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Drug store retailer focuses on inventory productivity and fulfillment strategies
Leo Hartnett, VP of efficient consumer response of CVS, the $20 billion drug store chain of 4,100 stores, shared insights, experiences and predictions about the dynamics of supply-chain management with Chain Store Age.
CSA: Let's focus on the front of the store, rather than the pharmacy, and begin with a discussion of CVS' distribution practices.
Hartnett: CVS is configured east of the Mississippi, both in terms of stores and logistics. We have 10 DCs (distribution centers) which range in size from 230,000 sq. ft. to 980,000 sq. ft. Seven of these resulted from our acquisitions activity over the last four years. As you can imagine, at the time of acquisition these facilities operated differently than our core CVS facilities.
CSA: Will you bring all of the DCs to the same level?
Hartnett: Yes, part of the strategy is to evaluate the base-level systems that we run for material handling and warehouse management. We operate with the best processes and practices from the combined network. Our larger DCs are pretty close in operational methodology. However, each of the DCs will serve a slightly different role; some will service all categories while others will only be servicing core categories and cross-docking other categories.
CSA: What are the average volumes moving through your DCs?
Hartnett: In terms of the total network, we shipped more than 2 billion pieces of product out of the DCs last year, and that includes the pharmacy items.
CSA: How quickly does merchandise move through a DC?
Hartnett: That's difficult to answer without giving away the store. The overwhelming majority of our inventory is at the store level, being presented to customers. Clearly, the greatest opportunity for more efficient inventory management is at the store level.
CSA: On store deliveries, does inventory move from the truck to the shelf?
Hartnett: There is some backroom inventory, but 85% to 90% of the inventory exists on the floor in the stores. Our philosophy is to maximize the retail space in each store and replenish as needed on a regular cycle.
CSA: Do you ever envision a day when you'll be free of backroom stocks?
Hartnett: Completely free is an...