IBM Supply Chain Software Improves McKesson’s Bottom Line

Supply chain emissions are notoriously difficult to track. With the complexity surrounding them, it’s not hard to see why companies tend to ignore them when setting reduction goals in CSR and environmental reports. Tracking the emissions generated from harvesting natural resources, through transportation, refinement, assembly, and delivery to an end-user seemed like an insurmountable task just a few short years ago, but bit by bit, tracking is becoming easier.

Case in point: pharmaceutical distribution giant McKesson has adopted IBM’s Supply Chain Sustainability Management Solution, a Web-based analytics system which will allow McKesson to determine the emissions and distribution costs of any number of variables.

And given that McKesson supplies one-third of the prescription drugs used by hospitals and pharmacies in North America every day, the variables are endless.  The company provides pharmaceuticals to more than 40,000 health locations in the U.S., ranging from hospitals and health systems to community pharmacies and national chain stores to the Department of Veterans Affairs.

The software could weigh the costs and benefits of keeping cold-storage pharmaceuticals like insulin and vaccines in one central refrigerated storage facility rather than operating cold rooms at a number of warehouses. The software can also help determine the most efficient and cost-effective transportation routes for delivery trucks based on traffic patterns and time of day.

Or, McKesson could incorporate hypothetical changes like adding microgeneration capacity to a single warehouse — perhaps to power a cold room — or the potential of using natural gas or biodiesel to fuel part of the fleet. It can even take into account the energy usage of warehouse forklifts. Or, if demand for a particular medication rises in a particular region, the tool can calculate how much more energy those sites will have to consume, how much more carbon will be emitted and by what amount material handling and storage costs will rise.

McKesson was  Supply Chain Sustainability Management Solution’s first user, but IBM is now making the analytics available to everyone through its Global Business Services. It offers users:

  • Evaluating site locations based on CO2 emissions, transportation, warehousing and inventory costs.
  • Determining the cost of serving a customer based on carbon dioxide emissions and dollars and cents.
  • Weighing the costs and benefits of alternative transportation modes.
  • Predicting the impact of using solar panels on a warehouse, or using alternative fuels on a given route.

And the first customer is certainly satisfied.

“IBM has given us the tools we need to weigh the environmental and financial effects of actions we may take in our supply chain,” says Don Walker, senior vice president distribution operations, McKesson Corporation. “This system will be valuable to any business seeking  ways to achieve both their financial and carbon reduction goals.”