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Author's profile photo Judy Cubiss

How are Companies Developing Business Models with Big Data

In the last category –  “Big Data Innovator Award”,  this is an award by SAP that recognizes company stories that leverage SAP HANA by applying advanced data science to their business/business processes  to achieve big results. This often involves creating new business models and working smarter with Big Data.

McKesson has been nominated for developing a healthier distribution system with SAP HANA.  Check out McKesson’s and all the other entries and cast your vote for the best stories.  But hurry up – voting closes soon

Here is the entry from McKesson;  Developing a healthier Distribution system

McKesson plays an integral role in health care, serving more than 50% of American hospitals, 20% of physicians and 100% of health plans. And as the largest pharmaceutical distributor in North America, they deliver one-third of all medications used there every day.

The company was looking to become more agile and ever more responsive to its customers, so they explored SAP HANA and its real-time capabilities early on. After engaging with business users in a design thinking exercise, they developed a list of 6 potential POCs. McKesson’s first POC was running the CO-PA Accelerator on HANA and the performance improvements were substantial—with many key reports processing from 4 times to 100 times faster.

The benefits of SAP HANA confirmed, McKesson looked to embark on a more transformative project— bringing real-time information to bear on the McKesson pharmaceutical distribution system that fulfills 200,000 orders each day. With many of their customers employing “just-in-time” ordering, McKesson’s commitment is to deliver orders received by 5pm by the next business day. Customer agreements often contain a “fill or kill” clause—meaning that if an order is not fulfilled same day, the customer can take their business elsewhere.

So McKesson’s distribution system needs to be close to flawless—but it was not. The company has distribution centers (DC) across the country with the massive central DC playing a crucial role in supplying the regional DCs. To process an order from receipt to shipment at the central DC, the workflow includes multiple zones—or stages— each with its own systems and reporting tools.

Unfortunately, the various systems did not integrate easily and often showed conflicting information on the status of orders, inventory, etc. One zone showed stock and it was not there, another zone showed a stock-out and there actually was stock available in another zone, and so on.

The absence of a consolidated and accurate view of the hundreds of thousands of orders being processed each day hindered management’s ability to identify and intervene on orders that were in danger of not shipping that day. In fact, the average ship time from the central DC was close to 2 days, twice as long as the stated goal. That put McKesson’s customer relationships in jeopardy, but more importantly, it also put patients who need a specific prescription medication each day at risk. One executive described the situation this way: “the DC was on fire”.

With so much at stake, McKesson’s CIO and the SVP of the Distribution Operations made finding a solution and getting it deployed a top priority. Working with SAP Data Services, data was replicated and cleansed from the other, non-SAP, systems into SAP HANA, which was deployed as a “sidecar” datamart with about 1TB of data. McKesson partnered with Infosys to build a custom application and dashboard with a Business Objects WEBI front-end to provide a simple, easy to use tool to identify “hotspots” that need to be addressed. The new system went live within 4 months.

With the new dashboarding application, McKesson distribution supervisors can immediately see which orders are in jeopardy of not shipping within the same-day window and can manage problems and “hot spots” across all zones of the DC. And since the dashboard application analyzes and highlights the trouble loads, the information employees need is one click away, versus the seven steps required with the previous system. Further, with the data from the various operational systems replicated into SAP HANA every 5 minutes, the information is real-time, so when a problem arises it can be dealt with immediately. And while McKesson initially trained 5 users at the distribution center on the new application, word has spread and there are currently 25 users optimizing product and order flow through the warehouse in real-time.

The impact on McKesson’s pharmaceutical distribution business has been dramatic. Time spent on reporting and research of hotspots has been reduced by 3-4 hours a day at the central DC, allowing the McKesson team to be more proactive in managing all aspects of operations. And they have made big strides towards reaching the key goal of 100% same-day shipment—average ship time has been reduced to 1.25 days from 2 days before the new system (SAP HANA) deployment.
Ron Thompson, VP of IT, notes that while on some level it is counter-intuitive that the solution to a problem built around non-SAP data was SAP HANA, McKesson has found it a robust platform for custom applications. Ron stated “who would have thought that SAP could solve a non-SAP problem”. But with HANA and WEBI, McKesson did just that…

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