SUPPLY CHAIN SECURITY

REPORT 4

Dr. Benito Garza

TMGT 4342
Prepared by:
Jennifer Dowell
Ashley Galvan
Ana Molina
Roger Rodriguez
Alberto Vela

December 13, 2016

Background Information
Walgreens was founded in 1901 by Charles R Walgreen in Chicago,
Illinois as one drug store. The pharmacy was located in a prosperous Chicago
area, but that wasnt enough to keep the business from struggling. The
challenge Walgreens faced was the store layout, selection and pricing of
merchandise, and service. It was not long before Charles Walgreens came
up with innovated ideas to attract customers and delivery a warm ambiance
in the store to keep their customers. Walgreens changed the ways they
carried out customer service. When a customer called in to place an order,
the employee always repeated the customers name, address, and items
ordered. This allowed the other employees to prepare and complete the
order to provide the customers with accurate and speedy service.
By 1913, Walgreens had grown to four stores in Chicagos south side.
During the alcohol prohibition, Walgreens found success in dispensing
prescription whiskey. This prompted expansion into other areas of country.
With its introduction of malted milkshake the company established ice cream
manufacturing plants. This led way to a substantial growth in sales,
estimating $1.2 million by the mid-1920s. By then Walgreens had expanded
into Minnesota, Missouri, and Wisconsin. By 1930, Walgreens had grown to
a total of 397 stores and raking in $4 million dollars in annual sales. Today,
Walgreens is the second largest pharmacy chain in the United States only
behind CVS Health. Today Walgreens operates 8,177 stores in all 50 states,
the District of Columbia, Puerto Rico, and US Virgin Islands. The sheer size of
this company makes for a very interesting case for supply chain
management.
Walgreens has been the recipient of many awards in supply chain
management. In 2012, Walgreens received the US Environmental Protection
Agency 2012 SmartWay Excellence Award. This award recognized
Walgreens as an industry leader in freight supply chain efficiency,
performance, and environmental sustainability. The use of optimized routes
to be more efficient and creating more effective ways to decrease empty
miles (this is when there was no product was being hauled), the company

has decreased its carbon footprint by nearly 15%. This is due in part that
every truck is optimized to carry product. Walgreen has adopted RFID
systems at their distribution centers. In 2008, it announced it had integrated
RFID with its shipping, warehouse management and material handling
operations at its Anderson, South Carolina distribution center. The RFIDbased capabilities at that Walgreens DC include applications which verify
that shipping totes contain the correct items for the order, that all totes
required for the order are present, and that totes are loaded onto the truck in
the proper order. RFID integration allows for a 20% growth in productivity
when compared to the distribution centers not utilizing this technology. To
prevent controlled substance (narcotics) diversion at its distribution centers,
Walgreens uses robotic machines that can count medication and store it by
lot numbers before they are shipped to retail stores. These machines are not
allowed to be off by one tablet, capsule, caplet etc. because the federal
government is intolerant to missing pills Bar code scanning is also utilized
to ship and receive products to ensure it is the right product.

Supply Chain
Walgreens operates in nearly 8,200 retail locations in the United
States, and filled approximately 894 million prescriptions on a 30-day
adjusted base as of 2015 and with more than 13,000 retail locations
worldwide. Walgreens services include retail, specialty, infusion, medical
facility and mail service, along with respiratory services. These services
improve health outcomes and lower costs for payers including employers,
managed care organizations, health systems, pharmacy benefit managers
and the public. Walgreen's corporate structure is made up of 10 separate
divisions with multiple career opportunities in each division.
The marketing division handles all product and brand marketing for the
company. E-Commerce, IT and engineering maintain all hardware and
software, along with developing new processes to advance Walgreen's for
the future. The facilities and real estate team help locate store fronts and
building sites for expansion for future Walgreen locations. Other corporate
departments include the Walgreen's corporate management team, finance,
legal, human resources, merchandizing and procurement, sales and strategy
and business development.
The distribution division at Walgreen's is made up of five departments
and operates 19 distribution centers that distribute products to over 8,200
retail locations. The distribution management team role is to reports to the
corporate office. Opportunities at the distribution centers include
management positions, team members, maintenance positions and human
resources positions. Distribution centers handle all of their own finances,
human resources, inventory and productivity. In store organization consists of
a variety of positions report to management at the local level. Managers then
report to corporate headquarters concerning inventory, sales and other
areas. Local managers hire their own local team members to fill a variety of
positions at the in-store level. Possible team member positions include
beauty clerk, store team lead, photo specialists, service clerks and
management trainee positions. Internships are also available at the in-store
level.

The heart of Walgreen's business has always been its pharmacy which
what was envisioned by Charles R. Walgreen Sr. when he opened his first
store in Chicago at the turn of the century. There are many pharmacy
opportunities which include pharmacist positions, pharmacy technician
positions and pharmacy student programs. Students pursuing a pharmacy
degree can take advantage of in-store internships at the local level or a
variety of corporate internships that provide alternative career paths in the
pharmacy industry. Corporate pharmacy students may have the opportunity
to participate in case studies and other projects alongside multidisciplinary
interns. At the end Walgreens objective is to build a highly efficient and
effective supply chain relationship with each and every vendor. The thorough
understanding of Walgreen policies, processes and procedures of ordering,
receiving, payment, data sharing and shipping to distribution centers and
retail stores is crucial to their goal of supply chain profit maximization.
Walgreens is highly respected for its use of the high-tech approach to
information technology and customer service within the consumer product
goods and healthcare industries. Because of its rapid record growth and
sophistication of tis supply chain optimization, Walgreens has taken on a
project to begin the synchronization of product data with its suppliers.
Through the use of Global Data Synchronization Network, Walgreens is
improving its operating efficiencies and accuracy of the data represented in
its product catalogs. The Global Data Synchronization Network (GDSN) is an
Internet-based end-to-end integration system, allowing trading partners
(Manufacturers, Distributors, Wholesalers, Retailers, Food Service operators
and Healthcare organizations) to securely access and exchange product
information in real-time. Trading partners always have the latest information
in their systems, and any changes made to one company's database are
automatically and immediately provided to all of the other companies who
do business with them. The GDSN uses the GS1 system based upon the
Global Trade Identification Number (GTIN). (What is Global Data
Synchronization (GDS)? n.d) 1WorldSync was selected by Walgreens to

serve as their GDSN-certified data pool and has begun to require its suppliers
to use data synchronization to transmit their item data. By streamlining
product data through the GDSN, Walgreens can leverage accurate,
consistent product and company information throughout all levels of the
supply chain. Walgreens ultimate goal is to synchronize all mandatory GDSN
item attributes.
As part of their supply chain management, Walgreens requires all its
vendors to sign up with their SupplierNet vendor website. The objective of
this website is to build a highly efficient and effective supply chain
relationship with each and every vendor. There are five key initiatives to a
successful Walgreen Supply Chain relationship. They are as follows: 1.
Electronic trading enablement 2. Item and Catalog Management 3. Vendor
profile management 4. Vendor shipping compliance 5. Accounts payable
management. They expect each vendor to have a thorough understanding of
their policies, processes, and procedures of ordering, receiving, payment,
data sharing and shipping to distribution centers as wells as stores.
Walgreens currently operates 22 distribution centers within the United
States. Currently, Walgreens is beginning to implement radio frequency
identification technology (RFID) to track products inside their distribution
centers that serve thousands of stores. Walgreens has partnered with RFID
systems integrator software supplier, Blue Vector, to tag 170,000 assets at a
South Caroline distribution center. The plastic tubs and cages that carry
cases of products to shipping dock doors was the primary focus of the
implementation. As each container passes by readers, information about the
contents are synced with Walgreens warehouse system to ensure that
product quantities are accurate, that they are at the correct dock door, and
that the products are being put on the right trucks as wells as the correct
order for unloading. Any errors that the system detects will alert the
employees via monitors near dock doors. In an interview with John Beans,
VP of Blue Vector, he stated that the system keeps Walgreens from spending
time and money handling products shipped to the wrong store, and it

eliminates paperwork and bar-code scanning from the loading process.

Implementation of this system has been taking to the Connecticut
distribution center and the plans to outfit four more out of its US distribution
centers.
In March 2013, Walgreens and partner Alliance Boots signed a 10-year
deal with AmerisourceBergen that includes daily drug distribution. This
enabled Walgreen to increase its sale of pricey specialty drugs. Walgreens
has distributed more than 80 percent of its own drugs but over time most if
not all of that distribution has been taken over by AmerisourceBergen.
AmerisourceBergens network will be used by Walgreens to start daily
distribution of most or all generics. Previously, Walgreens used its
employees, transportation, and warehouse to ship on a weekly basis and
used Cardinal Health on a daily basis for some drugs. Most of the
prescription Walgreens sells now are bulk, low-profit prescriptions. By
combining its distribution in the US and Europe with AmerisourceBergen,
Walgreens hopes that they will be able to negotiate better prices for those
bulk drugs. Alliance Boots and AmerisourceBergen are experts in
pharmaceutical supply chain distribution, Walgreens CEO Greg Wasson said
on a conference call. We are very good at it, but the combination of what
they both do to improve our supply chain, take that off of our hands, and
improve our service levels is really the opportunity that we are excited
about. (Walgreens: Strategic Evolution n.d)
A website titled Ethical Consumer search the Walgreens website in
November 2014 for the companys supply chain management policy and was
unable to locate it. They found that in the section of Social Responsibility
there was mention of supplier but placed a heavy emphasis of diversity
rather than protecting workers rights at a supplier level. A New vendor
questionnaire was found which included a request for a list of suppliers
manufacture. However, there was no documentation which assessed
working conditions at current suppliers. The only reference found that
related to working conditions the companys responsibilities under the

California Transparency in Supply Chains Act 2010. Based on the results of

risk assessment evaluations, Walgreen engages third party audit firms to
conduct audits to evaluate compliance with these requirements. The audits
are conducted on both an unannounced and announced basis. Walgreen
employees directly responsible for supply chain management in the
California market are required to complete Vendor Responsibility Program
training which includes awareness of human trafficking and slavery risks in
the supply chain of products and ways to mitigate those risks. Walgreen
maintains accountability standards and procedures for any employee,
contractor and/or vendor who is determined to have failed to meet these
requirements." However, no clear commitment to audit all first and some
second tier suppliers could be found. Nor did the company disclose an audit
schedule or results (Walgreens Boots Alliance - Supply Chain Management
November 7, 2014) Overall, the company received Ethical Consumer's worst
rating in this category for supply chain management policy.

Assurance Issues
Walgreens faces assurance issues, just like any other pharmacy, which
are medication errors, drug label troubles, and company polices contributing
to pharmacy errors. In regards to medication errors: to eradicate patient
errors have chains developing assurance checklists that employees are
required to use. Rite Aid has a seven-point quality assurance list that must
be adhered to when pharmacists fill scripts. The checklist includes confirming
the patient's name, address, date of birth, and the prescribers name. There
is also a point that requires the medication name and strength to be checked
when the drug is pulled from the shelf. In regards to drug label troubles:
Walgreen Co. scrambled to notify thousands of customers who had their
prescriptions filled during a recent system crash, because errors might have
left their labels unreadable. A failure of the system for processing
medications brought all 8,200 Walgreen pharmacies in the U.S. to a standstill
on Aug. 22. The system was restored later that day, but the chain spent
more than a week chasing down patients who had filled prescriptions during
that time. Walgreens discovered that some labels were misprinted during a
quality assurance check after the system disruption. In regards to company
policies can contribute to pharmacy errors: A USA Today investigation found
evidence that corporate operating policies such as allowing or encouraging
pharmacists to fill hundreds of prescriptions daily and rewarding fast work
can contribute to errors. Too many prescriptions, too few pharmacists. Some
stores fill so many prescriptions that pharmacists work long shifts with few
breaks
Security Issues
Walgreens has been named as a top performing leader for freight
supply chain efficiency and environmental performance. Walgreens
pharmacies have the objective to build an efficient and effective supply chain
relationship with their vendors. Walgreens pharmacies not only focus on
being a drug store, but also offers mail service, home care and specialty
pharmacy services through its Walgreens Health Services division.
Therefore, their supply chain is very extensive and complex. Walgreens is

the nations largest drugstore chain. Walgreens provides nearly 6 million

customers the most convenient, multichannel access to consumer goods and
services and trusted, cost-effective pharmacy, health and wellness services
and advice in communities across America. Walgreens scope of pharmacy
services includes retail, specialty, infusion, medical facility and mail service,
along with respiratory services. These services improve health outcomes and
lower costs for payers including employers, managed care organizations,
health systems, pharmacy benefit managers and the public sector. The
company operates 7,944 drugstores in all 50 states, the District of Columbia
and Puerto Rico. Take Care Health Systems is a Walgreens subsidiary that is
the largest and most comprehensive manager of worksite health and
wellness centers and in-store convenient care clinics, with more than 700
locations throughout the country.
With a great company, comes great responsibility. That is why the
organization uses Smartway, program that helps companies advance supply
chain sustainability by measuring, benchmarking, and freight transportation
efficiency. The company is running at a very good pace incorporating
technology at the maximum level both in the store and along the supply
chains. The organization counts with successful implementation of the Radio
Frequency Identification (RFID) monitoring the display impacts in its store
chains, along with the digital lab facility that is provided in eighty percent of
the company's stores. This is of great benefit because it means that the
supply chain management is doing well; however, threats are everywhere
and there is no exception for Walgreens to suffer them. Even though the
organization has a great control method for the supply chain; supply chain
management needs to stay alert about any threats and make sure that there
is trusted employees working it. Another key step for a successful supply
chain is to have trusted suppliers that meet the requirements the
organization is asking for.

External Analysis
External elements are factors that can negatively or positively impact
the business beyond its control. All businesses are vulnerable to both the
internal and external factors. There are several external elements that affect
the business, such as economic, government, sociocultural, and competitors.
Economic trends can impact the company by causing unemployment or by
generating a booming business. The government can change the regulations
and law on how businesses should operate, such as taxes. This impacts the
businesses supply chain structure by how they handle employment taxes,
health and safety, and quality control regulations. Another major impact is
the international supply trade that can cause positive or negative challenges.
The sociocultural factor includes lifestyle trends which varies depending on
the location of the business. This can also include factors such as income,
ages of customers in the surrounding areas, and consumer preference.
Competition with other businesses alike can also have an impact of the
business. There may be other factors, not mentioned, that have an impact of
any business which is why it is important for businesses to be aware of their
SWOT analysis. The SWOT analysis is beneficial to any business, at any point
in time. It also allows the business to identify strengths, weakness,
opportunities, and threats that influence or impact the business, and make
changes that would positively impact the business. Conducting an external
analysis is essential for the operation of a business. It allows the business to
evaluate and analyze the environment to better operate and compete with
competition. One way to overcome negative external forces is to
communicate with employees to eliminate room for rumors or conflicting
stories. To eliminate competitor threats the business must build a loyal
relationship with their customers and ensure that they improve their
customer satisfaction by focusing on the customers needs.

Internal Analysis
Unlike external factors, the organization has control over the internal
factors. It is important to recognize potential opportunities and threats
outside company operations. However, managing the strengths of internal
operations is key to business success. Management forms an essential part
of the supply chain and, of course, the supply chain seems affected by
management. The type of management style that the organization has may
indeed make a difference.
Another factor that may affect the supply chain is the effectiveness of
the communication level within the organization. Supply chain consists of
relying in one level of the supply chain with the other. Miscommunication in
between the supply chain may greatly affect the flow and effectiveness of
such. It is very important that communication channels are clear and
straightforward.
For a departmental store such as Walgreens, it is important that an
inventory control is kept. Since the organization counts with multiple
departments; and each of them have seasonal items, items with expiration
dates, etc., it is important to keep a good control of such. A good inventory
control will also help by preventing employees of abusing the system and to
detect losses.
For the supply chain of Walgreens, it is also important to keep quality
under control. It is understood that Walgreens has its own brand products
and for such products Walgreens wants to deliver the best of it to its
consumers. Quality control starts at the beginning of the supply chain and
must be kept throughout in order to be able to deliver its best.

Recommendations
1.) Walgreens could make mail order pharmacy part of its core business.
With its large network of physical locations, immense economies of
scale, and strong brand name, it would be a formidable competitor.
Risks include taking revenue from its core business, diluting the
Walgreens brand, and technological implementation difficulties.
2.) Walgreens could directly challenge the mail order pharmacies. By
offering good service and maintaining a strong brand name, the
Company could reinforce the Walgreens message.
3.) Walgreens should save on expensive nurse and physicians assistant
wages by operating the Clinics with more selective hours, focusing on
lunch breaks and after school hours when most individuals are likely to
arrive.
4.) Walgreens has a very strong balance sheet and can afford to take on
the calculated risk of experimenting with pharmacy remodeling to
reflect the new purpose that physical locations will soon serve:
consultation, outstanding service, and in some cases walk-in care.
5.) Actively encourage health plan sponsors, such as employers, to offer
their beneficiaries pharmacy networks that include Walgreens.

References
Brady, Kevin McCoy and Erik. Deseret News. 12 02 2008. News Article. 05 11
2016.
Levy, Sandra. Drug Topics. 09 07 2007. Web Article. 05 11 2016.
McKay, Peter Z. UF Business Library. 29 10 2014. Web Article. 05 11 2016.
Orvis, Mark Wagner and Wayne. Strategy + Business. 27 08 2013. Web
Article. 05 11 2016.
Ziobro, Paul. The Wall Street Journal . 4 09 2014. Web Article. 05 11 2016.
Diamond, D. (2013, February 06). Is Walgreens the Future? Retrieved from
The Healthcare Blog: http://thehealthcareblog.com/blog/2013/02/06/what-abig-pharmacy-chains-moves-tell-us-about-what-the-future-may-look-likeunder-obamacare/
Panagiotakakos, V. (2012, October 9). General News. Retrieved from
Walgreens: http://news.walgreens.com/press-releases/generalnews/walgreens-named-top-performer-leader-for-freight-supply-chainefficiency-and-environmental-performance.htm
Shenkman, D. (2016, July 05). How they Did it, Walgreens Talent Strategy.
Retrieved from Supply Chain Management:
http://www.scmr.com/article/how_they_did_it_walgreens_talent_strategy
Walgreens Deploying RFID In Distribution Centers - InformationWeek. (n.d.).
Retrieved from http://www.informationweek.com/mobile/mobiledevices/walgreens-deploying-rfid-in-distribution-centers/d/d-id/1072016
Walgreens: Strategic Evolution1 - Babson College. (n.d.). Retrieved
November 20, 2016, from http://www.babson.edu/executiveeducation/thought-leadership/retailing/Documents/walgreens-strategicevolution.pdf
Walgreens - 1WorldSync. (n.d.). Retrieved November 20, 2016, from
http://www.1worldsync.com/customer-page/walgreens/