1. Opportunities in Clinical Supply Chain Innovation Michael Hobbs Vice President Clinical Supply Solution Owens & Minor, Inc. September 10th, 2008

2. Owens & Minor 2 Copyright Owens & Minor, Inc. 2008 Owens & Minor Today

3. Owens & Minor 3 Copyright Owens & Minor, Inc. 2008 Agenda Clinical Market – Devices & Implants Supply Chain Issues Elements of a Solution Opportunities for Diversity

4. Owens & Minor 4 Copyright Owens & Minor, Inc. 2008 Expense Growth Rates 2002-2004 Supplies have overtaken labor as the fastest growing line item. Source: The Advisory Board Company 2005 Total Operating Cost Salary Expense Benefits Expense Supply Expense Supply expense increasing 64% faster than total operating costs

5. Owens & Minor 5 Copyright Owens & Minor, Inc. 2008 25% Supply chain management expenditures will reach 45% of total cost Labor Supplies Logistics & Distribution Others Total * Figures based on HFMA estimates. Labor cost includes salaries, wages and benefits based on average of leading hospitals in the U.S. and Others is inclusive of profits to the hospitals Source: S&P Industry Surveys: Healthcare Facilities; HFMA; industry reporting; Pipal Research analysis Supply Chain Management 100% 45% 15% Total Cost Incurred by Hospitals

6. Owens & Minor 6 Copyright Owens & Minor, Inc. 2008 Medical Supply Industry - US Acute Care US $58B Med-Surg Supplies US $76B Non-Acute US $18B Commodity $20B Devices & Implants $38B

7. Clinical Supply Chain Issues

8. Owens & Minor 8 Copyright Owens & Minor, Inc. 2008 The traditional “Supply Highway” is complex and expensive. 70% of Total Transactions 35% of Total Spend Purchasing FTEs - 1 Receiving FTEs - 1 Suppliers Direct Purchases 3PL 30% of Total Transactions 65% of Total Spend Purchasing FTEs - 6 Receiving FTEs - 3 Organized Totes & Pallets Distributed Purchases

9. Owens & Minor 9 Copyright Owens & Minor, Inc. 2008 Clinical/Direct supply chain is 4 to 5 times less efficient than the distributed supply chain Inventory Turns Cost per PO Nursing Cost per PO Delivery Cost per Line Electronic Order Fulfillment 4 18 $12 $60 $0.70 $3 $2 $9 25% 75% 1x 2x 3x 4x 5x Commodity Device & Implant

10. Owens & Minor 10 Copyright Owens & Minor, Inc. 2008 What drives this model? Customer intimacy High industry gross margins

11. Owens & Minor 11 Copyright Owens & Minor, Inc. 2008 MD&I suppliers experience certain challenges in servicing this market… Poor sales visibility Small order size High order frequency High freight charges High front-office cost Manual order process

12. Owens & Minor 12 Copyright Owens & Minor, Inc. 2008 Suppliers have issues with consignment… % of respondents citing issue as significant or highly significant Source: Archstone Consulting, “Medical Device Supply Chain Council Consignment Survey Results”, January 6, 2006

13. Owens & Minor 13 Copyright Owens & Minor, Inc. 2008 Medical device manufacturers cash cycle is 4x slower than O&M *Note: Lower numbers are better Source: CFO Magazine 2006 Working Capital Survey

14. Owens & Minor 14 Copyright Owens & Minor, Inc. 2008 …and, customers experience substantial supply chain costs with MD&I. 1 st Time Order Accuracy Lines/ Order TurnsExpiration Target Performance 78.8% 1.5 2.1x 5% GAP EDI% 25% Charge Capture 75%

15. Owens & Minor 15 Copyright Owens & Minor, Inc. 2008 “Having RNs and techs manage product databases, manipulate inventories to avoid expiration, cross level stock, analyze physician utilization patterns, etc. is at best a profound distraction from their clinical value.” Thad MacKrell, O&M, as quoted in Healthcare Purchasing News, December 2006

16. Elements of a Solution

17. Owens & Minor 17 Copyright Owens & Minor, Inc. 2008 Clinical supply chain components & savings opportunity

18. Owens & Minor 18 Copyright Owens & Minor, Inc. 2008 18 Resources (On-site & Off-site Normalize Data, and Analyze Spend Data) What Clinical Departments Need Inventory/Order Supply Mgt. (Visibility, Expiration, and product recalls) Collaboration (Business Reviews) Price Mgt. (Tier Maximization, Digitize Contracts) + + + Clinical Supply Chain Services Managed or Monitored Solutions Revenue/Clinical Utilization Mgt. (100% charge capture) + Equals a 3-4 Return On Investment Not Software

19. Owens & Minor 19 Copyright Owens & Minor, Inc. 2008 O&M Specialty 3PL Offering Value-added Services 1.Transportation Optimization 2.ePedigree Compliance / Track and Trace 3.Cross Docking / Order Consolidation 4.Asset tagging / Custom Packing / Kitting 5.Product Recall Management / Reverse Logistics 6.ISO Certification 7.Management of Global Distribution and Logistics 8.Integration to Demand Planning and CRM Systems Basic 3PL Services Shared Warehousing Management Inventory Management Transportation Management Order to Cash Systems Order Management Accounts Receivable Chargeback Processing EDI Outsourced Order to Cash Processes cGMP Regulatory Compliance Distribution Network Hospital Distributor / Wholesaler Physician Office Patient Specialty Center Or Department Sales Agent

20. Owens & Minor 20 Copyright Owens & Minor, Inc. 2008 Our solution is working in… Over 100 clinical departments nationwide including: –The Cleveland Clinic –Yale New Haven Hospital –The Ohio State University Medical Center –Stanford University Hospital –Thomas Jefferson University Hospital

21. Owens & Minor 21 Copyright Owens & Minor, Inc. 2008 Services for Clinical Supply Chain Hospitals IT Services (RFID, Interfaces etc.) Clinical staffing services (RN/RT) Educational Services (CME, CEU etc..) Clinical Outcomes services (tie supply chain to outcomes, utilization review) Supply Spend Analytics Contract Management service Reimbursement Services (Billing/Coding) Direct Bill services Recall Management Services Supplier Service Customer Service Direct Bill Services Clinical outcomes post market entry Research and Development (New Product development) Recall Management Clinician Educational Services

22. Thank You!