2008 Supply & Demand Chain Executive Pros to Know

Honoring supply chain leaders building their companies' 21st century supply chains


The thousands of employees who work in the company's 25 pharmaceutical and 43 medical-surgical supply distribution centers play a critical role in making that mission a reality. Cardinal Health distributes one-third of all medicines and medical-surgical products used in the United States each year, making more than 50,000 deliveries each day to more than 33,000 pharmacies and 90 percent of all U.S. hospitals.

The company's 21st supply chain vision is to be a true strategic partner with hospitals, pharmacies and other care providers to "chase zero" — Zero medication errors. Zero waste. Zero lost revenue. Zero supply gaps. Zero stock outs. It's a lofty goal, but by listening to the needs of its customers and engaging employees at every level of the organization, Cardinal Health is moving closer to zero each day. The company aims to build the healthcare industry's most agile, responsive, global and customer-focused supply chain, with the ultimate goal of making healthcare safer and more productive.

Tighter links in the medication supply chain are driving increased safety, efficiency and integrity from the manufacturer right to the patient bedside. Automated inventory management is helping to reduce medical and pharmaceutical costs. And as Cardinal Health works with customers to consistently deliver the "perfect order," delivering the right products at exactly the right time to exactly the right location, it's helping its healthcare customers improve clinical performance, profitability and patient outcomes.

Since its founding more than 30 years ago, Cardinal Health has grown to become an $87 billion health care services company. Much of that growth occurred through acquisition, which meant disparate systems, processes and procedures across many functions and throughout its distribution center network.

In 2006, the company began to pursue a bold plan to move from a "holding company" model to an "operating company" model, uniting its businesses, systems, processes and procedures to deliver consistent services from a single source. Just a handful of the new processes and technologies that have since helped the company move closer toward its vision of creating the 21st Century Supply Chain include:

  • Initiating company-wide Lean business philosophy to create a culture of innovation and process improvement to reduce process inefficiency, improve employee job satisfaction and enable the company to be more responsive to customer needs.
  • Initiating an 18-month "Operating Model" project that will see each of its distribution centers go through an intense Lean Six Sigma transformation to improve the customer's experience while also improving employee engagement.
  • Consolidating dozens of customer service centers nationwide into two customer service centers (with 500 employees each) based in Arkansas and Kentucky to provide a more consistent and efficient customer experience.

Since the beginning of 2007, eight Cardinal Health employees have been certified as Black Belt Lean Six Sigma leaders. The company completed more than 442 Lean Six Sigma projects in 2007 and currently has nearly 250 on tap for 2008. Since July 2007 (the start of Cardinal Health's 2008 fiscal year), the company has realized more than $62.8 million in savings as a result of its aggressive Lean Six Sigma and Operating Model projects. Most of the company's operational excellence projects lead to an average savings of nearly $71,000, and projects led by certified black belts yield an average savings of $191,000.

Cardinal Health has experienced dozens of quality and cycle time improvements as a result of its "Operating Model' project, all of which have had a significant impact on customer service levels. Many of these improvements are distribution center or customer specific, but the following examples provide insight into how the company's redesign and pilot of new processes and technologies have improved efficiency and service levels.

  • The company's Buford, Ga., distribution center has improved quality each month since the project began and has reduced shipping errors by nearly 50 percent since June 2007.
  • A redesign of the company's UPS receiving process has resulted in an 82 percent reduction in cycle time for putting away product and making it available for customer order.
  • A redesign and pilot of the company's "ValueLink" low-unit-of-measure pick process has resulted in a 31 percent productivity improvement in picks per hour.
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