McKesson is the largest pharmaceuticals distributor in the United States. While they do not manufacture drugs or supply healthcare services, they are the leading provider of supply, information, and care management products to the entire healthcare industry. In the words of McKesson’s Chairman and Chief Executive Officer, John Hammergren, “McKesson is helping transform healthcare into a modern, efficient, and quality-driven system.” One way they are accomplishing this is through their corporate-wide, customer-focused Six Sigma initiative that began early in 1999.
Savings and Benefits
“We have completed Six Sigma projects in our distribution center operations, contracts management, accounts receivable, accounts payable, dock to dock, drop ship, and returns areas. Recent results for customers include:
- “Streamlined recall notification processes. Upon receipt of a recall notification from a manufacturer or the FDA, we now take a series of actions to notify customers and our DC network. FDA inspections at McKesson distribution centers prove that the new recall notification process meets or exceeds federal requirements.
- “Contracting process improvements. We have secured agreement from suppliers to accept responsibility for the timeliness and accuracy of contract pricing. This collaboration has yielded industry-leading accuracy and timely pricing for our valued customers, reducing operating costs across the supply chain.”
“As a result of systematic and strategic programs such as the Six Sigma approach we have implemented to improve our processes the past six years, our quality measures are much improved. Our customers tell us that McKesson has the best service in the industry. For example, in mid-April, we accepted an award from Wal-Mart as Supplier of the Year, the second time in four years we have been singled out for quality performance by a customer known for its demanding standards. In Fiscal 2005, we renewed all of our large accounts that were due to expire and we are beginning to see signs of sell margin stabilization.”
“We have used an approach called Six Sigma to analyze and improve our processes and quality. Over the past three years, Six Sigma has achieved $40 million in net operating savings in our Pharmaceutical Solutions segment. We are now expanding its application broadly across McKesson.”
“McKesson’s success depends ultimately on the loyalty and commitment of our customers and employees. We are using a series of Business Scorecards across the company to measure annual financial, customer, employee and operating process performance compared to pre-set objectives. Hundreds of employees trained in Six Sigma methodologies are applying them to drive process improvements that lower our costs while increasing quality for our customers. Across McKesson, we adhere to a set of principles to make decisions and guide our behavior, which we call “I CARE’’: Integrity, Customer-centered, Accountability, Respect and Excellence. Over the past two years, as a result of our focus on product quality and responsiveness, customer satisfaction has increased significantly, as measured by a number of independent, third party measures. Employee satisfaction has also increased. Even more importantly, employee turnover has been reduced and is now substantially lower than industry averages.”
2002 Letter to Stockholders
Articles and Links
Six Sigma, McKesson Canada
Simplicity is Key to Corporate Strategies, Drug Store News, July 19, 2004
John Hammergren Oral History, Computerworld Honors Foundation International Archives, April 6, 2004 (Google cache)
Six Sigma Is a Way of Life, Building frameworks for Six Sigma success – Case Studies – Quality Management Philosophy, Workforce, May 2003
Energized!, repertoire, Jun 2001