McKesson Automation

Improvement┬ápioneer┬áAndrew Pelis learns how lean manufacturing, six sigma and an exceptional supply chain keep McKesson Automation at the forefront of pharmaceutical distribution. Based in Cranberry Township, Pennsylvania, McKesson Automation, Inc. began as Automated Healthcare, a company founded in 1987 by Sean McDonald, one of healthcareÔÇÖs leading technology innovators.  ÔÇ£Back then, the company focused on one product ÔÇô ROBOTÔÇôRx ÔÇô a high-volume, bar-code-driven automated medication storage and dispensing system located in the central pharmacy,ÔÇØ explains David Zirnsak, director of manufacturing at the 100,000 square foot site.By 1996, Automated HealthcareÔÇÖs success had led to its purchase by McKesson Corporation ÔÇô the longest-operating company in healthcare today, marking its 175th anniversary this year. With software and hardware technology installed in more than 70 percent of the nationÔÇÖs hospitals with more than 200 beds, McKesson is the largest pharmaceutical distributor in North America and the leading healthcare IT company. ÔÇ£At McKesson Automation, our focus is to help hospitals distribute medication, from the pharmacy to the patientÔÇÖs bedside, ensuring accuracy and safety every step of the way,ÔÇØ says Zirnsak.Over the past ten years, the company has invested heavily in research and development, culminating in the design of one of its most successful product solutions, the AcuDose-Rx medication dispensing cabinet. ÔÇ£This advanced system is used in patient care areas in hospitals, enabling nurses to safely dispense medications on the same floor where the patients are located,ÔÇØ says Zirnsak. ÔÇ£We use advanced software to provide the most secure, controlled access to the medications in each cabinet. All of the drawers are locked and contain a number of locked pockets that can only be accessed by authorized personnel. So for example, if a patient is in need of morphine, only an authorized nurse can log onto the system to dispense the medication. Once the appropriate patient is selected, the specific drawer and pocket containing morphine unlocks, allowing the nurse to safely dispense only the needed medication.┬á ÔÇ£Our hardware and software are fully integrated through a central software suite which can automatically send replenishment orders for needed medications to the McKesson distribution center. This functionality tightly controls the integrated supply chain process and ensures that hospitals do not have to wait for inventory.ÔÇØ All McKesson Automation solutions are designed to improve process efficiencies, enhance safety, and reduce costs. ÔÇ£While we create advanced automation solutions for our customers to achieve these results in hospitals across North America, we also have adopted several effective processes and procedures to accomplish those same objectives internally,ÔÇØ added Zirnsak.In 1999, McKesson Automation became a pioneer of lean manufacturing and six sigma within the healthcare sector. To date, the results have been staggering and continuous improvement remains a key driver as the company looks to the future and ways to mitigate costs.Charles Stack, materials manager, explains just how effective this strategy has been. ÔÇ£In 1999 we were acclaimed as one of the first healthcare information technology and transactional businesses to adopt the six sigma methodology, a management philosophy originally developed by Motorola that emphasizes setting strong objectives, collecting data, and analyzing results to enhance business operations.ÔÇ£Our adoption of lean and six sigma principles was wholly embraced by our 1,000-strong workforce which today boasts a high number of master black and green belts. Consequently, the company has seen extraordinary success culminating in inventory reductions despite the various product launches in the past ten years. ÔÇ£Over the past six years, we have enhanced our work centers with new fixtures, new tooling and improved workloads, resulting in a 100 percent increase in productivity, improved floor safety and additional floor space for new products. On average, over the past three years, we have accomplished material cost reductions of 8 percent per year over high volume products, while our inventory accuracy has been the highest ever at 99.5 percent,ÔÇØ he continues.ÔÇ£We use three processes ÔÇô lean manufacturing, quality and kanban ÔÇô to improve efficiency, productivity and reduce manufacturing costs,ÔÇØ added Stack. Manufacturing inventory has remained at its lowest level in the last two years, despite the introduction of several new products.The company also uses statistical process control (SPC) to chart major and minor defects on a daily basis. ÔÇ£As a result, we have improved the product design and manual process control to eliminate the root cause of defects, which has improved reliability by 10 percent on the previous years.ÔÇØ┬á Another knock-on effect of these stringent processes has been improved customer experience and service capabilities. Quality and just-in-time delivery have become bywords for the companyÔÇÖs suppliers, too. ÔÇ£Initially, we had a manual kanban pull system used to trigger the raw material replenishment process. Because of the growth and complexity of our product lines, we teamed up with Ultriva to move to the electronic kanban system. Our suppliers are now linked via a web portal to our manufacturing floor. Once the inventory is used, a signal is sent to the supplier to initiate the replenishment process. By providing real-time, in-transit inventory status for McKesson Automation and our suppliers, we have realized a 10 percent improvement on inventory turns and a 50 percent reduction in supply chain administrative costs. In addition, entering into long-term strategic alliances with suppliers has further allowed the company to combat inflation and rising costs over the past twelve months.ÔÇØ Another success realized by McKesson Manufacturing is the ability to deliver products with incredible lead times. The end result is world-class order fulfillment. David Zirnsak believes the company is doing everything it can to keep costs down for the healthcare industry. ÔÇ£Cost control and maintaining our flexibility in the future will be crucial. There is a lot of waste in healthcare (over $300 billion), and we need to constantly explore ways to eliminate that waste to ensure healthcare is affordable in the future, particularly given that the baby boomers are now aging. By providing effective processes and products, we are helping healthcare providers improve efficiencies, enhance safety and reduce costs.ÔÇØ ┬á