How this start-up disrupts supplies to save costs for smaller hospitals

Medikabazaar is using a disruptive platform and a roster of 150,000 SKUs to help health centres in smaller cities reduce inventory holding costs and boost efficiency

An aggregator and an e-commerce marketplace to service the estimated $68-70 billion health supplies market was an idea that was just waiting to be snapped up. And Medikabazaar, in its first iteration in April 2015, has assumed precisely that role. With 150,000 stock keeping units (SKUs) on its roster, 18,000 hospitals across the country as clients, tie-ups with suppliers (manufacturers and distributors) both Indian and international players from China, Korea, Israel knocking at the door, Medikabazaar is currently keeping all salvoes fired. 

Practically every manufacturer or supplier of medical equipment, instruments and consumables will make a beeline for hospitals in larger cities, in order to be on their vendor list. But what happens to 25-, 50- or even 100-bedded hospitals in up-country? They typically don’t have bargaining power, and have to block a great deal of money to hold large inventories, as chances are they won't get supplies when they need them. 

This is where Medikabazaar, an e-marketplace and aggregator with 150,000 SKUs and over 100 global manufacturers, comes in. “We offer value beyond just competitive pricing in every category of medical supplies. Hospitals can find every category and brand with us, they can compare prices, technical options as well as financing options," says Founder and CEO, Vivek Tiwari. 

In a competitive market, with price control and a number of other regulations, healthcare providers are increasingly finding it hard to remain profitable even in a scenario of high demand. Procurement is a non-core service for a hospital and can easily be outsourced. “Hospitals should not really be locking in capital on inventories," says Sanjeet Singh, Executive Vice President-Operations and Revenue, Medikabazaar.

Tiwari has discovered the spot he can disrupt. His aim, however, is not to replace the distributor. Instead, he is assuming the role of a partner and ironing out the wrinkles in procurement to ensure smooth, efficient and just-in-time supply. Most importantly, he aims to do away with locking in several months of working capital on the part of the small hospital. In addition, his outfit offers same-day delivery of medical supplies through a team of two-wheeler borne staff, warehouse support, warranty and service support, and pre- and post-sales hand-holding through a team of experienced and qualified biomedical engineers and procurement specialists. 

“Our sweet spot is tier-II and tier-III towns, which have to live with the pain points and are quick to adopt new and innovative solutions,” says Tiwari.

Medikabazaar's catalogue ranges from needle-and-glove to ventilator, to CT and MRI, to medical equipment, to consumables and disposables, to physiotherapy and wellness equipment, to OT and ICU equipment. It also includes beds and furniture, dental equipment, hospital IT including hospital management software, and telemedicine and remote diagnostics.

The company started with initial funding from Rebright Partners and Prominent Angel Investors, in series A round. Healthquad, Rebright Partners were the lead investor and Mitusi Sumitomo, CBC Co Japan and Elan corporation are among other investors to have put in $6 million. 

The three pillars of growth

Technology platform: Medikabazaar is encouraging the adoption of Vizi, a platform that uses machine learning and AI to do predictive analytics on a hospital's monthly demands. It has set a target to implement this system in over 5,000 hospitals over the next few quarters. Currently, it has 200 hopsitals in its fold, which are using Vizi. Inventory flow should be just-in-time (JIT) so efficiencies come in without having to lock resources. 

Ajay Jassal, Director-IT, SCM & Pharma at Centre for Sight, a leading opthalmic chain of clinics confirms that partnering with Medikabazaar has helped his set up lower procurement costs while maintaining quality. Typically, MedikaBazaar helps partner hospitals pare inventory from 60 days to about 10 days, freeing up working capital in the process and helping the institution save 20-30 per cent on holding costs. 

Expanding reach: From the current 11 fulfillment centres in Delhi NCR, Mumbai, Guwahati, Lucknow, Ahmedabad, Indore, Kolkata, Chennai, Bengaluru, Visakhapatnam and Hyderabad, to another 12 locations. These fulfillment centres have warehouses and a fully functional office. Though the warehouses are a capex investment, the centres don’t hold inventory for more than 10 days. Imported products are stocked only if they can be pushed easily in India, and investments are made only if demand comes in volumes. In any case, international products typically make up just 10-15 per cent of all products on offer. Besides, global manufacturers help with credit terms so capital is not blocked. What's more, regional warehouses can cater to large catchment areas. 

Last mile integration: Medikabazaar's MBGO project, which is a two-wheeler-based delivery model, has completed a successful pilot. Same-day delivery is rare as far as medical supplies are concerned. And in smaller markets, it is even harder to reach products instantly. Since Medikabazaar's target market is smaller cities, the two-wheeler-based delivery model works, as each rider typically covers 50-100 sq miles. The model will be scaled up with a promise of same-day delivery to smaller hospitals. “In the next two quarters, we want to change the perception of medical-supply delivery,” Says Tiwari. The riders carry the shipment in a backpack with a battery-operated temperature-controlled box for medicines that have to be maintained at 2-8 degrees. Small fridges are also used for moving plasma products and injectables. Medikabazaar has also brought in penholders that can maintain insulin for up to 70 hours. 

Tiwari is taking a cue from the FMCG sector, which brought stores to the consumer's doorstep. A similar thing has to happen in the healthcare segment as well so that the hospitals can manage costs and create higher efficiencies. Medikabazaar has currently tied up with Jaslok Hospital & Research Centre, Centre for Sight, CMC Vellore, Regional Cancer Centre, Apollo Hospitals, Reliance Hospital, and HCG Manavata Cancer Institute, among others. It also has a deal with All India Institute of Medical Sciences (AIIMS), Delhi, to supply exculsive oncology products which are only available through MedikaBazaar. 

In a first, the company has entered an agreement with the Association of Healthcare Providers of India (AHPI), which is encouraging its 10,000 members to use Medikabazaar to source medical supplies, as it offers a quality platform that could result in huge savings for them. Says Gridhar Gyani, President AHPI, “Hospitals need to get out of non-core services and encourage companies like MedikaBazaar which take over services.” 

Challenges 

The going has not been easy, though. Forming partnerships with hospitals in larger cities is a slow and tedious process. In smaller cities, however, conversion to the Medikabazaar offering is faster. 

“Displacing the existing model is not easy, and it is only technology which can bring in the disruption,” Says Tiwari. The catch here is that while the model leans heavily on technology, it is equally dependent on the brick-and-mortar, last-mile connectivity which promises quick delivery in short times. “The old model is highly inefficient. It blocks capital and involves high inventories. What we offer is a far simpler solution," says Sanjeet Singh, Executive Vice President Operations and revenue, Medikabazaar. 

Revenue is earned based on the size of a consignment that a hospital requires. A small percentage is taken from the vendors. While Vizi is offered free of cost currently, a small fee may later be charged, based on usage, as hospitals begin to appreciate its worth.

At some point, Medikabazaar will end up displacing the distributors, even as it begins the first part of the journey by providing service to the hospitals. 

Supply to pharmacies, diagnostic labs and other service providers will happen in the second phase.