Speech Summaries

Kevin Smith Senior Vice President, Supply Chain & Logistics CVS/pharmacy

Connecting Supply And Demand

Kevin Smith, SVP, Supply Chain & Logistics, CVS/pharmacy, said that the CPG industry needs to embrace common technology to win in a Wal-Mart world, emphasizing that public exchanges allow CPG companies to leverage economies of scale and take advantage of joint industry knowledge. He also stated that collaboration has never been easier or more efficient, and collaborating with competition to benefit the industry can’t wait.

CVS relies on WWRE to help it drive dollars straight to the bottom line while improving business relationships; by employing reverse actions it has improved its supply chain and margin position.

How can we win in a Wal-Mart world? The keys to Wal-Mart's success are that it drives standards-based processes, has better communication with suppliers, and has a better store for its consumers. Until the industry adopts one standard, it is not going to be successful. It needs to take advantage of its joint knowledge and model the success of Wal-Mart. Winning requires that CPG companies evolve trade relationships to be more efficient, cost-effective, and growth-oriented.

Questions And Answers

Q: What initiatives do you have to help you increase your supply chain efficiencies?
A: CVS is a company that has grown through acquisition, and as we acquire new companies it takes a long time to swallow all of the components. From a logistics standpoint we are doing more in business with the same operating budget. Using new inventory management initiatives, last year we were able to take $400 million in inventory out of the distribution centers and drive appropriate inventory at stores.

Q: How has loyalty card data worked for you and why? Does it drive logistics decisions?
A: I would not say loyalty data directly drives logistics decisions, but it influences these decisions. There is a great mistrust with consumers and loyalty card data. We use the data to provide ExtraCare rewards and have seen an increase in loyalty and usage per transaction.

Q: There is a need for manufacturers and retailers to collaborate. Does a standard exist without Wal-Mart's approval?
A: We are willing to embrace UCCnet because Wal-Mart has directed suppliers to use it. It is more important for us to have a standard than to argue about whether UCC is the best one -- a common standard will help us in dealing with Wal-Mart.

Q: What savings have you achieved using WWRE?
A: Most of our savings have come through auctions and it is in the tens of millions of dollars -- more than we have invested.