McKesson to Downsize Carbon Footprint

McKesson Corp. and IBM Corp. are teaming on an initiative aimed at reducing carbon dioxide emissions and trimming drug distribution costs. McKesson supplies one-third of the prescription drugs used by hospitals and pharmacies in North America, providing pharmaceuticals to more than 40,000 health locations in the U.S.

McKesson will use IBM’s Supply Chain Sustainability Management Solution (SCSM), a Web-based analytics offering, with the goal of simultaneously minimizing both its carbon dioxide emissions and its distribution costs. The new technology was developed in collaboration with IBM Global Business Services and IBM Research mathematicians.

The system draws on McKesson’s supply chain, sales and geographic data to create “what if” scenarios that are helping in decision-making concerning distribution network modeling, supply planning, inventory positioning, vehicle routing and sustainability management.

McKesson expects to use the system to determine the value of keeping pharmaceuticals that need to be kept cold, such as insulinand vaccines, in one central refrigeration facility. The engines in the tool calculate the inventory cost and the potential reduction in carbon emissions against the option of keeping such products in all its warehouses. Based on such comparisons the system will provide recommendations to allow for increased efficiency with minimal environmental impact.

Similarly, SCSM can identify the best ways to bring pharmaceutical products into McKesson’s distribution network and manage inventory and customer deliveries in a way that can help minimize McKesson’s carbon footprint and its costs. For instance, it can calculate the emissions implications and monetary cost of transporting a given product from the vendor directly to local warehouses or through a central warehouse and recommend the best action.

The sustainability module of SCSM uses detailed data on all the energy consuming equipment McKesson has in its warehousing and transportation operations, including lift trucks, conveyers, refrigerators, HVAC and trucks, along with their specifications and hours of operation. Based on this information, the tool estimates energy use and carbon emissions relating to supply chain activities and reports on them by operation, site, product, or other categories.

For example, if a demand for a particular medication rises in a specific region, the tool can calculate how much more energy those sites will have to consume, how much more carbon will be emitted and by what amount material handling and storage costs will rise.

In addition SCSM can be used to better understand the cost and carbon implications of alternative distribution configurations. For instance, it can quantify the cost and carbon benefits of relocating a warehouse, or opening an additional warehouse in a given location.

The SCSM uses a Web interface and a Cognos dashboard for reporting. It runs on a variety of IBM middleware.