Pharmaceutical distributor cuts day of safety stock

Canada's Medis increases shipping productivity and inventory control accuracy with barcode-based automated warehouse

Scattered across Canada from St. Johns, Newfoundland, on the east coast to Vancouver, BC, on the west coast are 14 warehouses for Medis Health & Pharmaceutical Services, Inc., Canada’s leading pharmaceutical distributor. Until last year, warehouse tracking of the pharmaceutical and related items it shipped across the nation was primarily a manual chore. However, over an 18-month period, each warehouse is now being converted to an electronic tracking program. By the time all 14 are automated, Medis expects to eliminate a whole day of safety stock.

"With a $4 billion company, that is a lot of stock," says Martin Losier, vice president, information technology and CIO at Medis. "We have close to 30,000 SKUs, so efficiency and accuracy are important."

Medis is a wholly owned subsidiary of McKesson HBOC and Canada's largest distributor of pharmaceutical, health and beauty aides with headquarters in Montreal. Its warehouses ship products to Canadian pharmacies, hospitals and healthcare institutions.

"We must manage all inventory movement properly to service our customers efficiently and quickly. We have to make sure we can track all goods and quantities from when we receive them in the warehouse to when we ship them to the customer," says Losier. With warehouses ranging in size from 50,000 square feet to 200,000 square feet, that is a challenge.

A new radio frequency (RF) system meets that challenge by electronically recording the movement of bar coded items on conveyors, in totes and in cases on pallets. Each movement is sent via RF communication or hardwire to the Medis proprietary warehouse management system (WMS) residing on an IBM AS/400. As a result, the WMS knows at any moment exactly what was received and what purchase orders were fulfilled.

Immediate benefits

Even at the half point mark in warehouse conversion, Medis saw benefits, says Losier. Among the first were less "scratch" incidents where a needed product was not in the warehouse as expected. The increased accuracy from bar code scanning and the up-to-the-minute information from real-time data collection improved the record keeping information, so warehouse workers weren't sent on wild goose chases.

Efficiency gains, even from a simple printer location change, were soon evident, too. "Before, someone had to collect the pick sheets from the computer room, then start putting stock into the totes. Now the pick sheets, created on a small, lightweight IBM laser printer, are at the starting lines. We easily moved them, even to the mezzanine. The previous printers were way too big to move out of the computer room. As a result, we start our production a half hour sooner," says Losier. "This makes us much quicker at fulfillment than ever before."

Mistakes and discrepancies are rare with the RF system, but if they do occur, it's quickly spotted--much sooner than a batch system does, says Losier. For example, scanning products at receiving ensures that the correct amount is recorded and it is immediately compared with the purchase order. However, if a quantity is key entered as 10 instead of 100, the immediate crosscheck with the purchase order alerts the worker of the discrepancy. The worker can then verify or change the quantity.

"Now, corrections are made much more quickly," says Losier. "We are nearly 99.9% accurate on received goods."

Simple speed of receiving is another system advantage. "Tons of little packs come into the receiving area," says Losier. Previously, each one was manually checked with a receiving document, key entered into the warehouse management program and then matched with the purchase order to identify discrepancies. Now, all that is done simultaneously as received products are scanned.

Medis also reduced the need for emergency replenishments during the picking process. Since receiving and put-away is done more quickly, more products are shelved when picking starts.

Overall, says Mario DiBattista, director of network and technology at Medis, "the RF system has brought many productivity quality improvements. It has increased the accuracy of the orders because stock is where it is supposed to be, Sstock location is accurately recorded, and therefore less products shorts occur.what's picked and shipped is verified as complete before sending. As a result, the number and subsequent cost of returns is reduced. That's a significant advantage. We definitely gained what we wanted in the accuracy and the benefits from that. The system greatly improves both inventory management and customer order fulfillment."

At one point in the development process, Medis had to choose between speed and accuracy. With the new system, it's replenishment process takes a bit longer than before because of the number of scans done to track products in and out, onto pallets or skids, to temporary locations and then to replenishment. "It was a trade-off between quality and speed. We had to choose which one to emphasize more. We decided quality and we haven’t regretted our decision," says Losier.

The accuracy gains for orders picked and shipped were well worth it, he says. "People have a tendency to underestimate the cost of quality, of accurate shipments. If you send out the wrong product, it is returned. Now you have to receive it again, put it away, assure credit and call the customer. Returns are a big thing, running into many millions of dollars."

The tools and integrators

Montreal-based Scanpak Inc., a system integrator and label supplier, installed the entire RF-based tracking system with assistance from Positive ID Wholesale (, a wholesale distributor of SATO printers and product tracking hardware tools, including RF systems and bar code scanners.

"The Scanpak team provided the implementation expertise, including a special password-restricted, Scanpak-monitored Web site at "The special Scanpak password-restricted Web site they established to report problems was quite helpful. It really helps ." says DiBattista.

The Web site log reduces multiple phone calls and helps Scanpak provides hardware replacements within 24 hours, says Joe Pace, director of operations at Scanpak.

The Scanpak-designed system features tiny wearable scanners (Symbol Technologies' WSS1040) worn on the back of the hand of warehouse workers for most of the product tracking. Other workers use hand-held integrated scanner/terminals (Symbol's 6840s radio frequency gun style and LS2106 hand-held scanner). Overhead omnidirectional scanners (Metrologic IS8500) read bar codes on totes as they move on conveyors to shipping. All but these hardwired overhead units communicate to the warehouse management software program via Symbol's Spectrum 24 Network radio frequency system. The overhead units are wired to the warehouse management system via an Ethernet network for real-time tracking. All scanned data is therefore immediately entered into the proprietary warehouse management system.

To make the system work smoothly, bar codes are used on pick lists, shelves, totes and cases. Medis uses SATO America’s heavy-duty printers (M-8400Rve and CL608e) for tote and shipping labels, as well as product price tickets. The SATO printers even print on the wax-coated, ID Warehouse shelf labels that are scanned when products are put away or picked. Bar code label design is managed by T.L. Ashford's AS/400 label design software.

The challenges

Every installation faces some challenges, and for this one there were three: project size, printer communication compatibility and jumping from manual to automated operations. Teamwork and training resolved all of the issues.

"The biggest challenge was going from fairly manual to partially automated and wireless all at the same time. We weren't just bridging a gap, but going from caveman and fire to an all-electric stove," says Jeff Klossner of Positive ID Wholesale. "But due to the cooperation of Scanpak and Medis, the integration was fairly easy."

Medis used a swat team to train users, test the equipment online and support the workers going online. Members of each distribution center's swat team included three levels of learning. Some people came from centers already using the new system. Others came from the center installing the program and still others came from the next place scheduled to install the system, says Scanpak project manager Michelle Baechler, based at Medis headquarters. Once the swat team had satisfactorily tested the equipment, it began training employees in blocks based on their tasks.

"The training gave people with fear of the change a chance to feel a little more confident," says Baechler. "This training was definitely a Medis strength."

Training was treated as a valuable, essential part of the implementation. It helped increase support of the system, reduced errors and cut down learning curve time.

Medis and its system integrators faced the project size issue by starting out slowly, using a Web site for trouble shooting issues, doing the install over several months and with continuous communications vital in a teamwork environment.

Warehouses: unfriendly to printers

The teamwork paid off, for example, when questions arose about the brand of printer. Scanpak brought in samples for a test run, which lead Medis to select SATO America's thermal-transfer printers. Since labeled totes are recycled back to Medis, the label adhesive had to be strong enough to keep the label attached until it returned to Medis, yet capable of releasing from the tote when the container was reused. A printer needed to accept the adhesive labels without causing the system to get gummed up.

In a warehouse environment, printer operation is a challenge. "We try to keep it as clean as possible, but with a lot of case goods, it tends to be dusty," says DiBattista. That dust can hamper printer operation over time. "When printers get caked on with dust, there's always the possibility for dust to get stuck on the labels," says Joe Pace, director of operations at Scanpak. That affects adhesion and the ability to scan.

"But for the Medis environment, the SATO M8400Rve printer is a little workhorse. It's internal Ethernet connection makes it impervious to dirt and damage. Medis is going to be impressed with the SATO printers, " says Pace.

DiBattista already is. "They just churn out case labels all night long while the price ticket printers are going full speed for part of the night. Yes, we need to keep the heads clean, but by treating them right, they should last a long time."

The heavy-duty peel and present capabilities of the printers were a definite plus to Medis, but their ability to communicate with legacy Medis software was the clincher. Other brands could not meet that challenge.

Medis uses the SATO M8400Rve to print shipping /address labels and the CL608e for bin labels. Scanpak pulled in the two fast, rugged printers even before they were on the market, says Pace, because they were ideal for the warehouse-labeling environment.

Once the label is applied, the tote goes onto the conveyor system. Then overhead scanners track how many and which order they go to, alerting the WMS that this order is on its way to shipping. It automates the entire order closing process, says DiBattista.

Success comes from enterprise-wide support

"The success of such an enterprise-wide and smooth implementation is to have a team of people coming from all the levels of specialties and knowledge," says Baechler. Medis made sure the project involved people from all levels, "from the picker to engineers to the head office."

As a result of the successful installations, Medis is increasing each warehouse's processing volume. It has increased receiving, put-away and replenishment accuracy to nearly 99.9%, shortened turnaround, cut shipment errors, reduced product returns and reduced safety stock.

Medis was acutely aware that accuracy and speed for coast-to-coast shipping must start in its own backyard. It made sure it could accomplish their mission from the ground up with an enterprise-wide team supporting a bar-coded, real-time data tracking system.

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