Professional Documents
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CVS Case 2
CVS Case 2
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Total Annual Prescriptions estimated loss due to customers leaving in 2000 = 55mn
Equation 2: ➔ 5X + 40Y = 55
Y=0.54285 million heavy users → 8 % customers left heavy users.
X = 6.65715 million light users → 92 % customers left light users.
13 % of light users left due to service → 0.865 light users left due to service.
44% of heavy users left due to service → 0.238 heavy users left due to service.
55 million annual prescriptions lost resulted in 2.5 billion in lost revenue.
Estimate of 1 prescription = 45.45 $
Light users’ prescriptions lost / year due to service → 4.325 million.
Heavy users’ prescriptions lost/ year due to service → 9.52 million prescriptions.
→Total amount of prescriptions lost due to service = 13.825 million.
13.825 x 0.04545 (revenue/ prescription) = 0.628 billion.
→ Approximately 630 million dollars in lost revenue due to service.
PSI impact potential growth with improved service:
SERVICE IMPROVEMENT CVS REVENUE GROWTH
60% 377 million
70 % 440 million
80 % 500 million
90 % 565 million
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5a. Provide a simple graphic flowchart or workflow chart before any changes.
Drop
Script Pick up
Review by
Pharmacist
Put in Slot
Hard
Package
Stop
5b. What is the key problem from your perspective? Why does it persist? Using the 3
principle obstacles to upstream thinking discuss what were the factors potentially
preventing upstream approach before PSI? (refer to Figure 1 on page 3 of assignment
sheet).
The key problem is poor customer service and a week communication link between
customers and staff, whereby a bottleneck is seen at the pick-up window resulting in poor
service and disappointed customers. Obstacles that prevented upstream approach include
problem blindness defined by a situation where a problem is not acknowledged. This can be
due to the fact that CVS was seeing growth rates every year which masked losses due to
customer defection. Another obstacle to upstream efforts is lack of ownership, where staff
at drop off were not taking any responsibility and were not trying to solve the problems
encountered, since they were simply not responsible for these tasks and had no explanations
or qualifications to handle the situation.
5c. Please provide minimum of 1 and maximum of 3 potential causes for this problem
which can be linked to “barriers to upstream thinking and problem solving”? [i.e., what are
some of the reasons/situations for these causes].
Potential causes for this problem can be:
• Unmanned drop off and data entry which is done just an hour before, an insufficient
amount of time to handle every process.
• Insurance checking is done while customer wasn’t available and in case of a high bill
where the insurance doesn’t cover customer is not notified or contacted before script
is filled to proceed.
• A general poor communication channel to customer, whereby staff at drop off
window are not able to explain any problems (no refill, high bill, delays in
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prescription) that come up since they are not trained and are not qualified to give
any explanation to these problems.
Possible links to barriers of upstream thinking can be related to problem blindness where
they are not noticing there is a missing link to communicate with customers during the
fulfillment process. Another barrier to upstream thinking is the lack of ownership with the
staff at pick-up where they are underqualified and cannot take responsibility for problems
that were not part of their initial job qualifications resulting in poor service.
6. What exact changes do you recommend to CVS’s existing pharmacy fulfillment process:
6a. Provide a simple graphic flowchart or workflow chart of your changed process. Pick up
Involve
Customer Hard Package
Online Stop
Portal
6b. What is (are) the key change(s) to the previous process that helps overcome the
problem?
• Integrate data entry with drop off processes while customer is present at the
pharmacy. Customer information is entered into the system when they drop off their
prescription. Data such as DOB would be entered correctly and to prevent
unnecessary delays in the insurance check. Insurance checking can also be added to
this stage to make sure one party is available to solve this issue in real time. An online
portal can later be added to this stage as a long-term solution to register the same
information.
• IT systems can be used to include inventory information as well to tackle OOS issues
in the initial stage.
• Employ a specialist responsible to communicate with customers during fulfillment
process on any problems that may occur (refill / insurance check) and promptly
inform customers of any delays that may occur such as issues pending due to doctors
who have not yet responded, insurance issues, no refill allowed or low inventory.
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• Standardize a central database that links databases with that of third-party payers
(insurance, employers etc..), which would computerize the processes at each stage
minimizing errors and inaccuracies.
• Customer notified after packaging is completed to decrease waiting time at pick up.
• Staff more personnel at drop off and pick up to make sure there will always be
someone available at the window and drive through.
• Train staff and have them give explanations in case any issue comes up that is outside
of CVS’s control.
6c. Why you think this solution can work to eliminate or lower the problem? How are you
bringing in some of the “7 Questions” to answer this question.
Relating to the “7 Questions”, upstream efforts are implemented by identifying the
boundaries of the system and to what extent process improvement can be implemented due
to this system. With this solution the system is changed within the boundaries where process
improvement works on adjusting the fulfillment process to take away the bottleneck at the
pick-up window and resolve issues early on using upstream efforts. Part of the problem in
the existing process at CVS roots from the first stage of Data entry, where the lack of quality
processes at this stage result in customers becoming irritated when they leave the pickup
counter empty handed or with the wrong prescription. By integrating data entry and drop off
and including a prompt insurance check at drop off, common issues such as inconsistent
data, unauthorized refills, payment issues would be minimized. Having real time data,
notifying customers, and involving them in the process would result in minimizing queuing at
the pick-up station and help them understand the cause of pending pick-up dates. When
customers are informed of reasons for a delay in their prescription, they can manage their
expectations and get involved by following up with their doctors’ response to the pharmacy
or coordinating any missing information with their insurance company consequently
accelerating the whole process.
7. Focus on what type of Information Tech, if any, are required to implement your process
changes. Think about what capabilities are provided which are useful.
7a. What is the type IT (Function IT, Network IT and Enterprise IT) that is needed to enable
the change in process you are suggesting? Why?
The type of IT that is needed to enable the change in the process is Enterprise IT, such as ERP
(enterprise resource planning) system. This system relies on a top-down approach and is
implemented across all sites in an organization. It has the capability to redesign company
processes by standardizing workflow and has a key feature of uniformity that makes sure
processes are identical along all locations. This system would enable improvements in
communication with third party payers, suppliers, and doctors and ultimately with
customers which is the key missing link in the CVS previous process. Another key feature of
this software is the ability to monitor activities and evaluate performance which is crucial for
setting early warning systems.
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7b. Please link the type of IT you choose to one of “7 Questions”, i.e., why it would help
with one of the questions? How?
This type of IT system has a top-down approach so any interest in standardization has to be
led by the top. Since top management is aligned with these changes and IT at CVS is
considered part of the operations function, they are thus willing to fund and implement
these changes. EIT can monitor activities and evaluate performance, therefore it can be used
as a successful tool to evaluate change and to set early warning systems to make sure safety
is not compromised in any way while making sure no harm is created. These early warnings
systems/right predictors can be used to make sure the system is working seamlessly. For
example, EIT features allow the ability to give out alerts for risk factors such as “refill too
soon” or “no refill allowed”, incorrect or insufficient data, communication problems, or
anything that needs additional assistance early on which ultimately hastens the fulfillment
process, improving service consequently.
7c. What should you be monitoring after the change you suggested in 6b and 7a? (Please
provide reason how you are addressing at least one “key” question of the 7 Questions).
In order to monitor changes and measure success, it would be helpful to indicate the
number of heavy and light user defection which was previously analyzed using interviews
before PSI. Also, the number of problems arising at pickup can be measured by interviewing
staff after program implementation. EIT can also be used in this case to monitor activities
and evaluate the number of current customers at CVS and the revenue generated from these
users after a year.
8. Think about the key professional roles in the pharmacy.
8a. Which (single) role is HIGHLY likely to resist your proposed solution? Why?
Third party payers might have reservations in sharing their database in real time, but any
standardization linked to DUR checks and prescription accuracy, anything affecting customer
safety would result in resistance internally as well. EIT requires very strict involvement from
top management since any interest in standardization is to be led by the top. The key to
upstream thinking implementation here is to avoid no harm and make sure ERP system
integration will need to occur to ensure that new issues are not created.
8b. How would you tackle their potential resistance?
Careful monitoring of the new fulfillment procedures and the ERP system integration will
need to occur to ensure that new issues are not created and to make sure no harm is issued
especially related to safety and accurately filling out prescriptions. System implementation
should begin by working with the regional CVS representatives and representatives of
various third parties who interface with CVS to be sure the new system will add value to all
parties involved. It should be reassured that this system would enable improvements in
communication with third party payers, suppliers, and doctors and smoothen the process
without causing any harm.
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9. What kind of “leverage” are you going to use to implement the change you have
proposed taking into account barriers and questions?
Leverage is trying to find points of change in the process in order to implement process
improvement and maximize impact towards the outcome- customer satisfaction. The use of
intuitive data allows the problem to be represented clearly which shifts focus to the root of
the problem allowing maximum impact on process improvement. This would allow CVS to
have a share in the market power and become leaders in the retail pharmacy industry due to
excellent customer service. The new process should be implemented gradually to all major
locations to make sure customers and internal staff are aligned with the new changes to
maximize impact at these points of change.
10. Reflection question: Provide an account of why it took CVS so long to establish the PSI
to tackle customer defection problem although it was known before. HINT: Pick 1 or more
of 3 barriers. (Max 5 sentences.) You use below to start your thinking.
The main issue of why it took CVS so long to establish PSI and try to tackle the customer
defection problem is due to problem blindness, as CVS was in a position where they weren’t
sure what was going on. They were seeing high growth rates despite poor service which
masked and hid the problem until it became urgent. Poor service was a symptom of the
problem but not the actual root of the issue that PSI was trying to tackle. The depth of the
problem was not represented until PSI started gathering data and interviewing customers
and staff to understand the intensity of it and to get to the root and find solutions using
upstream efforts.
11. Upstream Thinking is a Highly Generic Framework and an Enabler of Using simple
Analytics and Numbers to unlock revenue increase or avoiding cost potentially. But the
CVS and Expedia cases show clearly this is not just a potential it is real! However, both
cases also demonstrate using Upstream Thinking concretizes what we mean by Business
Analytics – namely [analytics insights + business action = business impact]. Write up to 5
sentences on this: In other words, how does upstream thinking provides a link between
analytics insight and business action?
Business analytics surrounds the problem with data ─ it is the tools needed to gather data
analyze it and come up with meaningful solutions that increase effectiveness in the
workplace. Analytic insight here can help tackle the important problems rather than the
urgent by representing the magnitude of the problem, find out where these problems are
manifesting themselves at the root and highlight points of change. This way upstream efforts
can be initiated where these problems can be tackled before they happen, resulting in
maximum impact towards the objective outcome.