Case Summary: Owens & Minor, Inc.

Minor did not want to pass up. This case explains the strategy Balderdash and his team approached to arrive at the bold with ensample. The year prior to the bid, O&M was struggling to regress Its be while trying to understand the profitability of their guests and services. By the closing curtain of 1995 the company had encountered an $1 1 knew that he needed to reevaluate the companys be and set methods If they wanted to even be considered in winning the Ideal contract. Palavered and the team were concerned with their current cost-plus pricing method.Cost-plus signified that the customer paid a base manufacturer price plus a mark-up added on by the distributor. This allowed for drawbacks like customers engaging in cherry-picking and only enable the distributors to complete low-margin, inexpensive products. This method overly tied Os fee to the regard as of the product rather than the value of the service. The complexity of the pricing structure make it difficult for purcha sing manager to track actual product cost or compare quotes from competing manufacturers and distributors.The company did more than what was being paid for. Their tasks include Own and manage the inventory for the manufacturer Take on the pecuniary risk associated with the function of managing the inventory flow to the hospitals Care for product returns impart the receivables (cash flow issues due to long payment terms of customers) Carry and manage most of the inventory for the hospitals (stockpiles at times) Track and verify customer prices for undertake product purchases and monitor agreements between end- subroutiners and manufacturers.Owens & Minor creates a clear value-add for some(prenominal) manufacturers and suppliers. O&M takes the full responsibility for all parts of interchange a product. On the other hand customers dont want to buy and throw products before they are ready to use It. Thus O also enables them to achieve more businesslike structures, while reducing additional costs related to managing efficiently. The best decision for this company Is to follow activity establish costing and develop that Into activity based pricing.Customers were requesting efferent types of services such as products to be packaged In smaller units and having stockpiles programs. Valves and his tea hoped that activity-based pricing system would align fees with services, reliving O of the burden of unprofitable customers. victimization the BBC method would enable the company to evaluate their cost drivers and make efficient decisions based on that data. Although, Palavered and his team submitted a flexible plan where they offered to use both pricing methods, it method proving that they can be leaders in changing the market.