Walgreens

Changing the Game in Prescription Drugs: Walgreens and AmerisourceBergen

Posted on by spr1323amueller

In March of this year, Walgreens and AmerisourceBergen announced a partnership to take over part of Walgreens prescription drug distribution. This partnership will give both companies a leverage in size and help them better compete in the already large industry. President Obama’s Affordable Care Act will extend health care coverage to a lot of people who previously did not have it. For the pharmaceutical industry, this means a lot, and companies will be fighting to keep prices low. “To win, companies must capture enough new volume to offset the effect of pricing pressure on profit margins” (Cahill).

The news of this merger is very relevant to Operations Management, because of the changes it will mean for Walgreens supply chain. Previously, Walgreens had used Cardinal Health Inc. for some of their distribution needs, but not nearly to the extent of the new AmerisourceBergen partnership. However, the contract Walgreens had with Cardinal is up in August, and they will be using this opportunity to change how they run their distribution. For Cardinal, their stock price has already been falling.

In a quote from Crain’s Chicago Business, author Joe Cahill sums up what this means for Walgreens supply chain: ”Walgreen’s agreement to buy $28 billion worth of drugs annually from AmerisourceBergen will pump more volume through the wholesaler’s distribution network, boosting asset utilization and profitability. At the same time, wholesale costs should fall as the bulked-up middleman leans on suppliers.”

One of the main reasons for the merger, besides the cost-cutting, is their new-found access to specialty drugs. The company that has been known for their bulk prescriptions, is now able to sell drugs for, “cancer, rheumatoid arthritis and multiple sclerosis, which have higher profit margins but are also more expensive to keep on hand” (Humer and Wohl). Previously, Walgreens was not able to supply all of these drugs because their delivery trucks came from Cardinal only once a week. Now Walgreeens will be receiving daily deliveries from AmerisourceBergen (Japsen).

This partnership does not only mean new things for Walgreens, but AmerisourceBergen as well. This contract will be worth $400 billion over the ten years that it is in effect. It is becoming increasingly more difficult for small companies to compete in this economy for this type of industry. This partnership really allows Amerisource Bergen to focus their efforts on, “generic and branded prescription drugs around the world” (Japsen). Being able to concentrate their efforts in specific areas, allows AmerisourceBergen for further cost-cutting

Thoughts for discussion:

Do you think rival CVS/Caremark will begin to change or rethink their distribution after this news?

What does this mean for other pharmaceutical companies? Are the industry giants, the only real players now?

Will other companies take note of Walgreens change in supply change?

Sources: http://www.chicagobusiness.com/article/20130323/ISSUE10/303239984/the-one-word-reason-for-walgreens-amerisourcebergen-deal#ixzz2RocEDyrl

http://www.forbes.com/sites/brucejapsen/2013/03/19/walgreens-amerisourcebergen-play-creates-worlds-largest-drug-buyer/

http://www.reuters.com/article/2013/03/20/us-amerisourcebergen-walgreens-idUSBRE92I0EP20130320

Nine Retailers with the WORST Customer Service

Posted on by spr1331bcardenas

 

In today’s changing world the product is no longer the most important thing in the shopping process, people are beginning to care more about customer satisfaction, especially in the retail industry. Although its true that customer satisfaction is improving, not all retailers are keeping up with today’s expectations, according to the American Customer Satisfaction Index (ACSI).

Brick and mortar are still the highest rated retailers; however e-commerce is beginning to excel as well. On the negative side, traditional retailers are the ones that are receiving the most negative assessments.

Although many traditional retailers remain with good or average scores, especially the ones that compete with online shops.

In the latest ACSI study, the average for retail companies was 76.6 of a 100-point scale in 2012. With the exception of Internet retail, which is considered as e-commerce for ACSI. This Industry got an 82 score, and from the nine worst rated retailers from ACSI scores, there was just one online retailer.

But even an “average” score, can be considered bad for business, because customer expectations are very important for a company’s score. However customers are lowering their expectations. They’re not actually looking for better shopping experience in the traditional retailers, and for internet retail is the other way around, customers are expecting more of them.

The businesses that failed to impress customers last year have been having a difficult time for many years. As we learned in class, many companies go under because they failed to understand what the customer really wanted. For example, Safeway has been struggling with customer satisfaction for the past 10 years.

For other companies underperforming is a relatively new obstacle, like the case of Netflix, that outperformed average for four years and in 2009 was rated the top retailers, but in the past two years the Internet video retailer has been considered the worst Internet rated company.

Although traditional retailers are struggling to keep customers satisfied, they still have the majority of the sales, but its probable that if Internet retailers continue outperforming in customer satisfaction (compared to traditional retailers) they will gain brick and mortar market share eventually.

 

Nine retailers with worst customer service:

9. Walgreens– Health/ Personal care

• Customer satisfaction score: 76

• 12-month revenue: $70.79 billion

• One-yr. share price change: 22.42%

8. TJX Companies — retail

• Customer satisfaction score: 76

• 12-month revenue: $25.88 billion

• One-yr. share price change: 20.18%

7. Gap — Retail

• Customer satisfaction score: 76

• 12-month revenue: $15.65 billion

• One-yr. share price change: 45.84%

6. Supervalu — supermarkets

• Customer satisfaction score: 76

• 12-month revenue: $34.77 billion

• One-yr. share price change: -35.60%

5. Sears — department Store

• Customer satisfaction score: 75

• 12-month revenue: $39.85 billion

• One-yr. share price change: -34.60%

4. CVS– health/personal care

• Customer satisfaction score: 75

• 12-month revenue: $123.13 billion

• One-yr. share price change: 15.95%

3. Safeway –– supermarkets

• Customer satisfaction score: 75

• 12-month revenue: $44.21 billion

• One-yr. share price change: 13.60%

2. Netflix – e-commerce

• Customer satisfaction score: 75

• 12-month revenue: $3.61 billion

• One-yr. share price change: 70.80%

1. Wal-Mart — department store

• Customer satisfaction score: 71

• 12-month revenue: $469.16 billion

• One-yr. share price change: 22.65%

 

Sources Cited:

http://www.usatoday.com/story/money/business/2013/03/16/9-retailers-worst-customer-service/1991519/

http://www.theacsi.org/acsi-results/acsi-results