McKesson Corporation

Simulation modeling makes supply chain decisions that cut inventory by USD1 billion

Published on 30-Jan-2014

"By utilizing the work that we did with the IBM team, we were able to dig down through billions of pieces of data to get a P/L level view by item. We actually developed an entirely new supply chain as a result of the work that was done." - Don Walker, senior vice president of distribution operations

Customer:
McKesson Corporation

Industry:
Healthcare

Deployment country:
United States

Solution:
BA - Business Analytics, BA - Business Intelligence, BA - Predictive Analytics, Big Data & Analytics, Energy Efficiency, IBM Research, Smarter Planet, Supply Chain Management

Overview

Based in San Francisco, McKesson Corporation is the world’s largest healthcare services company, with annual revenues of more than USD120 billion. The Pharmaceutical Supply Division, McKesson’s largest, with revenues of more than USD97 billion a year, is at the center of the pharmaceutical supply chain, serving all pharmaceutical manufacturers and more than 25,000 pharmacies, hospitals and clinics.

Business need:
Without a granular, end-to-end view of the supply chain, McKesson managers had no way of gauging the upstream and downstream profit impacts of individual decisions.

Solution:
McKesson’s First-of-a-Kind supply chain scenario-modeling solution relies on interlocking algorithms to optimize the distribution network, inventory policies, supply flows and vehicle routes, along with analytical engines to calculate key financial, operational and sustainability metrics.

Benefits:
The solution reduced working capital requirements by USD1 billion by improving inventory management and supply chain efficiency.

Case Study

Based in San Francisco, McKesson Corporation is the world’s largest healthcare services company, with annual revenues of more than USD120 billion. The Pharmaceutical Supply Division, McKesson’s largest, with revenues of more than USD97 billion a year, is at the center of the pharmaceutical supply chain, serving all pharmaceutical manufacturers and more than 25,000 pharmacies, hospitals and clinics.

The Opportunity
If McKesson could reconfigure key aspects of its distribution strategy, such as transport modes, scheduling and the placement of inventory, it stood to dramatically reduce working capital requirements. But without a granular, end-to-end view of the supply chain, managers had no way of gauging the upstream and downstream profit impacts of individual decisions.

What Makes It Smarter
McKesson’s First-of-a-Kind supply chain scenario-modeling solution relies on interlocking algorithms to optimize the distribution network, inventory policies, supply flows and vehicle routes, along with analytical engines to calculate key financial, operational and sustainability metrics.

Real Business Results
The solution reduced working capital requirements by USD1 billion by improving inventory management and supply chain efficiency. By rearranging supply chain parameters based on product-specific and customer-specific requirements, the solution also significantly reduced transportation costs. Moreover, because the solution enables decision makers to assess upstream and downstream profit impacts of supply chain decisions in near-real time, they can more easily formulate and assess out-of-the-box solutions.

For More Information
Please contact your IBM representative or IBM Business Partner.
Visit us at ibm.com/cognos.

To learn more about McKesson Corp., visit www.mckesson.com.

Products and services used

IBM products and services that were used in this case study.

Software:
Cognos Business Intelligence, WebSphere Application Server

Legal Information

© Copyright IBM Corporation 2014 IBM Corporation Software Group Route 100 Somers, NY 10589 Produced in the United States of America January 2014 IBM, the IBM logo, ibm.com, Cognos, DB2, WebSphere and Global Business Services are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The performance data discussed herein is presented as derived under specific operating conditions. Actual results may vary. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.