The 40-year-old president of Surgical Product Solutions found a niche to fill in redistribution of surplus surgical supplies and is able to meet growing demand for thousands of SKUs by putting his expertise into a robust, data-backed platform.
It was serving on BNY Mellon’s Best Practices team that gave aspiring entrepreneur Justin Tennant the confidence to start his business, Surgical Product Solutions (SPS), with partner Steve Darocy in 2011. Shortly after being hired during the merger of The Bank of New York Co. and Mellon Financial of Pittsburgh a few years earlier, Tennant was promoted to Best Practices, a group formed to streamline internal teams and processes, as well as design and implement custom technologies to augment those processes.
“My experience at BNY Mellon under the Best Practices group gave me extensive exposure to how operations teams, processes and technologies were planned for, designed and properly implemented,” says Tennant, who started SPS when he was 30 and recently turned 40. “It also exposed me to how important data was to decision making at all levels of business. So, when I started my own business, I was able to scale and build our departments and processes quickly as well as make very informed decisions.”
Chief among the lessons learned from Best Practices: “Everything is driven by data,” and “It’s good to lead from your gut but let the data help you make your decisions.” Tennant is fond of saying both and credits data collection and analysis, along with the strength of his 50-person team, with driving the growth of Surgical Product Solutions, which has been growing consistently at an average rate of 30% year over year. The Pittsburgh-based redistributor of unused surplus surgical supplies buys and sells to more than 3,000 healthcare facilities nationwide and exports product to more than 45 countries, including Brazil, Honduras and other developing nations that do not have access to certain medical supplies.
“On average, we have 6,000 to 7,000 SKUs in stock,” says Tennant, who serves as president. “When you’re moving that many SKUs in any given moment, you have to have data-driven tools to help you manage the inventory.”
When new customers are onboarded, 12 months of their purchasing history (through their normal distribution channel) is loaded into SPS’ open-source ERP system Odoo. From the data, “we know what they’re buying, the frequency and sometimes the price point,” says Tennant. That information is then matched against SPS’ inventory to provide the customer with a fill-rate analysis. “A lot of times we can be a prime source. If not, we can usually fill 50% to 60%. And for every order that comes in, we’re not only collecting the data on the items that we can fill, we’re collecting it on the items that we can’t fill to help us build an internal source of demand.”
It Starts with a Need
Armed with Tennant’s background in business and finance and Darocy’s years of experience as a sales rep in the healthcare industry, the pair started SPS a year after the Affordable Care Act became law. With the healthcare industry scrambling to respond, administrative costs on the rise and billions being spent annually on discarded, unused medical supplies, hospitals and other healthcare facilities were facing immense pressure to cut costs. “We saw an opportunity,” says Tennant. “The Affordable Care Act changed the playing field and it forced healthcare providers to get creative with their supply chain and their budgeting. It’s really driven demand for companies like ours.”
Nationwide, there are only a handful of other competitors that fill a similar niche. SPS’ buy/sell service model helps healthcare facilities minimize waste and either cut or recoup costs by rerouting product that would otherwise be discarded, most often due to contractual changes. It also offers customers the flexibility to buy in what it calls “eaches” or single units instead of cases, a popular value-add that helps with cash flow by allowing healthcare providers to keep less inventory on the shelves.
There are three levels of interaction with the customer, says Tennant. SPS sells high-volume products at discounted pricing primarily to smaller single-unit hospitals and out-patient surgery centers. The larger hospitals and health systems are its suppliers. “Our sweet spot is midlevel independent hospitals that are doing both,” says Tennant. “That’s when we offer the most in savings because if we’re buying and selling with an organization, we’re saving them anywhere from a quarter million to half a million dollars a year.”
Still in Start-Up Mode
“Justin has almost doubled the revenue of his company over the last three years,” says Mike Hren, one of Tennant’s mentors as well as the founding coach/facilitator of the group Mashup U. “This rate of growth has caused him to grow as a leader in several ways. Maybe most importantly, he has learned to trust his vision and communicate that vision more. He also learned to trust his management team and be more open about his own struggle with this high rate of change.”
Committed to growing as a leader, Tennant has been attending the CEO peer group led by Hren for the past two years. Talking with other CEOs managing similar complexities within their own business has been helpful, he says, particularly during SPS’ most recent growth spurt. Just last year, the distributor added several new layers of management, moved into a new warehouse and brought in a recruiting firm to onboard and train 20 new employees. It also added a new ERP and three departments — marketing, IT and analytics — to support its purchasing platform Stockhawk. Also launched in 2019, the new system allows customers to view real-time inventory, submit same-day orders, generate custom reports and “take the shopping experience out of the buy,” says Tennant, who credits his peer group with helping him flush out “the tech piece.”
“I understood at some point with my service model I had to come up with a better customer experience,” he says. “We were saving hospitals money but we were a lot of work because our system was not automated. If a hospital wanted to buy from SPS, they had to come to us and either shop our inventory online or call our sales rep directly to verify what we had in stock. Now with Stockhawk, the technology is driving the order process. It saves the customer time; it saves us time.”
The system allows SPS to collect massive amounts of data — a capability it hopes will translate beyond filling more orders. “We’ve provided a lot of savings to our customers, but we’ve just begun to scratch the surface,” says Tennant. “Our vision is to be a partner. As we’re onboarding customers onto the platform, our hope is that they will be able to use our data to develop benchmarks to better identify opportunities to reduce waste, and make more informed decisions in the supply chain.”