PartsSource offers hospitals a single source for their parts and services needs to reduce supply chain costs and increase asset uptime.
By Jim Harris
Healthcare providers look to PartsSource as a single source for biomedical and diagnostic imaging on-demand products. “We are often described as being part Amazon, part group purchasing organization [GPO] and part enterprise resource planning system,” President and CEO Dr. Phil Settimi says.
The Cleveland, Ohio-headquartered company delivers the industry’s only online, fully integrated medical products and parts procurement e-commerce marketplace for hospitals, clinical sites and health systems across the country. “Some hospitals have to work with hundreds of vendors to keep their hospital equipment running,” adds Kate Shafer, director of marketing and communications. “PartsSource is able to manage all those vendors on their behalf. The customer knows they can use the same ordering process for everything they need and PartsSource acts as part of their supply chain.”
Thousands of orders received through PartsSource’s e-commerce marketplace daily are sent directly to the manufacturer, which ships orders directly to the customer. In addition to fulfilling parts needs, PartsSource also offers robust spend analytics and workflow automation support to transform their procure-to-pay process and improves productivity, reduces costs and improves analytic insights.
“In a traditional process, if an organization needed parts from five different manufacturers, they placed five different orders,” Shafer says. “Through our system, they can place one order for as many different items as they need. And, if they need a manager’s approval, they can have the entire process automated. “
Although most of its orders are drop-shipped, the company also maintains a warehouse at its headquarters that stocks a small number of high-demand SKUs that are regularly backordered from manufacturers. “As a service to our customers, we buy these items in bulk and stock them, so a customer can have them the next day instead of waiting for weeks,” she adds.
PartsSource facilitates more than two million transactions annually among 12,000 hospitals and clinical sites from more than 1,000 OEMs and 5,000 suppliers. The company’s e-commerce site is also open to general consumers, who can use it to order parts for home medical equipment.
The company specializes in parts for off-contract equipment, which can comprise up to 20 percent of a hospital’s total spend. “No one really has a solution like the one we offer to the market,” Settimi says. “GPOs provide contract support and contracted pricing for a lot of what hospitals buy, but not all of it.
“Hospitals then need to negotiate non-contracted products themselves, but with hundreds of vendors, they don’t have purchasing power,” he adds. “We can leverage member-driven purchasing power to get them improved pricing. We brought together a powerful set of tools that did not exist in the industry before.”
PartsSource was founded in 2001 as a distributor of hard-to-find medical equipment parts. The company’s sales and supply chain operations initially consisted of a team of people that called equipment OEMs and secondary suppliers to find parts. Today, 86 percent of the parts carried by the company are direct from the OEM, with the balance coming from secondary suppliers to meet customer expectations.
As the company grew, so did its need for a dedicated supply chain department. “We needed a whole department dedicated to constantly sourcing direct parts and products and negotiating on our customers’ behalf,” Shafer says.
Many of the OEMs the company works with see them as a vital partner. “Five to 10 years ago, we contacted suppliers on a part-by-part basis; now we are more focused on creating strategic partnerships to not only meet our customers’ needs but help our suppliers to achieve their goals,” she adds. “From a hospital perspective, our supply chain solves a mission-critical need by providing items on-time that meets or exceeds their documented quality standards.”
PartsSource’s supply chain team is responsible for sourcing items ordered by its customers either online or by phone. The company’s customers only see a single invoice from the company for the products they order. “To our customers, they’re only working with one vendor. Our supply chain team does the legwork to get orders to vendors,” Shafer says.
The supply chain team uses several technology solutions it developed to source items for customers. These include an algorithm-driven procurement engine, which it uses to get orders and customer shipping information to OEMs, and a supplier-ranking module.
The patented supplier-ranking module gives the best options for every item in the online catalog. More than 1,000 OEMs and 5,000 suppliers are included in the engine, which ranks them based on 12 qualitative and quantitative data points. “We use the module to make sure customers are getting the best quality part for the best price,” Shafer says. The module helped PartsSource to recertify their ISO 9001 certification last year.
In addition to ranking and auditing suppliers internally, the company’s vice president of quality assurance also visits supplier sites. “We make sure the information our suppliers give us and the processes they tell us they follow all check out,” she adds. If there are ever issues, suppliers are placed on process improvement plans.
The company continues to build its capabilities. Within the past few years, PartsSource has doubled the number of products it offers, bringing its total offerings to more than 4 million SKUs. This includes products from manufacturers including GE and Phillips.
PartsSource has also improved its technology platform in part by digitizing its entire catalog. The company can transmit orders to OEMs in seconds using an electronic data interchange system. “We’ve invested in helping people get the products they need as efficiently as possible,” Settimi says. “We want to better communicate with customers and suppliers and transact commerce as efficiently as possible.”
The company within the next few years wants to extend its services to major healthcare organizations. PartsSource recently gained greater ability to expand when it was purchased in May by equity firm Great Hill Partners. The firm typically purchases and invests in e-commerce companies that are industry disruptors.
“We are consistently delivering supply cost savings to clients as well as workflow reductions and continual analytics to make decisions from, and I feel that we’re still in the bottom of the first inning,” Settimi says of the company’s future outlook.