OWENS & MINOR
Technische Universität München
Management Accounting
-Case Study-
Harvard Business Case
Case Study: Owens & Minor
Structure of the Case Study
1.
O&M: Company Profile
2.
Costing and Pricing at O&M
3.
The Case
4.
O&M‘s Proposal
5.
Solution of the Case-Questions
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Owens & Minor, Inc: Company Profile
Headquarter: Mechanicsville, Virginia, U.S
Revenue 2010: $ 8.12 billion
Number of employees 2010: 4,800
One of the leading distributors of medical and surgical supplies
200,000 products from about 1,200 manufacturers, e.g. gloves, wound closure devices, sterile procedure trays, intravenous products, operating room items, etc
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Owens & Minor, Inc: Company Profile
Core Business-Process:
Services
(Consulting, Logistics Service, etc. )
Manufacturer
Manufacturer
Bulk Products
Manufacturer
Individual Order‐
Delivery
Customer
Manufacturer
Customers: primarily hospitals, healthcare systems, group purchasing organizations (= buying groups of hospitals) and the federal government
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Situation: Change in Customer-Behaviour
Initially: Service stopped at the hospital‘s loading door: pallets with high number of units Now: low-unit-of-measure or stockless systems become popular at customers:
e.g. plastic totes that go directly to the nursing and surgical units, bypassing the entire storeroom process
Increasing service-level
Questions for O&M:
What are the costs of the service?
How to price the service appropriately?
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Activity-Based Costing at O&M (introduced at O&M in 1994)
Several activites (= Cost Drivers) affect costs per customer and hence customer profitability: Type of service requested
Number of purchase orders generated per month
Number of lines per purchase order
Cost
Drivers
Interest costs from carrying receivables
Number of
Management Accounting
-Case Study-
Harvard Business Case
Case Study: Owens & Minor
Structure of the Case Study
1.
O&M: Company Profile
2.
Costing and Pricing at O&M
3.
The Case
4.
O&M‘s Proposal
5.
Solution of the Case-Questions
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Owens & Minor, Inc: Company Profile
Headquarter: Mechanicsville, Virginia, U.S
Revenue 2010: $ 8.12 billion
Number of employees 2010: 4,800
One of the leading distributors of medical and surgical supplies
200,000 products from about 1,200 manufacturers, e.g. gloves, wound closure devices, sterile procedure trays, intravenous products, operating room items, etc
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Owens & Minor, Inc: Company Profile
Core Business-Process:
Services
(Consulting, Logistics Service, etc. )
Manufacturer
Manufacturer
Bulk Products
Manufacturer
Individual Order‐
Delivery
Customer
Manufacturer
Customers: primarily hospitals, healthcare systems, group purchasing organizations (= buying groups of hospitals) and the federal government
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Situation: Change in Customer-Behaviour
Initially: Service stopped at the hospital‘s loading door: pallets with high number of units Now: low-unit-of-measure or stockless systems become popular at customers:
e.g. plastic totes that go directly to the nursing and surgical units, bypassing the entire storeroom process
Increasing service-level
Questions for O&M:
What are the costs of the service?
How to price the service appropriately?
© Gunther Friedl – WS 11/12
Case Study: Owens & Minor
Activity-Based Costing at O&M (introduced at O&M in 1994)
Several activites (= Cost Drivers) affect costs per customer and hence customer profitability: Type of service requested
Number of purchase orders generated per month
Number of lines per purchase order
Cost
Drivers
Interest costs from carrying receivables
Number of