McKesson Corporation | Compass Inventory Management System

INDUSTRY:

Pharmaceutical

SERVICES:

Specialty Distribution

COMPANY SIZE:

76,000+ Employees

OPERATING BUDGET:

$198.5 billion (2017)

HEADQUARTERS:

San Francisco, CA

PROJECT OUTCOME:

  • Reduction in inventory outages
  • Improvement in contract compliance
  • Increased customer satisfaction
  • Reduced time spent by senior Inventory Management staff in managing sequestration details
  • Created decision support system (Compass) to allow McKesson Inventory Managers to easily implement contractual requirements for inventory availability

OUR CLIENT’S CHALLENGE

As one of the largest pharmaceutical wholesalers in the world, McKesson has supply contracts with major hospital chains, pharmacies, and government entities with varying sensitivity to inventory availability. For some customers, availability of specific key drugs is contractually required. McKesson needed a way to sequester products for these customers based on regional demand projections and contractual requirements. Initial efforts to accomplish this with spreadsheets and manual processes required significant time from senior staff and did not scale up as the number of customers and the complexity of contract provisions grew.

TEN2ELEVEN’S APPROACH

Ten2Eleven designed and implemented an enterprise-wide application – Compass – that allows McKesson Inventory Managers to log contract requirements and to indicate at a granular level (Customer, SKU and Distribution Center) the amount of inventory to purchase and sequester.

In order to address immediate needs and to gain feedback on the effectiveness of the approach, Ten2Eleven employed a phased approach, where the core algorithms could be leveraged early on to calculate inventory positions, freeing up senior McKesson staff from daily maintenance.

Phase 1 – Prototyping of Core Inventory Algorithms: Ten2Eleven spent several days interviewing McKesson Inventory Management staff and reviewing existing spreadsheet-based models. Ten2Eleven’s data scientists and business intelligence experts implemented the purchase-and-sequester algorithms in a relational database management system (MS SQL Server) and performed side-by-side testing with McKesson staff to ensure that calculations were identical.

As an interim measure, Ten2Eleven staff executed the algorithms daily, based on inputs from McKesson staff. In parallel, Ten2Eleven developed a full application with user interface, reporting capabilities, and system interface to McKesson’s SAP ordering system.

Phase 2 – Productionalized System: Ten2Eleven’s developers used an agile approach to develop a full application for McKesson’s Inventory Management team. This included a UI to view and update sequester information, file upload capabilities for mass import of information for new contract scenarios, system interface with SAP ordering system, and reports to indicate success of the inventory sequestration program.

Phase 3 – Optimization: Ten2Eleven added historical reporting to Compass to enable Inventory Managers to compare sequester information with outages and service level at a customer, distribution center, and product level. Based on analysis over time, refinements were made to the inventory algorithms to reduce outages and improve contract compliance and customer satisfaction.

Tags: Inventory Modeling, Management System, McKesson