WMS solution paves the way for future
Cardinal Health, Inc. is a Fortune 19, U.S.-based health services company that improves the cost-effectiveness of healthcare. As the business behind healthcare, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability.
The company maintains an intense focus on achieving world class, category-leading customer relationships, and these customer relationships begin with suppliers and extend to the hospital shelf (and other sites of care) across the healthcare supply chain. Cardinal Health is organized in two segments with many complementary and intersecting capabilities: the Pharmaceutical Segment and Medical Segment.
A key component of the company’s performance capability in serving its Medical Segment customers is a significantly enhanced Warehouse Management System (WMS) software package that Cardinal Health is developing together with its logistics partner of many years, Witron.
Cardinal Health examined the entire warehouse structure at its more than 40 North American medical distribution centers (DCs) and made the decision to use the latest generation of WMS to improve the performance of its supply chain. The rollout of the system at these Cardinal Health DCs should be completed by 2012 for the initial version, and by 2013 for the final WMS version.
The approach: From product to system partnership
“After a nine-month evaluation, we decided to optimize our DCs with the new Witron WMS because we’re confident this system will help us realize great value for a comparatively low investment in hardware and software,” says Kevin McCormack, Director of Strategic Planning / Execution at Cardinal Health. “The trust we’ve built over the course of our long-standing supply chain partnership with Witron also played an important role in our decision.”
Other key benefits of the WMS solution are the flexibility of the software design, the stability of the software during execution of the project and the ability to adapt the software to future logistical challenges and legal requirements. With the new WMS software, Witron is supplying a customized service layer that acts as a standard interface to the new SAP ECC that Cardinal Health has introduced.
”In the past, we needed support to implement our various network strategies,” says McCormack. “As a strategic partner, Witron is collaborating with us and advising us in our selection of suitable alternative technologies.”
Witron as a logistics partner for manual and fully automated locations
Witron has assisted Cardinal Health for many years with the operation of 40 manual and four fully automated warehouse and distribution center locations. Some DCs operate WMS predecessors, while others use Witron’s automated tote picking system called “OPS” (Order Picking System). The objective is to harmonize the special requirements of Cardinal Health with the company’s unique client structure and to provide the best possible logistics solution available.
“Cardinal Health was the very first client we worked with in the U.S. some 15 years ago,” says Karl Hoegen, CEO of Witron Integrated Logistics, Inc. based in Chicago. “This decision set the stage for Witron’s rapid development within the USA. In fact, North American sales now represent approximately 50 percent of our company’s total business. We appreciate our long-term relationship and partnership.”
Expansion of third-party logistics business now underway at Cardinal Health
Delivering the best possible service to clients in the most efficient way is the company’s goal. Cardinal Health also performs third-party logistics services for manufacturer customers. These include transportation and distribution services, product sterilization, cross docking, regulatory services, kit packaging and consulting.
Interview with Mike Berg (Vice President DC Operations) and Kevin McCormack (Director Strategic Planning) from Cardinal Health
How does Cardinal Health position itself as a medical products distributor in the U.S.?
Berg: Cardinal Health utilizes a broad network of replenishment and distribution centers to ensure that customer products are aggregated and distributed in a manner that optimizes the total cost of supply chain in terms of inventory, transportation, labor and infrastructure costs -- realizing that our customers, in many cases, have limited storage capacity.
What are the logistical challenges of your sector and distribution structure?
Berg: The challenge for our industry is adaptation and speed. The healthcare supply chain is not as efficient as it needs to be and, due to changes resulting from U.S. healthcare reform, must change rapidly to help health care providers do what they do best: care for their patients. Providers need supplier partners that are responsive, flexible and innovative, deploying best practices that will reduce costs, enhance efficiency and increase quality. We have to deliver the right product at the right time to the right location, while doing it in a manner leading to these outcomes.
What requirements did you consider for your future logistics solution?
Berg: The supplier partners that will win in the long term are those companies with an unwavering focus on cost, efficiency and quality while making it easier for the customer to do business with them. Providers will be challenged in the future to do more with less, and this has implications for suppliers and the logistics they offer to customers. We need to improve the accuracy of information in the supply chain and have the best cost-to-serve model so we can stop doing things that don’t add value. Our systems must provide transparency to trading partners up and down the supply chain.
Why did you choose Witron and its WMS solution? What are the benefits the company and its solutions provide for your requirements?
McCormack: After a nine-month review, Cardinal Health selected Witron because we were confident that the enhanced WMS would deliver what we needed at a much-reduced hardware and software cost. In addition, working with Witron results in less need for change management and training at our end because Witron’s enhanced WMS is very similar to what the warehouse associate uses today.
Berg: For 15 years, Witron has been an outstanding business partner and demonstrated a keen understanding of issues and solutions that move our business forward. We have very robust business requirements that Witron understands and meets.
Which features of your logistics solution are you particularly proud of?
Berg: Our current WMS solution supports multiple business units – each with its own set of customer needs. We also have a variety of operational environments and requirements based on volume and size of market served. Witron is flexible and dynamic enough to provide solutions that extend beyond the traditional distribution operation, allowing for advanced alignment and optimization of function.
Cardinal Health has made many advances with its systems. Will you share your goals and objectives?
McCormack: Our goal is to always meet our customer and supplier requirements, so we engage in continuous improvement as our customer and supplier needs evolve. Our recent improvements include enhanced business processes enabled by SAP / ECC and enhanced business processes enabled by Witron WMS (AIMS). Our biggest challenge is moving from a highly customized version of SAP, connected to our WMS AIMS system with a customized interface layer, to a standardized interface layer that will exist between SAP / ECC and the Witron WMS.
WITRON has been a WMS provider since 1996. What are the strengths of this partnership?
McCormack: Witron has been a partner since 1996 in both the WMS manual warehouse operations, deployed in more than 40 sites, and the ASRS automation, deployed in four sites. Over the course of our partnership, Witron has been very supportive of our evolving network strategies. With our recent technology improvements, we have asked Witron to take more of a collaborative role with technology strategy for our distribution centers.
Berg: Our relationship with Witron is based on trust, transparency and collaboration. The solution we have today is vastly different than what was originally deployed and has scaled and grown in depth of capabilities as customer requirements have changed.
Which benefits, both in quality and quantity, have you already been able to realize through the Witron solution?
Berg: Healthcare is a dynamic and challenging market. By partnering with Witron, we have been able to improve the productivity and effectiveness of our operations. Throughput and quality have increased significantly as a result. We have a fact-based methodology to help improve labor efficiency, product packaging challenges, facility layout issues and overall supply chain productivity. Integration of new technologies allows Cardinal Health to continue to advance and innovate in the supply chain space.
What future challenges/objectives can you identify regarding your supply chain? How will the technical and functional possibilities of the WITRON system support you?
Berg: Our biggest challenge will be to continue to deploy operational supply chain disciplines that allow us to continue to adapt and improve cost and quality on behalf of our customers. While healthcare continues to evolve in terms of where and how it is administered, it’s important to ensure our systems and solutions are customer-centric, so they’re able to react, innovate and help our customers better serve their patients.
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