When A. Ray Dalton founded PartsSource in 2001 with seven employees and a few hundred suppliers, the company was a very different creature than it is today.
“We started the company (as) an ASP (application service provider) company, where we’d just recruit hospitals to use the Internet,” he says. “They would click for the (medical equipment) part they needed and click through to the supplier, and we would get paid on each side of the click. What we found out very quickly is that the person needing the part has his head inside of a machine, not sitting in front of a keyboard, so that idea didn’t work.”
Today, PartsSource, which provides replacement parts for medical equipment, has 92 employees at its Twinsburg location and four at a Michigan distribution center, and it works with almost 9,000 suppliers.
Dalton’s team created an aggregation model for finding medical repair parts, and his in-house IT department created a proprietary database that allows a customer to search for a part, then identify the most likely company that makes that part or has it in stock.
Smart Business spoke with Dalton about his management philosophy and how his 4-year-old company’s technological capabilities have changed the industry.
How does your PartsFinder 2.0 application to improve the efficiency of your business? We just did an upgrade (to PartsFinder 2.0) on July 1. We went with a dot-net platform that would give us Internet capability and the ability to have over 2,500 users at once. … It’s the only parts aggregator software that we know of in the world.
We went out and researched all the suppliers, the people who make the parts for the different manufacturers. There are 731 health care OEMs (original equipment manufacturers), and 3,000 active models, which represent over 8.5 million parts. We’ve cataloged all these items so that you enter one item, and it directs you to the best place to buy those parts.
How has PartsFinder 2.0 changed your company’s role in the health care support industry?
We’re the only company in the world that does what we do, and we estimated last year we saved the health care industry over $7 million in parts purchasing. We’re helping to reduce the cost of health care for every hospital that uses us because that $7 million is what they would’ve paid if they would have bought the part from someone other than us.
In reality, that $7 million kept a lot of doctors, nurses and technicians working so that patients could be seen.
How does your sales force operate?
We have a proactive sales force (that calls on) 1,500 hospitals a day. We say, ‘This is Ray from PartsSource. What are you working on? Can I help you find a part for that?’ Between 750 and 1,000 times a day, they say yes.
Typically, a medical device in a hospital fails 3.2 times a year. The same technician doesn’t fix it all three times, so the hospital doesn’t track parts utilization, when the last part was put in or how much they paid for it because it’s an individual event to them.
The average hospital is ordering one part per technician per day. We’re ordering between 750 and 1,000 per day. So we use their individual buying needs one at a time, and we take that big buying activity and negotiate better prices and better terms than they can on a one-off transaction.
We will find any part for any device ever manufactured. We guarantee we’ll find it in two hours or less, and 93.7 percent of the time we do that. If we don’t call you back within two hours with a solution to your parts need, we buy you lunch.
In fact, the salesman is the one who has to buy the lunch because they’re the one who didn’t follow up, and integrity is No. 1 in our business: If you say you’re going to do it, you’ve got to do it.
What has been your biggest challenge in running your company as it grows?
Our biggest challenge has been the physical plant. We’ve moved three times in four years because we just keep outgrowing our buildings. Economically, the company is very sound. We’ve got about $400,000 debt on a $50 million company; that’s not bad.
(The Twinsburg plant) will hold us through the end of 2007, at which time we will either have to open up a duplicate facility somewhere else or we’ll have to move into a larger facility. At that point, we’ll be about $125 million in size and we’ll have 140 employees.
We’re considering other locations in the Twinsburg market. We’re also being solicited by a Scottsdale, Ariz., group to open up a mirror facility out there. We would prefer to stay here, and … we would love to continue to expand here because this is our base, this is our home. We have been able to find the greatest employees. I really believe our assets drive home at night. Our company is only here because of the quality of the people that we have. I don’t know if we would find that same quality of people in a different marketplace.
How does your company’s motto, ‘The answer is yes,’ fit into your management philosophy?
Many companies that I’ve worked for … it’s, ‘Don’t do this, don’t do that.’ We have a completely opposite philosophy here. We tell you the direction we’re going, and we ask you how you can contribute to get us there.
We believe every employee here has got better ideas than we do, and our job is to fund their personal and professional growth. So the answer is yes, how can we help you, how can we get this job done more efficiently?
That’s why we have such a high employee retention rate, over 90 percent. For the kind of business we’re in, which is a very aggressive business from the standpoint of a call center and data management, you would expect to have a 25 (percent) or 30 percent turnover. But we treat our people right, and we believe in celebrating the success.
We do that through company lunches and breakfasts. We have a sale bell so when a rep sells a part over a certain amount, they come in my office and ring this big bell. We go to Indians games, Dave and Buster’s, Laser Tag.
You’re going to spend two-thirds of your life in a workplace, you should enjoy being in that workplace. It should be a place where you move forward professionally and financially, and it should be a place that you’re comfortable being in, so we’ve created an environment where people are comfortable.
HOW TO REACH: PartsSource, (877) 497-6412 or http://www.mypartssource.com