How CVS Health is Rising to the Omnichannel Challenge

The global ‘factory reset’ triggered by the pandemic across both society and the world of enterprise affected some businesses more than others.

Most organisations experienced a significant increase in ecommerce operations, but those operating in the healthcare sector were more deeply affected still.

One such company is US-based CVS Health, the leading health solutions company, with more than 300,000 purpose-driven colleagues who work every day to build a world of health around every consumer, improving outcomes, lowering costs and broadening access to quality care.

From providing health and prescription drug insurance, to helping patients access their medicines, to providing high-quality care and clinical programmes, CVS Health connects the dots for people across their health needs.

Since the start of the pandemic, CVS Health has delivered an estimated 62 million COVID-19 test kits and 92 million vaccines (and counting). It also had to furnish the US population with consumer products that were in such stratospherically high demand their supply-and-demand bell curves resembled K2 line drawings. Sanitising gel, for example.

The pandemic turbo-charged e-commerce and direct-to-consumer delivery for CVS Pharmacy, part of the Pharmacy and Consumer Wellness business unit of CVS Health, in particular, and yet it wasn’t long before the company realised consumers wanted much more. It marked a sea change for the company; things would never be the same again. CVS would not have it any other way.

“We fared pretty well,” says Mario Rivera SVP & Chief Supply Chain and Logistics Officer for CVS Health, recalling those tumultuous times. ”But the pandemic highlighted how we had to treat our supply chain and logistics network differently. It showed us we had to make select investments to ensure that whenever the next challenge comes, we're ready to face that challenge head on.”

“Our Supply Chain and Logistics organisation is critical to ensuring that our retail pharmacies continue to be a trusted community health and wellness destination,” added Mario. “We are focused on setting our store network up for success by having the speed and flexibility to replenish the right inventory at the right time and the right place. Our consumers can choose to shop in our stores or online. If they shop online, they can choose to pick up in store or get a delivery right to their home.”

“Our strategy has been to stabilise, modernise and optimise our supply chain and logistics to support our customers and colleagues. People want omnichannel convenience,” says Mario, who is responsible for developing and executing CVS Health’s supply chain network transformation strategy. “And this is what we have been working very hard to deliver.”

85% of US population lives within 10 miles of a CVS Pharmacy 

With an extensive network that places a CVS Pharmacy within easy reach of most Americans, the company faces a unique set of challenges in maintaining its vast distribution system. An estimated 85% of the US population lives within 10 miles of a CVS Pharmacy. CVS has to deliver products to more than 9,000 stores and pharmacies across the country. 

“It’s a fairly complex supply chain,” says Mario, lodging a claim for Understatement of the Year, because around 5 million consumers visit a CVS Health location every day, and it has more than 60 million unique digital customers.

“Our supply chain and logistics organisation powers this network,” he says. “It’s the engine that makes sure all of our stores and consumers have the products they need, when they need them.”

On the ground, Mario and his team move products from CVS vendors into its supply chain and logistics network, through its distribution centres, and then into its stores and pharmacies. The final part of the supply chain puzzle is the last-mile delivery of products to consumers’ homes. 

“There’s a lot of direct-to consumer logistics,” he says. “Both through our fulfilment centre network and via our stores across the country.”

This would be a sizable challenge for any chief supply chain and logistics officer, but Mario says it is made even more complex by “the speed of change the entire industry is going through”. 

“Consumers are more and more asking for multiple options on how to get their products delivered, so we are in a very omnichannel world,” he explains. 

“People want to buy from the comfort of their home, but some want to pick up in-store and some want home delivery,” says Mario. “Others need to drive to a store or pharmacy, for face-to-face interactions with our wonderful store colleagues, pharmacists and technicians”. 

The speed and the velocity required to satisfy these hungry customers is “an evolving challenge for us”, he says.

Omnichannel is reshaping the CVS Health supply chain 

Omnichannel is reshaping the CVS Health supply chain in sectors-specific ways, too, with the company offering flexible services across the portfolio of health care products and services.

Explaining this is CVS Health VP, Network Strategy & Engineering, Dan May, who says that omnichannel has added a new dimension of offerings CVS can deliver to customers.

“As part of their health insurance benefits, many consumers are given either a monthly, quarterly, or annual allotment that can be spent on over-the-counter health products.”

“We now have a really nice fulfilment model whereby we ship these products by home delivery through four of our fulfilment centres.” 

“We also offer same-day delivery services where CVS items and prescriptions can be delivered in as little as three hours.”

He adds: “We have a significant store footprint that we can leverage. The combination of our fulfilment centres and stores is allowing best-in-class service to all customers.” 

Of course, embracing omnichannel in this way is a huge challenge, and not just technologically, Mario points out.

“We're making some impactful investments,” he says, “but really, it starts with making sure you have the right team in place with the right skillset. Having the right talent, and ensuring the team is placed in the right area, is critical for success.”

This, he stresses, was “step number one” for CVS Health when, three years ago, the organisation set out on the transformation journey it is currently mid-way through. 

And empowering its people to transform health care is a guiding principle at CVS Health – something it describes as ‘Heart at Work behaviours’.

“These principles enable our teams to deliver on our strategy,” Mario explains. “They guide how we conduct ourselves every day. First, we take care of our colleagues, because this allows us to take care of our customers wherever they are on their health care journey. Within all this there is of course a lot of hard work and passion.”

CVS Health strives to secure the right people and processes

Completing the company’s formula for success is its drive to identify, and embed, the right processes.

“This gives you the predictability, reliability and stability in your operations, upon which you can then layer in technology,” Mario says. 

The investments in technology have been made in select parts of the CVS Health network to ensure the company has speed of service not only to its stores, but also to ensure it can deliver to consumers directly at home – as Mario describes: “Reaching our consumers when and where they need us”.

The colossal personnel and technology omnichannel challenges that CVS Health is meeting have not happened in a vacuum; its partner ecosystem has also played a pivotal role. 

“Our strategy with SC&L investments in technology is to leverage best in class, proven solutions” says Dan May.

“Selecting the right partner is key at the beginning,” says Mario’s colleague, Jamie Tatum, who is Lead Director, Supply Chain Project Execution, and whose team plans, organises and manages supply chain technology investments.

It was Dan and Jamie who led implementation of the company’s automation at its New Jersey Distribution Center, working closely with warehouse robot technology specialist, AutoStore.

Its New Jersey facility is a key building within the company’s northeast network, and acts as a central warehouse. Most of its cosmetics and beauty products are serviced out of the centre, and are shipped to other distribution centres, which then ship onto stores. 

“We realised there was a unique opportunity to make that operation more efficient, and better able to support more volume,” Jamie says. 

After conducting an extensive search to identify the right technology to deliver on the goals of CVS Health, Jamie and his team opted for intralogistics and warehouse automation company Bastian Solutions to implement the technology.

“They have a proven track record in this area,” he says. “They've installed more AutoStores in North America than any other company. With Bastian’s help, we selected technology that really offered unique features that would make our operation more efficient, and were the first to integrate AutoStore and Tompkins Robotics.”

“Our AutoStore and Tompkins Robotics solutions have exceeded our business case, driving both productivity and quality. We are currently in phase two and expanding our AutoStore and Tompkins Robotics systems in New Jersey to distribute additional categories to the Northeast,” said Dan.

Jamie adds that Bastian “understood it's about creating simplicity, and how people and processes and technology complement one another”.

He continues: “Technology can’t be successful without the right people and processes. It’s never just about the technology but rather, it’s about listening to colleagues and customers, and understanding what the problems are.” 

Innovating across the network

The innovation doesn’t end there, for CVS Health is also modernising other distribution centres across its network. 

“Over the past two years we've rolled out pick-to-voice with Lucas Systems,” Jamie reveals. “We’ve really modernised the picking process, which is now becoming intuitive, being driven by a pick-to-voice that can speak multiple languages to our colleagues, who interact via a touchscreen. It's easy to learn and it's been eagerly adopted by our colleagues.” 

Dan, Jamie, Mario and their supply chain colleagues have had to rise to numerous and sizable challenges in recent years, and their success as a team is something Mario feels is “very special”.

“The most rewarding aspect of my role is the interactions with my team,” he says. “They’re a wonderful group of people – incredibly smart, very talented and hardworking, and we have a lot of fun!” 

He adds: “It’s pretty amazing to see the work my colleagues in supply chain and logistics put in, day in, day out, to make sure our stores get the product they need, when they need it, and that consumers are able to buy those products in the channel of their preference.”

“I’ve been fortunate to lead many great teams throughout my career and the CVS Health team is the best one so far.”