McKesson: raising expectations

Word is getting out that McKesson's new warehouse in Lakeland, Fla., picks and ships orders in less time while hitting 99.96% accuracy.

By Staff -- Modern Materials Handling, 2/1/2004

All too often, customers push a company to upgrade its performance. But at McKesson, a new warehouse in Lakeland, Fla. has beat its customers to the punch.

The company's previous facility in Tampa was maxed out by demand for prescription medicines, over-the-counter drugs as well as health and beauty aids. The facility had become overcrowded and lacked efficiencies when filling orders from hospitals and drug stores.

And the problem wasn't going to solve itself. Florida's population grows by 1,000 people each day with every senior in the state taking an average of seven medications.

The new 225,000 square foot warehouse now processes 30–35,000 orders a day with just 100 plus employees. Order processing accuracy is pegged at 99.96%. Furthermore, orders are picked and shipped in less time than before, says Doug Pace, general manager of Lakeland.

Those gains are just part of the reason that the facility has won Modern Materials Handling'sProductivity Achievement Award for Warehousing.

These new efficiencies also allow McKesson's customers to receive orders quickly and keep their own inventory levels low. "Our customers are skinny on their inventories," says Pace. "We work with them on a just-in-time process. A hospital may only have eight doses of a particular drug. In essence, their back storeroom is now here in this warehouse."

In fact, the pressure on Lakeland to meet high expectations is turned up a notch because the facility does not ship directly to hospitals and drug stores. Instead, the warehouse ships products six days a week to seven delivery hubs located strategically throughout the state. These facilities then sort deliveries for specific carrier routes.

Critical to Lakeland's success are energy-efficient, DC-powered conveyors and a sliding shoe sorter. It also relies on an advanced information system that includes wireless terminals for picking and Palm Pilots that provide visibility of items shipped.

To say the least, McKesson's inventory mix is broad not just in type of product but also in security and environmental requirements. Certain prescription medications such as chemotherapy drugs must be stored and delivered separately from other medications. Other drugs require a cooler. And still others must be secured in a vault as mandated by the Food and Drug Administration.

Each of these areas works as a warehouse within a warehouse. Receiving, putaway, picking and packing are performed just in that area. Picked items go directly to the delivery trailer, which is sealed before departure.

Other products such as certain prescription and all over-the-counter drugs as well as health and beauty aids, which combined make up the vast majority of the warehouse's throughput, are first putaway in either reserve storage or the forward picking module. A warehouse management system (WMS) directs activities.

Portable wireless terminals direct split-case replenishment from reserve storage by lift truck to the flow racks and shelving in the pick module. The WMS also directs movement of full cases to the lower level of the pick module, dynamically assigning the fastest movers to locations closest to shipping.

Orders are filled at night in seven waves. Using wireless terminals, lift truck drivers pick full pallets from reserve storage while other order pickers pull mixed stock keeping units (SKUs) of products from the same racks. Full cases in the forward pick area are picked to carts pulled by tuggers.

Split-case picking in the pick module is under the guidance of wireless terminals. The lower level contains prescription SKUs while the upper level has over-the-counter medications and health and beauty aids. Items are placed in totes which move through the module on conveyor. Completed totes move on to the sliding shoe sorter, which directs them to the 10 shipping docks.

Conveyors in the facility are notable for their energy efficiency. Instead of belts, chains and conventional drive boxes, the conveyors have small 24-volt DC motors built into rollers. These powered rollers then drive the other rollers in a zone 30 to 36 inches long. Not only did the system eliminate nearly 150 drive motors, but rollers operate only when totes are on them, minimizing energy consumption.

Also notable is McKesson's use of Palm Pilots to track shipments. As trailers are loaded, totes are scanned with the portable devices. The information is then made available to customers through a secure Web site. In addition to tracking shipments, the system gives McKesson's customers an advance look at what is coming their way.

For all of the gains already made in Lakeland, Pace is looking for still more improvement. To accomplish that, he is pioneering the use of a Six Sigma program to improve processes. It is believed McKesson is the only drug wholesaler using the methodology.

"To fully understand ourselves, we have to get into the cogs and gears. Normal is not good enough anymore," says Pace. "Six Sigma blows the doors off all assumptions. Once we see where we actually are, we can better control costs and meet customer expectations," he adds.

Six Sigma is being applied to practically every process in the warehouse from receiving and cycle counts to bubble wrapping and shipping. The goal is to reduce errors within a particular function to less than 3.4 per 1 million cycles.

In addition to setting milestones and charting progress, the program has turned up some interesting results. For instance, Pace says they looked at why the inventory system might show a product available but the pickers say none is in the location. In 44% of the cases, workers were looking in the wrong bin. Another 22% of the time, the worker had already picked the item and added it to the order but completed the transaction incorrectly. Basically, says Pace, the facts were different from what was thought to be the actual process.

As a result of the changes made in Florida, "word of mouth is spreading that McKesson has excellent customer order quality," says Pace.