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Creating Lean Supply Chains
Cardinal Health aims to create a leaner supply chain by enhancing customer service, reducing costs, and improving operational capabilities. The document details a strategic vision focused on aligning marketing and supply-side strategies, addressing customer expectations on order accuracy and delivery timeliness, and improving productivity through best practices. Key opportunities identified include optimizing inventory handling and receiving processes to enhance service levels and efficiency across the distribution network.
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Creating Lean Supply Chains
- 1. 1 Creating a LeanSupply Chain at Cardinal Health June 26, 2007 William Owad SVP, Operational Excellence Cardinal Health
- 2. 2 Healthcare Supply ChainServices Operations Demand PlanningDemand Planning Order ManagementOrder Management Inventory PlanningInventory Planning Supply Execution (distribution) Supply Execution (distribution) P L A N N I N G P R O C E S S E X E C U T I O N P R O C E S S CustomerCustomer Manufacturer / SupplierManufacturer / Supplier
- 3. 3 Cardinal Health Supply chainfacts Costs Managed ~ $780m Inventory $6b Headcount 9,000 Warehouses 75; 13m sq. ft Transportation 550 tractors; 680 trailers SKUs > 400,000 Customers > 50,000 Daily deliveries 43,000 2 national customer service centers that handle 650,000 calls/month 1 pharmaceutical re-packaging facility
- 4. 4 Supply Chain Operation’svision To achieve our goal, we must align our ‘go- to- market’ and supply-side strategies HSCS Operations Strategic Vision Provide category- leading customer service Achieve Cost Leadership Enhance Organization Capability Processes and Systems
- 5. 5 Strategic alignment What requirementsand potential uncertainties must we be prepared for over the next 3-5 years? Can our existing strategy be used/pushed further to fully meet these requirements, and, if not, where are there gaps? Beyond our existing strategy, what can be done to better meet these requirements? How can the existing strategy and new strategic elements be best melded together into a recalibrated operations strategy? What should Supply Chain operations’ 3-5 year strategy and associated transition path be? What role does operations need to play in order for the business units to win in the marketplace? When/where are we willing to trade-off cost for service/ flexibility? What is the transition path and immediate next steps?
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- 7. 7 Source: Cardinal Healthsurveys – Medical product customer survey, October 2006; Pharmaceutical distribution customer survey, October 2005 41 22 14 Medical products 52 21 19 13 Pharmaceuticals 1. Availability of preferred products 2. Competitiveness of pricing Voice of the customer consistently points to basic execution as primary supply chain driver of customer satisfaction Customer expectations 5. Accuracy of shipments 36 28 124. Ease of placing orders 3. Timeliness of deliveries
- 8. 8 Hospital Supply Chain Healthcarevalue chain is complex Supply Information Management MMIS Healthcare Provider Item Master Charge Master ORIS HIS B-D MedTronic Pfizer Bristol Myers Boston Scientific Manufacturers J&J Cordis Tyco -Parcel -Commercial -3PLs TransportTransport GHXGPOs McKesson O&M ABC Others Cardinal Health Transport Distributors Transport Other Inventory Pharmacy ER ICU OR Nursing Floor Inventory Inventory Inventory Inventory Inventory Special Procedures Inventory Receiving Fulfillment Payables Mgmt. Disposal Order Management Inventory
- 9. 9 Hospital base (MPS/Rx), surgerycenters, and lab Hospital supplies Scientific products Self-manu- facturing/ Presource Baxter Sutures Drugs OTC H&B GM Mostly LUM* 24-hour lead time Mostly parcel shipping Ambulatory care – physician office Mostly LUM* 12-16-hour lead time Courier network for Retail Greater variety of SKUs Less stringent lead time Alt care Rx, retail chains (non-WH), and retail independents Mostly case 12-14-hour lead time Courier network Mail order, retail bulk, and brokerage Consumer products 99% service levelsMostly LUM* 6-hour lead time ValueLink Mostly case 15-24-hour lead time Next day delivery Slow Fast ® Eight supply chains within the Cardinal Health network * Low Unit of Measure Source: Internal CAH interviews; team analysis
- 10. 10 Overall LSS DCDiagnostic Planning • DC 1 • DC 5 and 6 • Summary • DC 4 • DC 3 • DC 2 • Analysis Main site selection criteria: – Ensure we could view as many of the different processes (automation, conveyors, etc.) – No labor issues or other disruptions – Good operating practices
- 11. 11 Summary of keyopportunities from DC diagnostic Productivity • Significant variability in productivity by day and by employee Observations • Share best practices among employees and implement clearer, visual performance management Opportunity • Ergonomic differences when picking in the air • Minimizing in air picks will decrease riskSafety • Double handling and motion in receiving • Remove staging step for full pallets and sort by aisle for handstack receiving Capacity Quality / Damage • Damage from in air replenishment • Decrease in air picking with proper profiling • Annex drives significant additional labor and waiting time at the site (and main site has enough space to take additional volume) • Move all active inventory out of annex (if necessary move forward buys or excess stock to available annex space) Inventory
- 12. 12 Lean receiving willimprove service levels and cost Blueprint Concepts: • Single-Step Unload, Receipt & Putaway for High Volume Vendors – Eliminate sorting, staging and excess travel by unloading & receiving directly into case putaway location. (Requires fixed areas in case aisle for high volume vendors) – Partner with internal suppliers improving both upstream & downstream • Receivers Receive 100% – Redesign receiving layout to reduce sorting, walking, bending, and other NVA. – Successful designs have been implemented in several RX locations. • Safe, Ergonomic & Undamaged – Work with internal suppliers to develop high quality inbound loads
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- 14. 14 Receivers Receive 100% •Pallets unloaded directly onto conveyor queue for receiver • Products scanned and inducted onto conveyors to putaway area Condensed Sorting • Increases put-away density when multiple products are sorted onto single pallets that are taken for put-away, reducing the travel time of the case stockers Receiving example
- 15. 15 Creating the rolloutstrategy Step 1: Establish the facts Step 2: Build the core story Step 3: Edit to purpose Step 4: Road test • Where are we going? • Where are we now? • How did we get here? • How do we reach our destination? • What is the overall storyline? • What are the essential themes? • How can I use a metaphor or imagery to bring it to life? • Who are the key readers of the story? • How do I create a story that works for different audiences? • Is the content right? • Is it well written? • How can we ensure that people own the story? • What works well? • What needs changing? Tell and cascade story
- 16. 16 Supporting our healthcarecustomers • Our business operates 24/7 to support healthcare • Cardinal Health employees: – Distribute life-sustaining medications to healthcare customers – Manufacture and deliver vital medical supplies Having the right people in the right place at the right time is critical to our work, our customers’ work, and ultimately, patient care