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Cardinal Health’s Perfect Implementation

By August 7, 2023Uncategorized

Cardinal Health’s senior vice president of global logistics, said of their implementation of the Kinaxis’ supply chain planning (SCP) solution, “I was scared! I put my name on the line.” He added, “we needed results in the first year.” Pete Bennett, and his co-presenter, Mary Byrne, the vice president of supply and demand planning, spoke during a presentation at Kinaxis’ user conference Kinexions. They had every right to be worried. A previous supply planning implementation, of an SCP system from a different supplier, had not gone well.

When it comes to supply chain planning, the right technology solution can make a big impact on a business’ agility and resilience. Cardinal Health, a global manufacturer and distributor of medical, surgical and laboratory products, is focused on continuous improvement of service. Global logistics leaders wanted to improve service levels, lower costs, and fortify Cardinal Health’s supply chain planning process. The company made a bold decision to implement the Kinaxis Rapid Response advanced supply chain planning (SCP) solution with its AI-based technology platform. While change is always risky, leaders were confident that this decision would propel the business forward.

The Cardinal Health Supply Chain

Cardinal Health’s medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products. This segment also distributes a broad range of non-Cardinal branded products and provides supply chain services to hospitals, clinics, and other healthcare providers in North America. The medical segment’s supply chain consists of 61 North American distribution centers and 27 global manufacturing plants. 94% of US and Canadian healthcare systems use Cardinal Health in one capacity or another.

Supply Planning Implementations are Just Harder

The previous SCP implementation had not gone well. It was an IT-led implementation where a planning model was developed, the solution implemented, and then planners – who had not been sufficiently prepared and trained – were expected to use a system significantly different from the legacy systems they were familiar with.

Implementing supply planning solutions is hard. As with any major technology change, it can be challenging to balance business requirements and IT schedules all while protecting the customer experience. Ideally, you wouldn’t want your customer to even know that you implemented a system change. Indicators of success are critical.

If you are implementing a warehouse management system, for example, you scan something, you put it away, you store items, you replenish, you build pallets. The system either works or it doesn’t. A consultant knows immediately if things are not working, and the solution can be quickly fixed. However, when implementing an advanced supply planning solution, the signals are not always immediately clear. Many companies have negative impacts on customer service levels during the first five months of implementing an advanced supply planning solution, Mr. Bennett explained. The team at Cardinal Health was determined that this would not be the case for their customers. They had set a goal of zero disruptions to customers for the entire implementation. This was a bold and risky move.

With planning systems, there is a delay between cause and effect. Companies typically expect that inventory levels will drop and service levels improve at the end of the first month. If they don’t, there is deemed to be something wrong with the planning system. Company leadership, planners and customers begin to doubt the system. Teams will then revert back to their former tools, often times using Excel.

Live and Learn

Based on hard won learnings, Mr. Bennett and Ms. Byrne put together an almost perfect implementation. This was accomplished despite a difficult IT environment – the company had 28 different systems that needed to be integrated into their planning system.

The key success factors were:

A Dedicated project Team for both IT and Business – One of the most unique elements of the Cardinal Health team’s approach was in setting up a dedicated implementation team with peer-to-peer matched roles from IT and from the business. This was one of the toughest decisions they made as a leadership team. As Mr. Bennett explained, “I literally pulled my top talent out of the day-to-day planning team and my IT business partner did the same. We knew we wouldn’t be successful unless this was their only focus.” This is the penultimate example of leadership commitment. It is incredibly rare. But Ms. Byrne and Mr. Bennett saw it as fundamental to the success of the project.

Count them! Two Centers of Excellence – A center of excellence (CoE) is a team that provides leadership, best practices, research, support and training in a focus area. Cardinal Health developed two COEs. They already had a Supply Planning COE. This is not uncommon among multinationals who have implemented SCP. This COE was tasked with improving sales & operations planning (S&OP) maturity and supporting other strategic business process initiatives and best practices.

The leadership team added a second COE to lead the implementation, design and deliver training, act as the “Genius Bar” for Kinaxis technology questions, and generate future strategy for technology success with the new platform. This was unique. Mr. Bennett and Ms. Byrne listed this as the second-most fundamental success factor.

Efficient Hypercare Transition – Hypercare support did not occur all at once. Hypercare in most IT projects is the period of time immediately following a system Go Live where an elevated level of support is available. For a considerable period in what the Cardinal Health team called a “double launch”, planners used both their legacy planning system and the new Rapid Response planning application. It was not until all planners were comfortable with the output from the system that planners exited the legacy systems (Cardinal Health had no less than five different systems across multiple teams and business) and switched solely to the Kinaxis RapidResponse application.

Planner Metrics – They implemented adoption metrics on how often planners were using the planning application or if they were experiencing any pain points in the system. If a planner stopped using the application, or used it less, that was apparent to supply chain executives and could be addressed and solved.

Intensive Training – Training started a full year before the go live. There was both in-person and on-line training, all complemented by continued virtual training sessions and frequent skills assessments. They did not assume that just because planners had received training, they were comfortable with the system. Senior planners would identify planners that seemed to be struggling with the new system. If necessary, a trainer would fly to the site and provide one-on-one training.

The implementation team also surveyed planners’ level of confidence throughout the training. It was not until 96% of the planners said they were comfortable with the system that they went live.

The Results

It was important to have quick wins. The company got them. Within two months of implementation, the service level had improved several percentage points. Inventory decreased almost exactly as RapidResponse predicted it would. The planning team was able to optimize inventory movement across the network.

The results differed by division. But over time, service levels improved by up to 10% while inventory was reduced by over 20%. The backlog was reduced to less than 17% of revenues. And all of those occurred while the customer experience was protected during the transition.

Taking risks can result in success for both a company’s operations and their customers. And certainly Mr. Bennett and Ms. Byrne took a risk when they admitted they had learned how to execute an almost perfect implementation based on hard-won experience. I applaud them for their honesty. People in the audience really sat up and listened to what they had to say.

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