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Owens & Minor (OMI - Snapshot Report), leading supplier of healthcare products, recently announced the offering of GHX WebDirect2 web-to-electronic data interchange (EDI) solution to its small- to mid-sized healthcare suppliers. This underlines the company’s concerted efforts to enhance efficiency and reduce costs in the domestic healthcare supply chain.

The GHX WebDirect2 portal is a cost effective solution comparable to manual ordering procedures. It aims to assist smaller suppliers to extend their trading network without any major investment in equipment, technology and support staff. The GHX Exchange platform of the WebDirect2 portal allows suppliers to engage in electronic transactions. Even suppliers with limited or no e-commerce competency can gain as the portal offers an accurate and streamlined procure-to-pay process. Owens & Minor is thereby scheduled to improve its EDI order volume.

The portal should enhance the scale and scope of the company’s business with small to mid-sized suppliers. As medical device makers cope with margin pressure due to sustained pricing headwinds, the cost effective solution offered by Owens & Minor should reduce higher processing expenses of manual orders towards the achievement of greater order accuracy. Also, substantial goodwill enhancement seems to be on the cards for Owens & Minor with this venture amongst smaller suppliers.

Our Recommendation

Headquartered in Richmond, Virginia, Owens & Minor is a Fortune 500 company which administers healthcare supply-chain management solutions. We currently have a long-term ‘Neutral’ recommendation on the stock which carries a short-term Zacks #3 Rank (Hold).

The company continues to offer differentiated solutions and expand its core business processes to meet the needs of the healthcare industry. With the Movianto buyout, the company has found a feasible route to European market entry. Tuck-in acquisitions along with innovative solutions should fuel growth in the years ahead.

However, Owens & Minor continues to rely on select customers for a major share of its revenues. It also depends on group purchasing organizations to seek significant contracts. Additionally, the company faces a tough competitive landscape with peers like Cardinal Health (CAH - Analyst Report) and McKesson Corporation (MCK - Analyst Report).

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