From Chinese factories to European pharmacies: medical products go global and the digital supply chain breaks through

Italian man Enzo and his wife run a small medical consumables distribution store KLP in Milan, with annual sales of about 500,000 euros.

In the outbreak of the new crown epidemic in 2020, there is a shortage of masks and other materials in Europe, but KLP can get supplies at a price lower than 15%-20% of the market.

Enzo should thank one Chinese company, United Medical. KLP began to purchase gloves, protective clothing and other products through the joint medical in July 2018, placed orders in the online mall, received goods in 7 days, and the price was preferential, the MOQ volume was low, the inventory was small, and the annual capital turnover rate increased from 4 times to 16 times.

Many people may not know that in 2020, the first place in China's mask export volume is BYD, and the second place is joint medicine, which sells an average of 20 million masks per day.

While SHEIN redefines global fast fashion in the B2C direction with thousands of new models per day and a 7-day delivery speed, Lianyi Medical is also innovating the cross-border efficiency of medical devices in the B2B direction in the B2B direction in a direct connection between factories and pharmacies and low prices.

It can be said that in the whole process of digitization, tapping the advantages of China's supply chain, and benefiting global consumers, Lianyi Medical and SHEIN have done the same thing.

Founded 5 years ago, with a compound growth rate of 200%, we believe that it has case study value in the cross-border B2B field.

Ebang Power Industrial Internet team conducted an in-depth investigation of the joint medical, this article will analyze the joint medical model, deduce the development dilemma of China's B2B and the new way out of the industrial Internet.

This article is divided into three parts:

The current state of the medical device industry and the incision of the joint doctor

The transaction problems of B2B e-commerce and the solution of joint medicine

The double wave of cross-border e-commerce and digitalization has spawned a new species of industrial Internet

01

To study the model of joint medicine, it is necessary to first understand the medical device industry in which it is located.

Medical devices, medical technology, and drugs are the three pillars of the medical service system, which can generally be divided into four categories: high-value medical consumables, low-value medical consumables, medical equipment, and in vitro diagnostics (IVD).

According to The EvaluateMedTech's statistical forecast data, the global medical device market grew from $352.9 billion to $433.7 billion in 2011-2018, with a CAGR of 3.0% and is expected to rise to $594.5 billion in 2024, with a CAGR of 5.4%.

Relying on a complete industrial production base, China plays the role of "supply chain base" in the global medical device market, and has significant advantages in medical consumables, stomatology, rehabilitation and other categories, and has been exported to more than 200 countries and regions around the world.

Domestic medical device enterprises are mainly concentrated in the Pearl River Delta, yangtze river delta and Beijing-Tianjin-Hebei Bohai rim three regions, as of 2019, there are about 18,800 medical device enterprises in the country. Among them, Guangdong, Jiangsu and Beijing are typical provinces and cities, and the number of medical device enterprises is 3743, 2558 and 1852 respectively.

However, China's medical device production is dominated by scattered small and medium-sized enterprises, which oem for international brands, under the traditional trade mode, its medical device products exported overseas, need to go through a seven to eight links: OEM factory - foreign trade company - brand owner - general agent / large wholesaler - national distributor - regional distributor - terminal dealer - hospital / pharmacy.

That is to say, there is a lot of room for optimization in the delivery efficiency and transaction price in this chain. What Lianyi medical has done is to reduce the seven or eight links to three: factory - joint medical - pharmacy / clinic / distributor, so that overseas customers can purchase medical equipment at a very low price and with extremely high efficiency.

So, how does the joint medicine do it?

In the view of United Medical, "with the help of the technology engine of the Internet", China's medical device export business can achieve exponential growth.

The idea of the joint medical center is not to take the products of the Chinese factory to find customers overseas, but to study the needs of overseas customers, and then to find the corresponding production base in China, that is, focus on the region, focus on the customer group, and then focus on the category.

UNIMedicine will choose the starting market in Europe for three reasons:

First, Europe is a large market comparable to the size of the United States, with high incomes for residents and high medical expenses;

Second, the European medical industry has a relatively high degree of marketization, but the efficiency and integration are not as good as those in the United States;

Third, English is the lingua franca of Europe, the team does not need to develop a multilingual website, and the market expansion obstacles are small.

The customers of the joint medical are mainly small and medium-sized distributors or pharmacies, clinics, etc., that is, "small B" customers, millions of people in the world.

As far as the medical field is concerned, "good" is the premise, "province" and "fast" are the key, so the joint medical will take three aspects of customer value as its competitive advantage:

First, the product should be of reliable quality and stable supply;

Second, the product cost performance should be high, and the cost should be saved as much as possible;

Third, the delivery timeliness should be high and the turnover rate should be fast.

Specific to the category screening, The Joint Medical Mainly considers whether the gross profit margin improvement space is large, and then considers whether the customer accepts the replacement of the new brand, and most importantly, whether China has a supply chain advantage.

For example, the price of heart stents is 5,000 yuan, the purchase price is reduced from 800 yuan to 600 yuan, the gross profit improvement space is not large, and the price of masks is 1 yuan, and the purchase price is reduced from 6 to 3 mao, which means that half of the gross profit margin is improved.

The price advantage comes from the cost reduction brought about by the increase in efficiency.

7-8 links to 3 links, channel compression saves 20% of costs; self-operated or factory brands replace international brands to save 20% of costs; full-link digitalization reduces personnel investment and saves 10% of costs.

At the factory end, the joint medical center has targeted their needs of "taking more orders" and "making more money".

First, become the factory's largest customer, a contracting factory or a package production line.

Second, increase the sales of the factory's own brand.

Based on the above advantages, the repurchase rate of small and medium-sized distributors, pharmacies, clinics and other customers of United Medical Has reached more than 80%, and United Medical has achieved sales of nearly 2 billion yuan with a team size of less than 200 people.

02

The practice of united medical cross-border B2B field has case value, because how to move from information to transaction has always been a difficult problem for the entire B2B industry.

As early as 1995, a number of B2B enterprises such as Alibaba, HC, Global Resources, China Chemical Network, and Chinese manufacturers appeared one after another to provide online information display and promotion services. In the direction of cross-border going to sea, B2C has achieved a number of listed companies, and B2B online trading is still a problem.

Why is it that the whole industry has been suffering for 25 years, and it is difficult for foreign trade B2B to walk through the transaction? Zheng Min, chairman of Ebang Power, summarized three reasons:

1, it seems that marketing first, in fact, supplier stability is the most important;

2, it seems that placing an order is important, but in fact, the door is in the supply chain management;

3, it seems to be large and complete is the best, but in fact, the breakthrough is in the vertical category.

One of the important differences between B-end customers and C-end customers, C-end customers are more emotional than rational, and may place orders for impulsive and novel consumption at any time. B-end customer rationality is much higher than sentimentality, 80% of the purchase amount comes from long-term stable suppliers, a risky purchase, may ruin the career prospects of a purchasing manager, and even drag down a company.

This means that when buyers and sellers reach a stable trading relationship, the B2B platform becomes an unnecessary link.

After 2015, many B2B platforms have moved offline transactions to online in order to pursue online transaction volume, but the real demand of customers is not the action of "placing orders" online, but the efficient supply chain services behind them.

The reason why Lianyi Medical has been able to attract 80% of customers to repurchase is to provide more in-depth services for factories and customers, which can be summarized into three points:

First, the platform is the stable trading model of the supplier;

Second, the digital supply chain of the deep factory;

Third, the whole process digital system supports intelligent delivery.

When a customer searches online for items about masks, he doesn't want information, he wants the masks themselves. In the view of Lianyi Medical, the platform should provide delivery value for end customers, that is, quality and quantity, convenient payment, and efficient logistics.

For small business customers like Enzo, the smoothest purchasing experience is similar to personal shopping, placing orders online, and waiting for the goods to be received.

Therefore, Lianyi Medical provides one-stop services such as supply and sales, settlement logistics, warehouse management, local infrastructure, etc., and the Team spends the most time and energy to solve the "multimodal transportation", and the freight forwarding companies, shipping companies, truck companies, warehouse companies, localization delivery companies, customs clearance lines, etc. involved in the process are integrated into the digital system.

Customers don't even need to have their own storefront and inventory, and the goods are delivered directly to the customer by Unimedicine.

In other words, the joint medical center plays the role of a supplier.

Upstream, United Medical has established two self-operated factories and cooperated with more than 300 factories. On the one hand, Lianyi Medical has brought a large number of orders to the factory in the form of a package factory or a package production line, on the other hand, the United Medical Internet of Things technology has transformed the production line, which can monitor the production data in real time and facilitate the flexible allocation of orders.

In the case of factories that produce disposable inspection gloves, Unimedia digitally modified its sales software, demoulding machines and boilers, and brought in 800 million long-term orders.

The in-depth cooperation between UNIM and the factory has shown great advantages during the epidemic. Which factories are producing masks, how much capacity there is, what is the price of real deliverables, which factory owners are reliable, and these core trade information are not available to everyone.

Software is digital business knowledge, foreign trade procurement from the joint medical team invested more than 80 million yuan, with about two and a half years to develop a digital system, the system can achieve the whole process of automated operation, when the customer places an order on the website, the factory production line automatically receives a single scheduling, after the completion of production, automatically generate logistics orders, do not need sales, merchandisers and other manual participation.

03

The double wave of cross-border e-commerce and digitalization has spawned new species

Lianhe Medical has been understood by some investors who do not understand as "a foreign trade company selling masks".

In fact, to understand joint medicine, perhaps SHEIN is a good reference object.

In 2012, Xu Yangtian founded SHEIN, an e-commerce website that specializes in overseas women's clothing, and in 2020, SHEIN has a revenue of more than 60 billion yuan and a valuation of more than 300 billion yuan, and no one thinks that SHEIN is a "foreign trade company that sells women's clothing".

In most people's view, shein's most amazing thing is the "speed" and "precision" brought by its data technology, it explores the popular elements and fabric manufacturing styles in different countries through big data and the Internet celebrity economy, a small number of new styles, through background data feedback, deduces the explosive models, and then continues to produce.

More importantly, at the supply chain end, through production data, capacity data, fabric data and other information, to achieve product, cost, order, documentary, quality control, materials and other management systems to work together, many factories almost with SHEIN "human sword one".

SHEIN's bottom line is an efficient digital supply chain with flexible, fast response and lower cost dissipation.

In the planning of Unimedia, the next step is to provide more digital tools for small B customers to help them manage invoicing and inventory based on SaaS. Furthermore, rich customer data can make the flow of the entire chain more efficient.

For example, a pharmacy owner, when his inventory is consumed to a safe water level, the system automatically places an order to deduct money, the order automatically matches the manufacturer, the machine automatically schedules and notifies the logistics company to pick up the goods, the factory automatically produces and ships, the pharmacy owner does not have to do anything, and the required products are delivered to the doorstep.

Why are not many companies able to do this? Lianyi Also mentioned several reasons, in the past, cross-border e-commerce companies rely on Amazon's traffic to easily make money, and there are not many companies that are really willing to go directly to customers and go deep into the supply chain to do "bitter business"; secondly, there are not many teams that have the ability to consider overseas markets and China's supply chains.

Supply chain force, to win with digital efficiency, cross-border e-commerce and digital double wave stacking, cross-border tide will inevitably gush out SHEIN, united medicine and other rookie species. B2B e-commerce, so to the market value of 100 billion industrial Internet companies evolved.