Graham-Field unveils new distribution plan

Friday, October 31, 2003

ATLANTA - From now on, when an HME provider wants a Graham-Field product, he’ll have to go to Gulf South Medical Supply to get it.
Graham Field signed an exclusive distribution contract with Gulf South in mid-September and will no longer sell its products direct to HME providers.

“This is driving efficiencies through the organization to reduce costs,” said Irwin Selinger, Graham Field’s CEO. “When (providers) buy from Gulf South they are really buying direct from us. Our costs will go down because our inventory will be zero. We have no warehousing space.”

By cutting its costs, Graham Field can in turn reduce the price dealers pay for its products to the point that “the average cost to our dealers is going down on all our products” Selinger said.

“What we have done is make a bold step to say we are manufacturer and not a distributor,” said Mike Norbe, Graham Field’s vice president of sales and marketing. “That didn’t work in past, and if you look at every industry that approaches maturity, they use distribution to most efficiently get the product out to customers.”

Until signing the five-year contract with Graham Field, Gulf South had little exposure to the HME market. Of the company’s $450 million in annual revenue, $80 million came from home medical equipment sales, most of that in disposables, said Gary Nutter, Gulf South’s vice president of sales and marketing.

Starting in early October, Gulf South began introducing its HME customers to Graham Field’s products through 15 sales reps dedicated to the manufacturer’s line. Gulf South plans to double the size of that dedicated sales force within the next six to eight months. The distributor’s 125 long-term care reps also will help out with sales, Nutter said.

“This gives us an opportunity to leverage their brand name products and drive more of a bundled program to HME customers,” said Nutter. “Providers are looking to drive efficiencies, cut down on there inventory. Now we have hard goods and soft goods, but we also have a tremendous amount of technology we can bring these small dealers.”

That technology includes inventory tracking and management an as well as Internet-based order-entry information system where customers can access information about their ordering patterns, Nutter said.

While Graham Field and Gulf South officials express tremendous excitement regarding their partnership, as well the manufacturer’s recommitment to quality since exiting bankruptcy last spring, others are skeptical.

Graham Field officials claim the exclusive distribution arrangement is the first of its kind, and there may be a reason for that, say some industry watchers, who question the wisdom of a distributor limiting itself to one brand of product . Typically, providers turn to distributors to consolidate their purchasing of a variety of brands. By doing do, they can achieve volume discounts they might not get buying small quantities from a variety of manufacturers, said consultant Jack Evans, president of Global Media Marketing in Malibu, Calif.

“You don’t see many exclusive Graham Field dealers out there,” said Steve Cole, president of Dedicated Distribution in Kansas City, Kan. “You’ll see a Sunrise house. You’ll see an Invacare house. But never in my travels have I see a dealer centered around the Graham Field line.”

Additionally, by limiting its product to one distributor, Graham Field sacrifices the market penetration additional distributors can provide, say industry watchers.

Those concerns don’t faze Graham Field and Gulf South officials.

“It is our belief that we are going to drive demand,” Nutter said. “We feel that bundling product and getting next-day delivery to 92% of the population is going to be pretty enticing, especially at the pricing points we are going to offer.”

In the end, it will all come down to pricing, quality and delivery, said Alan Landauer, CEO of Landauer Metropolitan, the largest independent provider in the New York metropolitan area.

“It will make it easier to pick up small quantities, but for large volumes they will have to be competitive, and if they can be competitive through Gulf South, we’ll go through Gulf South,” Landauer said.
CEO Irwin Selinger (left) says the company’s exclusive distribution agreement with Gulf South will help reduce product costs for providers.