I was listening to a discussion on cable news the other day and they were discussing the concern Americans had with the increasing cost of prescription drugs. Merck has a huge footprint in the pharma industry and constantly churn out “feel good” solutions for whatever ails you. During this discussion, Merck’s CEO commented that “we are very transparent with our drug pricing as it goes out of the door”. He went on to mention that he couldn’t speak on behalf of drug retailers like CVS and Walgreens, but that the aggregate discounts and rebates are about 50%. Here is a bullet point…its all about the supply chain and the transparency of those discounts and rebates.
Like so many operators in a variety of commercial spaces, knowledge about the gap between gross and net is a big mystery. Many just assume that they are getting a good deal but have little visibility on how to benchmark their deal versus the best deal. When I heard this interview, it reminded me about why golfers (good and bad) struggle with all of the nuances of a golf swing, and how operators (good and bad) struggle understanding supply chain. As my old friend Jim Flick (may he rest in peace), swing coach for Jack Nicklaus, said in one his golf books:
The complexity of the human nervous system needs to make a seven-ounce club head, multiplied by centrifugal force to pull 150 pounds down a narrow shaft at impact, and upward of 100 miles per hour along a tolerance of 3 degrees either way, make contact on a ball within a tolerance of one tenth of an inch
Now compare all of the mechanics involved in a golf swing with all of the activity that goes on in your operation. The need to synchronize all of this activity is exactly why all real athletes have a coach. Who is the outside coach in your business?
timridgeway.com 