Up Close with John Amat from
Kimberly-Clark Health Care
New marketing exec highlights where the rubber
meets the road
by Rick Dana Barlow

No sooner had Kimberly-Clark Health Care plucked John Amat from its Safeskin unit to lead a newly centralized sales and global marketing operation as vice president than Amat already began making waves.

Under his watch the company deep-sixed two product lines, unveiled a remarkably simple but slap-your-forehead innovative marketing twist for their surgical gown line and is poised to launch a new synthetic glove designed to turn heads and hands at the same time.

Amat spoke with Healthcare Purchasing News Senior Editor Rick Dana Barlow via telephone from Brussels, Belgium, in early June about Kimberly-Clark Health Care’s achievements this year, as well as the challenges and goals that lay ahead for the Roswell, GA-based manufacturer.

The flip side of globalization really ties back to how we structured marketing. We created the strategic marketing group, but the actual span and scope of the global business teams was becoming way too broad. They needed to be everything to everyone. It was very difficult. So we created tactical or customer marketing teams for geographic areas. They’re responsible for supporting that sales force whereas the business teams are going to focus on the global P&L and the needs of the market as a whole. But the actual implementation will be done by the area marketing teams.

They are reporting to me. We’ve done it a little bit differently but we still have three global business teams and those three individuals are reporting to me. In addition we have the area marketing teams, which are reporting in to me, and also the strategic marketing team. The bottom line, quite honestly, is that part of this strategy of centralization was to pull together the sales and marketing activities into one unified commercial team rather than the disconnect of sales doing one thing while marketing is doing something different. We hoped that by centralizing that we would create one unified commercial approach.

It’s funny because what I always tell our marketing people is to just sit around and watch a customer and ask why they are doing something. We were literally watching a customer and saw that customer pull out a gown that turned out to be the wrong one. So they put it aside and picked up another one. It was just so difficult to identify and select a product quickly as they’re preparing the [operating room] suite. One of the things that we’ve focused on is how can we simply make life easier for the customers? It sounds silly but it really is an issue from an ergonomic design standpoint, from a dispensing standpoint – even how you open the actual box that it comes in. How can we make this simpler? Whether it’s the choosing, whether it’s the dispensing. It’s amazing how long it takes to set up the O.R. We just felt that it seemed to be something very intuitive that the customer would like. Obviously, we did some research and the customers loved it. Reactions have been very favorable.

There’s a cost to it, no doubt about it. Quite honestly, it’s not our intent to pass that on to the customer. We believe that with the market shares that we have it’s important for us to continually provide value to the products that we have. I know it sounds like a marketing thing but it’s reality that we need to continue to prove ourselves. This is one of those small areas that’s not a huge deal [for us] but it does make a big deal for the customer.

We’ve sort of done that and maintained that position as it relates to latex versus synthetics. We maintained that we would not color a latex glove. This is something that Dr. Wava Truscott pushed over the years, saying it was too confusing and could create risk and be too dangerous. So we have refused to go down that path. Most of our customers know that any colored glove coming from Kimberly-Clark is a synthetic glove. Any glove in that beige coloring is a natural rubber latex glove.

Do we do something else? Quite honestly, the biggest issue is printing on gloves. It’s a very difficult thing, believe it or not. Unless it’s a low-volume situation, like a surgical glove, it can be very difficult. It’s also expensive. But more than expensive, the error rate is huge. In fact, many companies that put some kind of logo or stamp to their surgical gloves are not using automated processes. They may have looked at automated processes but they’re actually doing it manually. So the error rates are still really high on printing on the gloves.

At some point we may offer a color index for the customer to make it easier for them to sort. But that’s obviously an educational process and it takes some time. It is an interesting thought.

The first one and the most obvious is the 400 percent increase in container shipments. And that one is simply a supply-and-demand issue. The amount of manufacturing that’s coming out of China right now is literally sucking up every container that is available to the point that there is a huge shortage of container shipments. Hence, it’s a supply-and-demand issue. [Transport companies] have been able to demand incredible premiums over the last few years on container shipments. That’s mostly driven by the growth of China as a manufacturing location. Most of it involves container-type shipments. Needless to say there’s also a component within the distribution piece related to fuel costs. It’s a small piece but certainly a piece of that 400 percent increase.

The energy cost increases are directly attributable to fuel prices. We’ve done a lot of things to try to minimize that. We’ve been trying to figure out ways to reduce the costs of operation. One of the innovative things that we’ve done, and a couple of companies do it as well, is use the [natural rubber] latex trees after they’re chopped down as fuel. Wood-burning fuel is something that we’ve put into play. But it can’t meet all our needs so that is something that has certainly affected us.

Actually, it’s a diversity issue. When Malaysia went through some political issues that led some companies to pull out in favor of moving to Thailand and Indonesia and a few other places, the [Malaysian] government really pushed diversification of crops. What we saw was palm seed oil becoming a big crop for them to grow. A lot of these areas replanted with palm seed rather than rubber trees. It’s just another supply-and-demand issue where the diversification of crops in certain countries has limited capacity of what these trees can produce today. The bottom line is that [growers] were getting more money for the palm seed oil than they were for natural rubber latex.

You can trace the powdered latex decision back about eight years ago, even prior to my tenure at Safeskin. The intent was to make a very concerted effort to transfer as many customers as we could to powder-free products. We had finally gotten to a volume point [for powdered gloves] that was so small. The amount of powdered business that we had left was so tiny that we felt we had accomplished our goal of transferring a significant portion of our customers to powder-free. Because what was left was such a small amount of business it wasn’t feasible to continue. We had accomplished what we set out to accomplish. We eventually did not want to supply any powdered latex products for the obvious reasons.

As far as the ValueSelect line, that’s a tough question. Had it been profitable we probably could have continued to make a very high-quality glove that we felt our customers were accustomed to. We reached the point where we realized we could no longer afford to produce that level of glove so we decided we would rather walk away from it. And that’s what we did. We just felt that financially we could not produce the quality level that our customers were used to.

It’s a great point. The toughest transition involved our international markets. I would say that more than 80 percent of our powdered latex product selling was in international markets. And most of that was in developing markets. Change can be tough. Really tough. Obviously, there’s a cost difference of going from powdered to powder-free. So that time frame is just the cost of change. It takes a long time to get users to change, particularly when it involves educational programs. We put a lot of money behind [education] with Dr. Truscott’s group. There were certain countries that we felt were never going to do it. But we’ve actually been surprised because through the transition a lot of our customers, even on the powdered side, have said that they would buy the powder-free latex.

Not really, because the way we have approached this is more on a consultative manner. We have given alternatives to our customers and showed them where they can go for a comparable glove. If a customer tells us that it’s going to use a powdered glove no matter what and will not go powder-free we have provided them alternatives where they can continue to buy powdered gloves. We’re not going to drop the price of the powdered glove, nor can we with all the dynamics going on, to make that transition if they don’t see the safety and quality issues behind it. That’s a tough one for us. But the volume is so small that it hasn’t affected that many people. We’ve really got that volume down to close to nothing.

That’s a very difficult question to answer because we felt that transitioning our product line from the ValueSelect to the powder-free latex would allow us a continued reduction in manufacturing costs to sustain [pricing]. We’re at a point right now that if we can effectively do this it’s all going to be variable on the continuing cost issues. Right now we’re not targeting a specific date when we’re going to raise prices X percent. We’re not there yet. But it could happen, depending on some of the movements of the markets.

It’s a fair question. The reality is that anything that is highly fuel-based we will be struggling about what to do with it. Any company will. Anything that involves a high cube volume and is manufactured overseas has the potential for this, too. It goes back to the whole supply-and-demand issue on container shipments. We don’t have a lot of plastics-based products, other than the Ballard lines, but certainly anything plastics-based at some point will be affected by fuel oil. Anything with a high cube volume, like gloves, is going to be affected, too.

No, I wouldn’t say that. As far as rationalizing our product line I don’t think you’re going to see anything major in the future. What more we’ll have to look at is certain product lines that we cannot continue to absorb the manufacturing cost increases. We have pretty much cleaned up our product portfolio – but not completely. Those products either had very small volumes or we felt we couldn’t compete in [those areas]. But most of the products we make are No. 1 or No. 2 in market share.

Certainly, it’s an area that we feel is an improvement to the safety of our customers, particularly as it relates to allergic reactions. It’s a trade-off, however, because you’re obviously talking about a higher-priced product. So the rate of conversion is going to be a little bit slower because it is a more expensive product. For us, it’s an objective – and it’s always been – to slowly move the market as it realizes the need for it. Part of that involves our continued educational efforts about latex allergies. But we have some very exciting products coming out in the next few months, and they will be synthetic-based. We feel it will be a significant improvement to what’s on the market today.

The biggest constraint to moving a customer from a latex product to a synthetic product involves two issues. No 1 is cost and No. 2 is the feel of the product and the safety and efficacy of the product. We feel that we will be launching very soon a product that will meet customer needs from a cost standpoint and also from a feel standpoint in a synthetic model.

I just can’t say right now. It will be a synthetic glove.

Guayule is an interesting material but I don’t know a lot about it yet. I haven’t looked that much into it other than the concern over whether there’s enough inventory and enough crops to supply a large demand. I don’t know the answer to that, quite honestly.

Basically, what we have done is really looked at synthetic materials that we could produce at the lowest possible costs and at the same time produce a glove that we feel comfortable about meeting the expectations of our current latex customers.

They’re synthetic materials.

Yes.

Our two to three top initiatives that we feel we have the brand and the license to play in involves infection control. We feel very comfortable that we can develop new categories and new products within the infection control area. Specifically, we feel that need will rise, not only because of nosocomial infections, but even more importantly because of market changes. If you talk to any hospital CEO today they will tell you that a portion of their pay or incentive system is based on quality. Within that quality incentive infection rates are most likely going to be one of many measurement sticks. We believe that infection rates are something they are closely monitoring. And, quite honestly, we believe that we can save lives. Whether it involves categories or products targeting surgical site infections or effective hand washing in a facility that protects patients and staff members we will look at it. Our strategic marketing group and our growth incubator team, which is a corporate resource, will look at the infection control area.

At some point, we all believe that infection rates for a hospital will become public. As an example, if I’m sick and have to have surgery, and I have a choice between two hospitals and one has triple the infection rate of another, as an educated consumer, particularly with the Internet today, I might choose the hospital with the lower infection rate. I truly believe that infection rates will be one of those things that hospital administrators and others will use as a competitive advantage.

The other area that we’re going to really invest in is continued expansion of the operating room products that we provide today. A significant portion of our products are in the operating room. That’s our customer base. We have very good relationships there. We’re getting creative in that we want to tie different products together, such as a medical device with a protective device.

Temperature management, in many cases, is viewed simply as an area to keep the patient comfortable. And it certainly is. You don’t want to wake up after a surgery and be freezing because that’s the first thing you remember. It’s not a hotel but the flip side is they want that experience to be as pleasurable as possible within reason. What laypeople aren’t aware of is that infection rates potentially can be affected by temperature. Patient warming is a critical piece to keeping infection rates down. It’s also a critical piece for the utilization of blood during a procedure. That’s a perfect example of a device that can warm the patient, keep the patient at normathermia and at the same time continue to protect them from nosocomial infections after that surgery.

Yes. And in different delivery systems.

We are very strong in North America and we’re very strong in Europe but the continued globalization of our brand is a critical strategy for what we’re doing. We’re picking our markets as they get ready to be educated and understand [the need for changes]. Some of the more developing markets are a little bit tougher. We’re picking our battles as we go along.

There is incredible growth potential in Europe. But more importantly there’s another worldwide issue that has nothing to do with product. I’ll give you an example. The country of Slovakia will be entering the European Union. As these countries enter the European Union they will have industrialization at a very western level. This will be tied to currency and constitution and everything else. Their expectation of healthcare and the providing of healthcare will immediately go up. In other words, the population will expect the provision of certain products and pharmaceuticals. With that obviously comes a cost to the government. What I think is going to happen among the central and eastern European countries is that you’re going to have a higher demand for quality healthcare at a western level and that will create opportunity, if you will, to provide western products.