Cardinal Health Invests In An Advanced Visibility Solution

With the onset of the Covid-19 pandemic, Cardinal Health made the decision they needed enhanced visibility into PPE shipments as demand for these products surged. Since then, FourKites has become a key steppingstone in their journey to build a next generation control tower. In an interview, Sean Halligan, the senior vice president of pharmaceutical operations at Cardinal Health, described how they are thinking about this journey.

Headquartered in Dublin, Ohio, Cardinal Health, Inc.

CAH
is a distributor of pharmaceuticals, a global manufacturer and distributor of medical and laboratory products, and a provider of performance and data solutions for healthcare facilities. The company, with revenues of over $150 billion, is massive. According to their most recent annual report, a strategic goal for the company includes enhancing their global supply chain. The company projected making capital expenditures in this fiscal year of between $400 million and $450 million; these investments will be primarily for information technology and infrastructure.

Cardinal Health reports revenues in two segments, the pharmaceutical segment and the medical segment, and the FourKites real-time visibility solution has been deployed to both. The pharma segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products to retailers. Their two biggest retail customers – CVS and OptumRx, account for 40% of Cardinal’s revenues. But they distribute products to customers of all sizes including independent drug stores, hospitals, doctor’s offices, nursing homes, and other healthcare providers.

Cardinal Health sources products globally and distributes those pharmaceutical and medical supplies in the United States through their network of distribution centers. The pharmaceutical segment alone makes more than 30,000 U.S. domestic deliveries every day. Cardinal picks, packs, and ships orders the next day across the country.

Across their inbound and outbound supply chains the goods are transported by air, ocean, rail, truckload, less-than-truckload, parcel, and even couriers. Cardinal Health wanted real-time visibility across all those modes. “Better visibility is something we always aspired to,” Mr. Halligan stated. “There have been fast advances in the last several years in this area.” Cardinal concluded that FourKites had the most advanced visibility solution and the best product roadmap. The FourKites solution did not offer visibility to couriers, but the visibility provider agreed to codevelop this with Cardinal Health.

Brian Rice, their chief information officer, stated in the annual report that “data is critical to everything we do as a company, and to our future growth. We are making significant IT investments to build our data capabilities and using innovative new technologies like artificial intelligence and predictive analytics to monitor trends and develop new solutions.” That statement, made before the massive distributor began working with FourKites, describes the visibility solution.

While the goal is real-time visibility, that is in part mode dependent. The visibility the FourKites solution can provide is dependent on the signals it gets from transportation assets. Truckload and less-than-truckload visibility is good at Cardinal. Cardinal has trailers that are equipped with GPS units that report on the trailer’s location to FourKites every 15 minutes. Similarly, Cardinal seeks to work with carriers that are willing to equip the trailers with GPS. Cardinal has chosen not to work with some carriers that could not meet their standards for “data readiness.” Planes can also provide near real-time visibility.

“Rail is improving,” Mr. Halligan said. There is visibility to the goods on the train. But when goods are unloaded at a train ramp, visibility is more problematic. “We can’t rely on the average dwell” at a ramp. “The average dwell is all over the place. It depends on the hub and which carrier is moving it.”

Ocean is like rail, there is decent visibility to goods as they move across the ocean. But then the goods arrive at a port, the time it takes to dock the ship, unload the ship, and move product in and out of a terminal is where the predictability breaks down. Picking the right ocean carriers and terminals to work with is an “ever evolving chess board,” Mr. Halligan explained. 

Last mile modes are also not as reliable as truckload (TL) or less-than-truckload (LTL). Delivery vans often don’t come equipped with GPS; drivers are then asked to use mobile handheld devices with GPS chips to provide the visibility. Because driver compliance can be an issue, visibility from handheld devices is not as robust as from GPS or electronic logging devices. “But the visibility from handhelds is better than it was. We are accepting this at this point in time,” Mr. Halligan said.

Because of the number of transportation partners Cardinal works with, the large number of different systems used, and the disparate types of data generated, the value of a network that can consolidate and visualize this data is significant. Cardinal is working with over 70 TL/LTL carriers and hundreds of carriers across the other modes. FourKites gathers all that data, consolidates it, normalizes it, and displays user friendly views into where all the shipments are.

This is a win-win project. It is good for Cardinal. There will be fewer time-consuming calls to customer service representatives asking where a shipment is. Further, the distributor will save money based on fuller trucks and trucks that travel fewer miles. Transportation efficiencies, of course, are also good for the environment.

But the visibility provides clear value to Cardinal’s customers. During winter storm Uri, which disrupted transportation across the South-Central US, a hospital in New Orleans was nervously waiting for an urgently needed shipment. A Cardinal Health team member could track the progress the truck was making every quarter hour and provide near real-time updates to the customer about their urgent delivery.  

Retail customers that have greater assurance of when goods will arrive will be able to operate more efficiently. More predictable arrivals will translate to higher in-stock positions. Better labor planning is also facilitated. For example, in a small drug store there are often only three people on duty – the pharmacist, the technician, and a person at the cash register. The technician might be able to help patients for a longer period when they know more precisely how long before their shipment may arrive. This efficiency can help improve the patient experience for Cardinal’s pharmacy customers.  

Right now, the FourKites solution provides visibility to Cardinal’s operational teams. Next, the visibility will be extended to customer service representatives. Eventually, customers will be able to get self-service visibility. The definition of what a “customer” is, is posed to expand from a business to a consumer. The pandemic has accelerated a trend to consumers having goods delivered to their homes; Cardinal wants to be a partner in providing these last mile services.

In terms of predictive ETAs, “we are starting to go there,” Mr. Halligan explained. Cardinal needs to use FourKites to build up the historical shipment data. “For example, we have started to use FourKites data to study our most interrupted delivery routes and the circumstances around those disruptions. This data will help us predict disruption in the future and allow us to proactively navigate routes around those disruptions.” Knowing this can allow those shipments to be more efficiently routed, or more time can be allotted to those shipments.

Cardinal is working towards a control tower, “that is our aspiration.” The control tower journey will include visibility to inventory at rest and in motion, predictive ETAs, a data lake, a canonical data model, and a planning engine. Cardinal has started building the foundation of their data model, of which Fourkites is a component as well as their planning solution. More needs to be learned. But gathering robust and trusted visibility data is the logical place to begin the control tower journey.

Mr. Halligan summed up this project by saying, “that is our aspiration, a cognitive self-healing network. I love projects that provide benefits across the end-to-end supply chain and for our customers.”