CVS Aims to Lower Inventory $1 Billion by Improving Performance

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CVS Aims to Lower Inventory $1 Billion by Improving Performance

CVS is aiming to lower its inventory level by $1 billion through performance improvements, part of several streamlining initiatives being undertaken by the drugstore retailer, which operates more than 7,100 stores.

Supply chain technology will play a large role in CVS' inventory reduction efforts, according to Larry Merlo, currently COO and president of CVS Pharmacy-Retail. Merlo will move into the CEO role at CVS on March 1 following the retirement of current chairman and CEO Thomas Ryan.

"Our plan focuses on three key areas of improvement across the supply chain: around people, process, technology," said Merlo during a recent conference call discussing the company's fourth-quarter financial results. "We've completed the people piece with new leadership as well as alignment across the supply chain to include incentives of those involved.

"From a technology perspective, we have all the tools in place to include our warehouse management system, where we now have a single view across all of our distribution centers," Merlo added. "And from a process point of view, we're working today to implement changes around ordering methodology with outside suppliers as well as replenishment logic in our distribution system."

CVS is also aligning more of its customer-facing operations with the help of its Consumer Engagement Engine, which completed its rollout to CVS stores in November 2010.

The Consumer Engagement Engine is "a critical component of our integrated offerings now and into the future," said Merlo. For example, the Engine rollout means that Patient Care, a retail adherence initiative that uses a variety of interactions to help more than 30 million patients remain on their medication therapy, is now integrated into CVS' pharmacy system. "This now allows interventions to be seamlessly sent to our entire fleet of stores electronically," said Merlo. "This connectivity enables our pharmacists to more effectively and efficiently conduct these patient interventions, which is a true differentiator for us."

For related content see: CVS Builds Customer Personalization into Pharmacists' Workflow