Distribution Case Study
Cardinal Health
Cardinal Health, Inc. is a leading provider of products and services supporting the health-care industry. Cardinal Health companies develop, manufacture,
package and market products for patient care, develop drug-delivery technologies, distribute pharmaceuticals, medical-surgical and laboratory supplies, and
offer consulting and other services that improve quality and efficiency in health care. The company, which is headquartered in Dublin, Ohio, employs more
than 49,000 people on five continents and produces annual revenues of more than $40 billion. The Ontario distribution center serves Southern California
and Nevada with 400 employees in 615,000 square feet of distribution space. The facility produces in excess of $500 million in revenue annually.
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“CMTC went the extra mile for us. They provided
extraordinary value.”
Mark Summers
Director of Operations
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Issue/Needs
Cardinal Health in Ontario is a modern, automated, system-rich
distribution facility serving hundreds of health care providers. The high
degree of integration between equipment, systems and processes restricts
the ability of local management to make productivity improvements.
Corporate earnings targets make it imperative that operations contribute
cost savings for the achievement of goals. Cardinal had knowledge of the
effectiveness of Kaizen Methods (a concentrated training and implementation
improvement program) within complex businesses, and chose CMTC to
train employees and provide guidance as they applied the techniques.
Implementation Highlights
From February to April 2004, CMTC consultants conducted 20 hours
of training with 20 Cardinal employees over 5 weeks. The 20 participants
selected 2 projects for implementation: 1) replenishment of IV solution
in Valulink and 2) picking batch cycle coordination in Valulink. The
participants and CMTC consultants applied the Kaizen methods to
the selected projects. At the completion of the project, the Cardinal
participants made formal project presentations to Cardinal executive
management.
Improvement Description
This project demonstrated that it was possible to improve operations
with technique and process changes. The project gave hourly employees
an opportunity to make a different type of contribution to the company’s
success. The employees rose to the challenge by developing valuable
projects and taking responsibility for the implementation of the projects.
The team addressing IV solution replenishment reduced storage
requirements by 1/3 and product stock on hand from 10 days to 3 days.
The team working with picking batch cycles reduced variation in lines
processed per hour from 400 to less than 20 resulting in predictable
workflow and less overtime.
Financial and Investment Impact
Total improvements from the projects included a one-time $100,000
reduction from stock levels and a recurring $50,000 from reduced
handling, and $150,000 from overtime elimination. Reduction in stock
levels resulted from the need to carry 70% less stock on hand.
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