Carlson School of Management News

Expediting the Blood Flow

Tuesday, July 24, 2012

In an age where you can order almost anything today and have it by tomorrow, one would think that when your hospital needs life-saving blood there's a nationwide, Amazon.com-like efficient, price-competitive means of attaining it. You would think, but before blood vendor General Blood came along two years ago, that wasn't the case.

Even today, the flow of blood, so to speak, is primarily regionalized in distribution, meaning hospitals in a region with poor donor participation are often faced with blood shortages, or conversely, spoilage due to over-ordering. On top of that, disparities in the price of blood put a financial strain on hospitals that are already under enough pressure as it is.

General Blood is working to ease that pressure. The Minneapolis-based, FDA-registered blood vendor founded by Carlson School Full-Time MBA graduates Ben Bowman (CEO), a former Ventures Enterprise student, and Dave Mitchell (EVP), a former Brand Enterprise student, is making great strides in trying to ensure that when blood is needed anywhere in the nation, it quickly gets to its destination all at a competitive price.

"There was no real player making a national solution for balancing excess and shortages, and also balancing price," Bowman says. "Blood is a gift when it's given, but after it gets that FDA label on it, it becomes an FDA product, a commodity, and so that commodity should flow freely nationwide."

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Gleaning from models utilized by such companies as Bloomberg, Chicago Mercantile Exchange, and Amazon, General Blood is incorporating nationwide supply chain efficiencies and pricing intelligence into the realm of blood distribution. "We're not clinicians, we're not medical experts, but we know the supply chain. We know what's going on in the market, and we can prove it to you," says Bowman.

And the proof is the process. They only work with community blood banks that have an excess of donors and lean manufacturing processes. Hospitals that contract with General Blood submit their order and the package of blood drop ships via a well-supplied blood bank where it is tracked until it's signed off at the hospital.

"We're just saying, there's things we've learned in supply chain, let's put that knowledge toward a product [blood] that really does need supply chain help-it's a perishable, high value, critical input. Those are three big check marks," adds Bowman.

A departure from 'the way it's always been'
Back when he was researching the viability of a business like General Blood, Bowman, who was still an MBA student at the time, says he discovered inefficiencies in the industry and was surprised by how readily they were accepted.

"I thought, how could this be possible? Is there a law, some regulation, or barrier?" he says. "So I called around to a lot of people and found out that it was the way it's always been."

He describes blood distribution as a cottage industry where oftentimes there is only one blood vendor for hospitals in a region, and that certainly hasn't meant the hospitals are all paying the same price, either.

"We've run into cases where there are the same two kinds of hospitals, same size, within a mile from each other paying 20 percent difference in blood - and they use the same vendor. It's just a matter of how well that individual hospital negotiates," says Bowman.

"We have come in and induced that level of competition and gave them a choice," he continues. "So this is a new way of doing things, but the feedback we've been getting from hospitals is: 'Now we have a choice. Now we know we're paying a fair price for the product. Now we're getting 100 percent of what we order instead of 90.'"

$1 billion impact
The bottom line, Bowman believes, is that General Blood can take $1 billion out of health care cost through reducing waste, instilling competition, and collecting blood where it's most efficient. It's a win-win for all involved.

"We think were on the right end of the equation. We're saving hospitals money on a critical input. We're making sure they're getting what they need at the right time so they're not out of stock or cancelling surgeries or worse," Bowman says. "We really feel like we're really getting a chance to be part of the solution, or small solution to this healthcare debate, instead of just reading about it."

General Blood is currently a semi-finalist in the Minnesota Cup competition.

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