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McKesson's new prescription for supply chain efficiency

New supply chain management software from IBM will help the drug giant weigh both the financial and environmental impact of business decisions.
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Written by Heather Clancy, Contributor on

There's another example out today of why addressing supply chain and product distribution inefficiencies also makes sense for the planet. McKesson, which supplies an estimated one-third of the prescription drugs used by hospitals and pharmacies in North America, is teaming up with IBM to deploy new analytics software that it believes will not only cut its distribution costs but will simultaneously cut its carbon dioxide and greenhouse gas (GHG) emissions.

The initiative is leveraging new IBM Web analytics software called the Supply Chain Sustainability Management Solution (SCSM for those of you who need acronyms). The software, which uses the Cognos dashboard to create various sustainability reports, will help McKesson teams make decisions about which distribution network might be best to deliver certain products, how to balance inventories to reduce transportation costs, how pharmacies and hospitals can better plan drug supplies, and how to route vehicles. Then, they can weigh each of these things from both a financial and environmental standpoint, and take action accordingly.

Here's an example: McKesson will be able to evaluate the impact of keeping all the pharmaceuticals and insulins that require refrigeration in one centralized facility. This would obviously be great when it comes to electricity costs related to heating, ventilation and air-conditioning (HVAC). But would it make sense from a transportation standpoint? The IBM software can help suss this out.

The software can be used to track the energy consumption of all the equipment within McKesson warehouses, including fork lifts, conveyor belts, refrigerators, HVAC, and so on. That way, as its supply needs changes, it can shift products around accordingly, using both the financial and environmental information collected by SCSM.

Says Don Walker, senior vice president of distribution operations for McKesson:

"Today, we are advancing our ability to contain costs while contributing to the health of our environment. IBM has given us the tools we need to weigh the environmental and financial effects of actions we may take in our supply chain. This system will be valuable to any business seeking ways to achieve both their financial and carbon reduction goals."

McKesson's environmental sustainability goals include a major focus on fuel efficiency for its U.S. pharmaceutical sales fleet. Right now, the pharmaceutical giant is focused on cutting carbon dioxide by up to 20 percent; in fiscal year 2010, those efforts will create an anticipated $300,000 in savings. The company is in the middle of embarking on a major energy efficiency initiative related to its data centers. Already, in fiscal year 2009, it consolidated three facilities into one, an effort that it estimates will reduce energy consumption by 525,600 kilowatt hours per year, or $65,000 annually, in energy costs moving forward.

This post was originally published on Smartplanet.com

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