Wyeth Resolves To Aid Its Distributors

Pharmaceutical manufacturers and the distributors that sell their products to doctors and pharmacies always have had somewhat of a love-hate relationship. Distributors want more information from the manufacturers about the status of orders and returns, as well as what causes hiccups in the supply chain. Manufacturers are reluctant to let distribution customers see under the hood, opting instead to react to complaints as they come in.

That's changing fast at pharmaceutical maker Wyeth, thanks to efforts such as customer scorecards it's delivering to distributors. By combining reporting data on order-fill rates, delivery performance, and shipper metrics, and delivering it to customers as an easy-to-read spreadsheet, the $17.4 billion-a-year drugmaker has begun to demystify the supply chain. The result: Wyeth and its distributors have moved closer to the distribution nirvana of just-in-time delivery.

"You can guarantee delivery to pharmacies if you have large inventory, but [distributors] want to maintain the minimum inventory needed to achieve their target service levels," says Wyeth CIO Bruce Fadem. "In an ideal world, we'd like to achieve just-in-time delivery, but it's a difficult thing to do. Theoretically, it's possible to get there. Practically, you're constantly working to move in that direction."

The scorecards are a significant step. Wyeth creates them using the business-intelligence capabilities of SAP's Business Information Warehouse to crunch data fed to it each night from SAP's R/3 enterprise-resource-planning software, which the company recently deployed across its U.S. business units. The system pulls transactional data it receives each day via EDI from shipping partners to provide a more comprehensive view of the supply chain. The business warehouse then assembles the data into the tables that make up the scorecards, which are sent via EDI to Wyeth's distributors.

Because distributors like AmerisourceBergen, Cardinal Health, and McKesson prefer EDI to, say, a secure extranet site, the scorecards they receive are static. In order to drill down into more detail, Wyeth holds regular meetings with the distributors to go over the numbers and troubleshoot.

The scorecards provide unprecedented information to customers. "It's really opened a whole new efficiency and effectiveness corridor for us," says John Phelan, senior director of trade national accounts at Wyeth. "Before, we'd be putting fires out all the time. Now, we're getting together with customers quarterly and going over the scorecards. We're diagnosing the relationship proactively."

If a report indicates an unexpected rise in the average time shippers take to get orders to Wyeth's distributors, rather than spending time tracking down the cause, Wyeth uses the scorecard to quickly look deeper into the data and ensure the proper reaction. If it discovers that one heavily delayed order skewed the average, then there's no reason for concern. But if it finds that one shipper is throwing the numbers off, then it knows a change may be needed. "It really becomes a diagnostic report for us in terms of how we're doing by our customers," Phelan says.

The measurement of how well shippers handle products was among the metrics distributors said they wanted to use to measure Wyeth's success as a manufacturing partner. They also wanted stats on how well Wyeth was doing with filling orders, how accurately those orders were filled, how often deliveries were coming within various time frames, and the rate of returns, along with comprehensive day-by-day summaries of the orders the distributors were placing.

At a meeting a few years ago to hammer out a contract that would govern Wyeth's inventory relationships with distributors, Phelan recalls that providing that sort of detailed data was considered a pie-in-the-sky goal that hinged on the R/3 rollout. Then, as last year came to a close, the technology was in place, and the hoped-for scorecards were a reality, not to mention a big hit. Phelan says, "Most of the responses have been, 'Wow, this is something we don't get from any other pharmaceutical company.'"

Illustration By Paul Watson

Continue to the sidebar:
Fadem Gets Wyeth To Rethink IT

Continue to Biotechnology & Pharmaceuticals:
Getting A Dose Of Cost Cutting

Return to the 2005 InformationWeek 500 homepage