McKesson Partners with IBM to Cut GHG Emissions

by | Nov 16, 2010

McKesson is using IBM’s new supply chain software, aimed at reducing the pharmaceutical company’s carbon dioxide emissions and drug distribution costs.

The Web-based analytics tool, the Supply Chain Sustainability Management Solution (SCSM), is expected to help McKesson determine the environmental and financial impacts of its supply chain activities.

The company provides pharmaceuticals to more than 40,000 health locations in the United States. According to the U.S. Environmental Protection Agency, transportation is the second largest contributor to the nation’s CO2 emissions.

The new technology was developed in collaboration with IBM Global Business Services and IBM Research mathematicians. The system uses 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.

The sustainability module uses detailed data on all the energy consuming equipment McKesson has in its warehousing and transportation operations, including fork lifts, 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.

An example cited by IBM includes McKesson using the system to determine the value of keeping pharmaceuticals that need to be kept cold, such as insulin and 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 these products in all its warehouses.

Based on the comparisons the system provides recommendations to allow for increased efficiency with minimal environmental impact, says IBM.

The SCSM solution also can identify the best ways to bring pharmaceutical products into McKesson’s distribution network and manage inventory and customer deliveries in a way that minimizes both McKesson’s carbon footprint and its costs. It could, for example, 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.

Key features of the SCSM offering include evaluating site locations based on CO2 emissions, transportation, warehousing and inventory costs; determining the cost of serving a customer based on carbon dioxide emissions and dollars and cents; weighing the costs and benefits of alternative transportation modes, and predicting the impact of using solar panels on a warehouse, or using alternative fuels on a given route.

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

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

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