor representatives are requested to assist in the following areas:
- Excess Inventory Relief: The return, relocation, or transfer of slow or non-moving stock and customer returns.
- Pricing/Literature: Ensuring that current product and pricing information is readily available in our Pricing Department; master copies of all price lists should be directed to the appropriate Purchasing and Pricing personnel.
- Equipment Service Considerations: Contact our Service Department to identify any ongoing parts or repair concerns, warranty labor reimbursement programs, or service agreements available.
- Appointments: Appointments with sales and purchasing personnel are not required but are recommended to ensure you don't waste a trip to Lexington. We try to accommodate drop-ins but are not always able to do so. We understand the high cost of air travel and discourage "hello" or "thanks for your business" trips without specific objectives.
- Gifts/Inducements: Gifts, bribes or other inducements to Grogan's personnel for the purpose of improperly influencing purchasing decisions are prohibited and may result in the representative being barred from Grogan's and/or legal action if appropriate. Gifts, contests, or awards of any kind for Grogan's personnel should be authorized in advance by a Sales Manager or Officer of Grogan's.
- Product Liability: Adequate product liability insurance coverage naming Grogan's as an additional insured is a requirement for doing business with Grogan's.
- Confidential Information: It is not our practice to disclose confidential competitive information - please do not ask.
- Vendor Rep Accounts: For purposes of product promotion or exchange, event sponsorship, or other mutually beneficial business purpose, Grogan's may open a sample trade-out "account" for vendor companies and their representative agent. Final determination as to business purpose will be made by Grogan's. A credit balance on such accounts should be maintained at all times. A ten percent (10%) fee is charged to the account on all transactions to cover processing costs. Merchandise accepted as payment for these or any other vendor debts should be currently active and subject to buyer approval.
- Telephone/Voice Mail: Vendor Representatives should dial our personnel on their direct line when possible or use our automated telephone system (859-254-6664) and enter the desired extension. If your party is unavailable to answer, messages may be left in the voice mailbox system.
- Toll-Free 800-Lines: Calls from vendors should not be made on our 800 lines, as they need to be left available for our mutual customers. Our vendors have a lot more money than we do, so they should contact us on their own dime.
- Parking: Designated parking spaces at the main customer entrance are reserved for disabled visitors and/or customer use only. In the event numerous or bulky items need to be unloaded, contact our Office Manager or Receiving Supervisor for instructions.
- Sales Tracing Reports: While we would prefer not to provide end-user sales tracings from the perspective of the value and confidentiality of our data, we recognize the important role it may play in sales compensation, quota determination, and monitoring of customer purchases. Electronic sales tracing reports are available to vendors meeting minimum qualifications upon request submitted to our Buyers, Sales Manager or CEO. The qualifications are that the vendor be substantially committed to sales through distribution and they agree to pay for the information according to our prevailing fee structure. Given the value of the information and the total investment involved in routinely processing and reporting the information, we feel that our charge of $50 per vendor report per month is more than reasonable. Reports are available in standardized csv or xls format, with special formats considered upon request. Payment by check, credit memo, or approved merchandise is acceptable. Additional details (e-mail, mailing or billing address, etc.) should be directed to our EDI Coordinator.
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Grogan's is a for-profit Kentucky C-corporation that is tax exempt for purposes of resale. We are a drug wholesaler for non-scheduled items, as licensed by the Kentucky Board of Pharmacy. Copies of applicable certificates or licenses are available from our Accounts Payable Department.
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Grogan's takes advantage of all trade discounts offered for prompt payment and has an excellent credit rating. We do not provide vendors with detailed financial information, personal payment guarantees, or security with respect to our assets. Bank and trade references are available upon request.
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With our market mix, net invoiced costs present advantages over rebate-based competitive pricing. However, we recognize the vast range of issues which have created the present two-tiered pricing structure and are capable of dealing with them when necessary and to our advantage.
- Automatic Extension Of Expiring Contracts: There is potential for disruption and loss of business upon expiration of rebated contracts and reversion to non-contract pricing. In the absence of our receipt of cancellation or revised contract information, Grogan's automatically extends rebated contracts for an indefinite term, or until updated information is received with adequate notice. Because of our contractually binding commitments to provide customers with advance notification of price changes, we are not able to implement price increases related to rebated contracts until 30 days after receipt of notification by the manufacturer.
- Price Increase Effect On Rebate Amounts: For purposes of accounting for and reporting of rebates due, manufacturer's distributor cost increases are implemented on their effective date with respect to any rebate claims due, with no arbitrary assumptions about our inventory levels at the previous cost.
- Rebate Amounts Due: It is economically impractical for us to wait for manufacturer rebate processing to be completed in order to receive credit against purchases. Rebate amounts due for prior months sales will be deducted from amounts otherwise due on the next scheduled remittance.
- Prospective Rebates: The prevalence and degree of rebate-based cost structures has the potential to dangerously and unreasonably inflate the acquisition and carrying cost of our inventory. To address this problem, we calculate an average level of monthly rebate activity for each vendor. If the average monthly rebates exceed $1,000 per month, we will make deductions from our payments that anticipate future rebate claims for that vendor line. Many manufacturers have developed their own programs that recognize and address this valid concern, while being consistent with their internal accounting systems, and we support those efforts.
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Grogan's can connect via Electronic Data Interchange (EDI) through Global Healthcare Exchange (GHX) with participating manufacturers and supports transaction sets 850 (PO), 855 (Order Confirmation), 810 (Invoices), 856 (Ship Notices), and 997 (Functional Acknowledgements). We can develop custom EDI interfaces with other vendor and customer systems as well. Contact Grogan's EDI Coordinator for more information