Medical Surgical Supplier McKesson Goes Lean
McKesson, the leading pharmaceutical distributor providing medical supplies and healthcare IT and driving more than $120 billion in annual sales, engaged with Ultriva by Upland to perform an onsite diagnostic visit to evaluate McKesson’s supply chain “vital signs.” This pilot program identified multiple areas for improvement.
Through this evaluation, four priorities were set to have immediate impact on McKesson’s supply chain health. These priorities included:
- The initiation of an electronic closed-loop system to exchange information with suppliers, rather than the continued use of spreadsheets
- Fix errors and scalability limitations associated with the existing manual Kanban system
- Address disconnects in the information flow between order entries, manufacturing shop floor and accounts payable
- Improve supply chain efficiency
Growth and Cost Reductions
In the late 1990s McKesson became a pioneer of lean manufacturing and Six Sigma within the healthcare sector. The results were impressive, and continuous improvement remains a key driver for the company as they look to continue reducing costs. As healthcare regulations intensified, McKesson experienced rapid growth for their automation business, requiring the company to respond quickly to this increased demand.
McKesson had already attempted to use an electronic Kanban system but were unable to grow with it as rapidly as needed. Suppliers were slow to adapt to that system, impeding the success McKesson needed. McKesson reached out to Ultriva by Upland to help with this initiative.
McKesson started by using the Collaborative Supply Portal with electronic Kanban. The short deployment started with analyzing needs, then designing the solution, advising on integration, and finished with training. McKesson implemented a closed-loop Kanban method that enabled all Kanban signals to be tracked and traced. They also utilized consignment, which allowed them to carry significantly less inventory. The Kanban loops were easily scalable and fixed the errors in McKesson’s manual system.
McKesson reduced the inventory for items put on Ultriva by nearly 50% and increased turns by nearly 100%. This was mainly due to migrating suppliers to the Ultriva Portal and reducing the lead time through standardized ordering methods. They also realized a 50% reduction in supply chain administrative costs. Other significant results included improved communication between the shop floor and suppliers and a sharpened competitive edge through swifter delivery of custom products.
Ultriva’s cloud-based software allows suppliers to log in online, eliminating the need for suppliers to install any new software or invest in any special equipment. This helped accelerate supplier adaption. McKesson has over 65 suppliers using the Ultriva Collaborative Supply Portal today.
By providing effective processes, Ultriva is helping healthcare providers, like McKesson, improve their supply chain and reduce costs.