Excellent presentation at the ProMat Executive Forum from Kevin Smith, Sr. VP of Supply Chain and Logistics at drugstore giant CVS, on what the retailer is doing in both areas. It’s an impressive story.

CVS’ supply chain supports some 5300 retail stores, including those recently acquired with the acquisition of Eckard’s. As with an increasing number of supply chain leaders, especially in retail, Smith and his organization clearly understand their mission is to support the stores and make it easy and satisfying for shoppers to do business at CVS.

At the same time, they recognize a dollar of supply chain savings in “on-marginal” – meaning it goes directly to the bottom line. Smith also talked about striving for “the Wow! factor” – impressing customers, competitors and analysts with new supply chain innovations and performance.

In the front of the supply chain, CVS is doing collaborative planning with suppliers on 45% of its total store volume – an impressive number. The retailer and its suppliers have complete visibility to inventory and movement from PO to store shipment. It averages 5 inventory turns a year – best in class in its segment.

CVS has a complex distribution network of 13 DC’s comprising over 7 million square feet of space. Each DC has heavy piece pick volumes (70%), and Smith noted they have virtually every type of automation there is across those facilities. He said they’ve looked hard to see which types really deliver what levels of productivity. Store deliveries are 98.4% on time, plus or minus 15 minutes. That’s impressive.

The company also sees growing pressure in labor, real estate, and building costs. As a result, and with its experience in many forms of automation, it recently built its new DeXma DC in Ennis, TX. (DeXma coming from the Latin for “God from the machine,” which is actually a theatrical reference.)

At 400,000 square feet, the DC is only half the normal footprint of a typical CVS facility while serving the same number of stores. It makes extensive use of automation and a variety of other productivity tools.

For example, inbound product is de-boxed before being placed into storage to eliminate this task from the pick lines, and CVS is working with suppliers on new packaging concepts to eliminate this step altogether. There is automation support for all inbound materials, and there is extensive automation for order picking, where “goods to picker” technology has been adopted.

Most impressive to me, the logistics group has direct integration with each store’s planogram, allowing the DC to pick in aisle/stocking sequence for each store. This speeds goods to the shelf, increases store productivity, decreases clutter in the aisles, etc.

The facility manages this throughput with 400 operators, about a third less than the 600 usually required for a similar CVS DC. They are building another such facility in Florida. Partners were the engineering firm The Stellar Group, and automation vendor Witron.

Smith ended by commenting that too many companies just do what has worked for them or others in the past, and that more need to push the envelope to get to the next level.

Do you think we’ll see more distribution facilities like CVS’s DeXma project? Do we rely too much on the tried and true in logistics – or do pioneers just get arrows in the back? Let us know your thoughts.