CVS 2004 Annual Report Download - page 12

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Another productivity gain goes live.
“A penny saved is a penny earned,” wrote Ben Franklin. CVS has taken
that credo to heart as we look for new and innovative ways to improve
our cost structure. That, in turn, allows us to sell our products at
attractive retail prices. Take our new, state-of-the-art distribution center
in Ennis, Texas. The first facility of its kind in North America, it
requires half the space of a conventional distribution center and needs
one-third fewer people to run it. Yet, its storage and retrieval systems
are capable of servicing the same volume and number of stores as a
conventional facility twice its size. The Ennis facility even boosts in-
store productivity because it selects and ships products customized to
the layout of each destination store. That can significantly reduce the
time it takes to get products from the delivery truck to store shelves.
When our new Central Florida distribution center opens in late 2006,
it will incorporate the same technology.
At the store level, the EPIC system has improved pharmacy workflow
and cut costs, while our Assisted Inventory Management (AIM)system
has taken the guesswork out of inventory tracking. AIM has helped
improve our in-stock position and steadily increase our inventory
productivity. Since 2001, we’ve used a combination of technologies to
reduce shrink levels by more than 50 percent. For example, our VIPER
software provides tools for analyzing front-store and pharmacy
transactions. Sorting through 3 million transactions a day, it can quickly
identify risk trends. We’ve brought VIPER and all our systems to the
newly acquired Eckerd stores. With the acquired stores’ initially higher
shrink levels and cost structure, we see a significant opportunity for
operating margin improvement.
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