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Medical products & distribution: Advancing a resilient, ever-evolving supply chain

“Our healthcare customers look to us for our supply chain expertise,” said Robert Rajalingam, president of Cardinal Health’s U.S. Medical Products and Distribution (U.S. MPD) business, a market leader in manufacturing, sourcing and distributing medical products to hospital systems, ambulatory surgery centers and clinical labs. Where once customers relied on Cardinal Health to simply deliver the products they needed, “they now rely on us for our strategic counsel and partnership.”

This significant change was driven by the COVID-19 pandemic and the many disruptions the pandemic created. “We’ve identified many opportunities to learn and grow and excel – and we have been laser-focused on doing just that,” Rajalingam said. After nearly three years of working collaboratively with customers to address supply chain challenges, he and his leadership team have transformed U.S. MPD, optimizing a supply chain that is resilient, flexible and fast-moving – and continually evolving.

As detailed below, the team has invested in employee expertise, physical space and innovations that add automation, enhance data and planning capabilities, and strengthen the employee experience. “We also communicate frequently and openly with customers, so that they understand both our challenges as a distributor and the strategic advancements we are making to become increasingly resilient,” Rajalingam said.

Growing employee expertise to better serve customers

Rajalingam and his leaders are building their team’s expertise and capacity to ensure that customers and their needs are fully supported. For example, an expanded number of collaborative planning, forecasting and replenishment (CPFR) analysts, who are experts in data management and analysis, work hand in hand with customers’ inventory and planning teams. Some are embedded within health systems; others are onsite regularly. “Our teams are often so closely aligned with our customers that it’s difficult to tell where one team ends and the other begins,” Rajalingam said.

Because the CPFR analysts have access to all our suppliers’ forecasting information, they can help customers predict and prevent disruptions. For example, they can see a coming product shortage eight weeks in advance, and then work with a customer’s inventory team to find and procure a suitable alternative product.

Other critical members of the team are focused on studying the supply chain with an eye toward meeting customers’ needs today AND tomorrow. Said James Sembrot, SVP, supply chain for U.S. MPD, “These are the pros who create and deploy solutions for both current and future challenges. They are always asking questions: What should we be doing differently? How do we improve and serve customers better? What problem has a solution that doesn’t yet exist, and how can we create the solution?”

U.S. MPD also has team members who concentrate on supply chain flow, analyzing products from the time they’re ordered to their arrival at a hospital. This group seeks to minimize friction at every point across the supply chain. “These folks rely on expertise in design, Lean Six Sigma, process improvement, and in technology and automation,” Sembrot said. “They identify defects and potential risks in the supply chain and remove them.”

Most important are the 5,000 frontline employees who work across six regional replenishment centers (RCs) and 36 forward-facing distribution centers (DCs). These teammates are responsible for picking, packing and shipping products to our customers.

Increasing physical space

U.S. MPD is engaged in a multi-year strategy to increase service levels and supply chain resiliency with increased inventory and expanded physical infrastructure. These investments also enable the team to integrate automation and more modern technologies; improve safety, service, quality and cost; and be more efficient in managing variations in volume and labor availability.

The investments include a new, nearly 600,000-square-foot distribution center opening in early 2023 in Central Ohio, as well as a $50 million inventory management project that, when completed, will collectively add nearly 1.5 million square feet to our RC network. These investments strengthen our on-hand inventory, allowing us to rapidly restock our DCs and store more Cardinal Health™ Brand inventory.

Additional investments are underway, with other expansions expected over the next three to five years, Sembrot said.

Investing in automation and other innovations

The U.S. MPD team continually researches, tests and deploys new technology solutions. In fact, our new Central Ohio facility, mentioned above, features a spacious innovation lab, where team members can develop and test solutions, while building and evaluating new capabilities in a real-world environment. “The space is like a giant sandbox where we can invent, experiment with different technologies, discover what works and learn how we can make improvements,” Sembrot said. “I’m confident that the lab will accelerate the rate at which we deploy technology throughout our facilities.”

Here are a few examples of solutions that are currently or soon to be deployed across our distribution network:

  • Autonomous mobile robots (AMRs): Over the last year and a half, AMRs from Locus Robotics have been deployed in several DCs, leading to increases in safety, service, quality, efficiency and employee satisfaction. “The robots are changing the nature of our work,” Sembrot said. Without robots, employees have to push 400-pound carts from station to station within the DC.

    Here’s how the robots work:
    Integrated with a facility’s warehouse management system, the robots receive picking instructions, are loaded with plastic totes by employees, and, using sophisticated AI and optimization algorithms, determine the most efficient routes for traveling from one pick to the next to optimally satisfy the customer order. 

    The pictures displayed on touchscreen devices help our employees accurately identify the correct products in the requested quantities. Our employees scan the items into the robot’s digital system, then place the products into the robot’s totes. Once the totes are fully packed, the robot moves them to a staging area for loading onto our delivery trucks.

    “Instead of constantly moving throughout an entire DC, each employee stays within a specific area and becomes an expert on the products located in that area,” Sembrot said. He noted that one of the measures of quality we use in the DCs is defects per million opportunities (DPMOs). “With the robots, our employees are succeeding more often, picking the right products in the right quantities. They’re improving our DPMO performance.”

    Our investment in robotics has also helped us better manage through labor shortages: They make it easier to attract and retain employees; they help new hires onboard more quickly; and they offer multilingual instructions, expanding the pool of potential employees.

    Robots are in use at distribution centers in Montgomery, New York, Buford, Georgia, and Detroit, Michigan; they’ll also be deployed in the new Central Ohio facility. Eventually, most DCs across the country will be equipped with AMRs
  • Additional automated solutions: In a facility in California, the U.S. MPD team is testing autonomous floor sweepers and scrubbers and will soon pilot an Autonomous Security Robot (ASR), whose self-driving technology, face- and license plate recognition and ability to engage with people, will help increase on-site security.
  • Advanced planning software products like Kinaxis®: These enable us to enhance our supply chain through concurrent planning and end-to-end network visibility. With Kinaxis®, we can factor in seasonality and balance demand and supply while accounting for capacity safeguards. And we can more easily simulate various product supply scenarios to create best-fit solutions for customers.
  • Visibility solutions like FourKites: These create connectivity with all carriers across the supply chain, from large national carriers to couriers in the final mile. Having visibility into products on trucks enables us to better serve our customers.

The team is exploring many more technology advancements, Sembrot said. “We are constantly looking at what’s coming. Because everything changes, and the rate of innovation is accelerating, we know that the best supply chain solutions of today may not be the best solutions for tomorrow.

“Our work is all about seamlessly connecting everything in the supply chain for our customers. We remove complexity for our customers, enabling them to best serve their patients’ needs. Our focus, always, is on the continuous improvement of safety, service, quality and efficiency across every node in the supply chain.”

Looking ahead
“Cardinal Health has been a leader in distribution for more than 50 years,” Rajalingam said. “We have employees who have served the same customers for 20 or 30 years. Our legacy and the depth of our relationships give us tremendous equity with customers. And now, customers recognize that we are pairing our legacy and the value of our relationships with a constant spirit of innovation. We are continuously evolving and improving.”

After three years of pandemic-inspired challenges, the transformation at U.S. MPD is yielding results. “We are seeing significant improvements in customer service levels, and we are winning new customers,” he said. “Most importantly, hospitals and health systems recognize that we are deeply committed to them and the care they provide to their patients. We strive to serve them tirelessly and seamlessly, and to do everything we can – today and into the future – that enables them to do their best work.” 

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Cardinal Health is a distributor of pharmaceuticals, a global manufacturer and distributor of medical and laboratory products, and a provider of performance and data solutions for healthcare facilities. Subscribe to our News Alerts to get all of our latest news.