MAN 5501 individual case report

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Dominique Washington MAN 5501 Individual Case Report Pharmacy Service Improvement at CVS Facts of the Case CVS competes in the pharmaceutical industry, which is an industry that focuses on keeping customers safe and watching out for their health. In this industry there must be efficiency within their systems to properly service customers safely. This industry has a big customer base, as many people rely heavily on their health being sustained through pharmacies. Throughout this industry, more and more pharmacy customers have third parties that help pay for prescriptions as well. When it comes to CVS (customer value store) specifically, they first opened in Massachusetts in 1963, and by 2002 was the one of the biggest retail drugstores. CVS had over 4,000 stores by then and revenue of about $24.2 billion. CVS began seeing problems with their customer service, whilst the business grew as quickly as the industry average. CVS decided to launch a PSI team, and staffed it with executives, managers, a store tech, business director, and those in the store operations field. Throughout this analysis the PSI team focused on many aspects of the fulfillment process that is entailed at a CVS pharmacy including: drop-off, data entry, production, waiting bins, quality assurance, pickup, and issued faced by the technician staffing CVS prescription pickup windows. CVS had 29.5 million pharmacy members at the start of 2000, in a year bringing revenue to $20 billion and during that year about 7.2 million regular pharmacy customers left CVS. During the year 2000, the total volume of filled prescriptions grew also, bringing 8.5 million new regular members. Those regular customers that left in 2000 took about 55 million in annual prescriptions, which is equivalent to $2.5 billion in revenue. The number of regular customers that left CVS,

left for various reasons; some customers were light users, some were heavy users. The PSI team that worked with CVS noted that light users had 5 scripts per year and were most likely to defect because of the location of the pharmacy. Heavy users had an average of 40 scripts per year, and most likely to leave because of poor service. The PSI team believed having a better overall process in pharmacies could prevent from 60-90% of customer defections, due to poor service. Approximately one in four scripts had a problem throughout the fulfillment process, and 16% that had problems were unresolved at pickup. 40% of customers voiced a complaint during a single eight-hour shift; the tech would also be asked questions that they were not qualified to answer and would be verbally abused. Those employees working pickup were the least trained, dealt with angry customers, and were the lowest paid, resulting in many employees leaving in less than a year on the job. The PSI team found that 27% of scripts encountered a big issue at some point in the process. Qualitative and Quantitative Analysis/Hard Conclusions When it comes to analyzing CVS pharmacy, first it is important to begin with the key success factors. CVS as mentioned in the key facts section, grew as quickly as the industry average, profiting $20 billion within just one year. Their key success factor here is that customers believe no other pharmacy would be much different, and CVS grew so quickly that many locations could serve to help the 29.5 million pharmacy members. With customers believing that it is difficult to switch from one pharmacy to another, CVS can be comfortable with knowing customers will help them to generate profit. Along with that, CVS has increased annually in net revenue, meaning they are successfully growing annually. When it comes to CVS and their weaknesses, there are several of them; one in four scripts had problems, 40% of

customers voice a complaint during eight-hour shift, and within the fulfillment process there were many issues. The main issues within the fulfillment process lied within the data entry, production, and quality assurance. With data entry the key problems were the drug utilization review (DUR), otherwise known as an automated way for the system to check against other prescriptions in the database and making sure the drug was appropriate. The DUR would stop the fulfillment process if problems came about. Another aspect for problems within the data entry step was the insurance check. The insurance check came after the DUR, which most customers had their prescriptions paid for by a third party, paying only a copay fee. But, if there is an insurance check on a drug that has not been seen previously on a patients record, there can be a problem, whether with the doctor or payor. With this insurance check, patients will typically have a much longer wait time. When it comes to production, the medicine to fill the script must be counted and verified by the technicians, and if this is incorrect, can cause a great deal of issues. For quality assurance, pharmacists must review each script, which is a pharmacists most important task, because if checked incorrectly, causes many issues for the pharmacy. Qualitative Qualitatively if CVS continues to defect customers annually, they will continually lose in total annual revenue and regular customers. A hard conclusion from this qualitatively is that losing many regular customers annually, will hurt CVS in terms of word-of-mouth. As discussed, word-of-mouth is the most important aspect of advertising/marketing, and with so many regular customers leaving, this could affect the number of new customers coming to CVS. Along

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with that it will be hard to implement a new process to CVS’ fulfillment process, due to the great amount of CVS pharmacies nationwide. CVS’ current fulfillment process not sustainable for long term customers, and CVS will continue to see customers leave if this process is not fixed or modified. It is also important to note that employees are not happy working for CVS, as a lot leave in less than a year. From that information, CVS is not properly catering to their workers. Finally, Technicians deal with customers who did not get what they were expecting, have further questions, and work the window, whom are the least paid, least trained, and dealing with angry customers. It is important to conclude from this that these technicians be well-trained, versed in pharmacy knowledge, and can answer and deal with customers properly. A vital piece of CVS’ fulfillment process is the pickup, and if this process is not up to a customers’ standards, they will not return. Quantitative Again, CVS had about $20 billion in total revenue in the year 2000 with 29.5 members as well. Approximately 7.2 million regular customers left but 8.5 million new regular members joined. Those who left took about 55 million in annual prescriptions, which is equivalent to $2.5 billion added to CVS’ revenue. CVS’ PSI team believed that 60-90% of their customer defections could be prevented based upon the fulfillment process, and the numbers support that fully. About one in four scripts experienced a problem at some point in the process and 16% of all the prescriptions that had issues were still not resolved at pickup. 40% of customers voiced a complaint for one eight-hour shift, stats also showing 27% of scripts encountered a substantial problem at some point in the process. If there was a problem regarding data entry and “no refill allowed,” scripts needed anywhere from 20 minutes to three days for a resolved issue, and the

average time for this was one day. When it came to a DUR hard stop, meaning the fill would fully come to a stop, there was a hard stop for 20% of all prescriptions; over 90% resolved by pharmacists, without involving the doctor who prescribed. Insurance checks encountered a problem during an automated insurance check, being 17% of all prescriptions. For production and quality assurance, 7% of scripts encountered partial or complete stock shortages of the needed medicine for the prescription. Finally, with pickup, the worse time for customers was between five and seven pm, waiting in line, having a bad demeanor, and not having patience for the tech. The first piece of analyzing this quantitative information is looking into the number of regular customers that left and the amount of prescriptions CVS lost. If CVS is losing around $2 billion in revenue annually based on the number of regular customers they lose, this means CVS is losing out on a great amount of value and worth the company has. Along with that CVS is focusing on the fact that at least 8 million customers will join their pharmacy each year, without fixing a big question, why are customers leaving at all? For instance, if CVS were to fix the issue of customers leaving at all, instead of only gaining 7 million new customers, they would gain these new customers, while also retaining the customers they already have, adding to their profit by around five to six billion (assuming 2.5 billion for the regular customers and from 2.5 to 3.5 for new customers). Secondly, having one in four prescriptions with a problem, further means that 25% of all customers have a problem with their script. If there are 25% of scripts with problems, this is about 24.9% over the norm of Six Sigma performance, showing a major issue CVS is having. This is the biggest problem throughout CVS’ whole fulfillment process, and these errors, if not eliminated can cause detrimental harm to total revenue. Third, 40% of

customers voiced a complaint for one eight-hour shift, showing 27% of scripts encountered a substantial problem at some point in the process. CVS’ customers are not happy overall, and to have four out of 10 customers voicing a complaint each shift, shows a lack in the fulfillment process, once again. Finally, seven percent of prescriptions had stock shortages, meaning seven percent of script profit was either lost, or postponed; customers in turn would have a bad demeanor towards CVS from this as well. Some of the hard conclusions from this quantitative information, one, CVS is lacking in the ability to keep regular customers happy and satisfied with CVS, with CVS expecting new customers annually, they are not focused on keeping the customers that are already loyal. Another conclusion, CVS’ biggest area of concern is the script problem, having one in four scripts with issues, cause for these regular customers to switch pharmacies, while also causing delays for customers, and creating a bad environment for the worker. Third, customers are not happy with CVS’ process, whether that be customer service, delay of prescription, a problem with the prescription, etc. Customers must be catered to more effectively in this process, to retain the regular customers and to profit annually. Finally, script stock shortages give time for customers to take their needs elsewhere, delays the process, and in turn hurts CVS. Overall, the main concern here are the regular customers, and how CVS can effectively keep these customers happy and healthy. Statement of the Problem/Key Questions/Key decisions The main problem noticed is that CVS is not efficiently and properly handling their regular customers. Whether this be in terms of answering questions, providing information, fixing problems with their prescriptions, fixing the script shortages, etc. CVS is greatly based on

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customer service, and the rest is retail, if customers are not properly handled, CVS will lose a great amount of profit. Another problem that falls under handling their customers, is fixing the fulfillment process. The fulfillment process again includes, drop-off, pick-up, data entry, quality assurance, production, and pickup. This process should be thoroughly vetted in each sector, creating an environment both great for the customer and employee. A key question within this case is, how to update the fulfillment process effectively and properly, creating efficiency for customers? This means a key decision to be made for CVS is revamping the fulfillment process, across all CVS pharmacies in the nation. Alternatives and Evaluation of Alternatives\Recommendations and Plan of Action When it comes to the alternatives and the recommendation CVS should incorporate, it is straightforward. First CVS must implement a training program for all employees on the basics of medications, answering questions, and handling customers properly during drop-off and pickup. If certain workers are not as knowledgeable in certain areas of prescriptions, it is important that techs know who to direct customers to, so that customers leave the pharmacy feeling confident and aware of their medication. This training program should cover a basic for customer service, as well as understanding all that a prescription process entails, including DUR’s, insurance checks, and data entry. Giving all employees a good understanding of the fulfillment process will perhaps help with retaining more regular customers. CVS should be motivated to provide training, in hopes of keeping employees as well. Many employees leaving after less than a year on the job, provides CVS with no stability long-term. Second, CVS must enhance the fulfillment process, this includes insufficient inventory, customers voicing a complaint, scripts not being ready, customers walking away, long wait time,

script resolution time, and unmanned drop-off windows. Going forward CVS should implement a more effective inventory list of medications, listing those that are going out of stock at a higher rate; list those running out daily/weekly/biweekly/monthly. It is important to create a detailed list of these medications, so that customers do not delay their wait time, and can properly treat their needs. In terms of customers voicing a complaint, this goes together with employee training, customers should be dealt with patiently, positively, and with feedback that can help. Scripts although currently have a system from when they have been sent to being processed, should be listed into categories in terms of high priority to low priority, in terms of filling these prescriptions. CVS does not want to lose customers, therefore having scripts ready is very important. Regarding customers walking away, this is based on service customers are receiving. If the training provided helps with the basics of customer service, less customers should be unhappy and walking away. Long wait time can goes together with scripts being ready, having scripts ready as stated above will fix this wait time customers may be having. If having scripts ready based on priority-scaling, another method could be providing customers with the CVS app and if they wish to see accurate and efficient timing of their prescription time, this app can help with wait times, and unhappy customers. In terms of script resolution time, this ranged from a fixed time of 20 minutes through three days, with an average of one day. If this number can be dramatically decreased, customers will receive their prescriptions quicker, allowing for less customers to defect from CVS. Finally, fixing the unmanned pick-up windows, means providing service within one minute of a customer arriving at a pick-up window. It may be effective to provide an alarm to the staff when a customer drives up to the window, helping with customer wait time, and retaining customers.

Finally, it is important that CVS appeal to keeping regular customers. From a marketing aspect, CVS can provide a better system for CVS customers in terms of prescriptions; this system can be exclusive to CVS pharmacy users, providing them with promos and deals for choosing to be a loyal customer to CVS. Also, providing CVS with a platform that answers basic questions regarding the fulfillment process, medications, drug interactions, insurance, etc. It is important to give customers the ability to research their health thoroughly, and providing information gives customers confidence in CVS’ abilities. Executive Summary CVS competes in the pharmaceutical industry, which is an industry that focuses on keeping customers safe and watching out for their health. CVS had 29.5 million pharmacy members at the start of 2000, in a year bringing revenue to $20 billion and during that year about 7.2 million regular pharmacy customers left CVS. CVS decided to launch a PSI team, and staffed it with executives, managers, a store tech, business director, and those in the store operations field. Throughout this analysis the PSI team focused on many aspects of the fulfillment process that is entailed at a CVS pharmacy including: drop-off, data entry, production, waiting bins, quality assurance, pickup, and issued faced by the technician staffing CVS prescription pickup windows. The PSI team believed having a better overall process in pharmacies could prevent from 60-90% of customer defections, due to poor service. Approximately one in four scripts had a problem throughout the fulfillment process, and 16% that had problems were unresolved at pickup. 40% of customers voiced a complaint during a single eight-hour shift; the tech would also be asked questions that they were not qualified to answer and would be verbally abused. The PSI team found that 27% of scripts encountered a

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big issue at some point in the process. CVS grew as quickly as the industry average, profiting $20 billion within just one year, and when it comes to CVS and their weaknesses, there are several of them; one in four scripts had problems, 40% of customers voice a complaint during eight-hour shift, and within the fulfillment process there were many issues. The main issues within the fulfillment process lied within the data entry, production, and quality assurance. Hard conclusions qualitatively show CVS is that losing many regular customers annually, will hurt CVS in terms of word-of-mouth; it is important to conclude from this that these technicians be well-trained, versed in pharmacy knowledge, and can answer and deal with customers properly. Quantitatively hard conclusions include, CVS is lacking in the ability to keep regular customers happy and satisfied with CVS, with CVS expecting new customers annually, they are not focused on keeping the customers that are already loyal, CVS’ biggest area of concern is the script problem. The main problem CVS has overall is retaining customers, while keeping existing customers happy throughout the fulfillment process. Going forward, CVS must implement a training program for all employees on the basics of medications, answering questions, and handling customers properly during drop-off and pickup. Along with that, enhance their fulfillment process, to better retain customers, while providing a more sustainable and efficient process within their medication system and delivery. Finally, CVS must focus on helping customers stay confident in CVS and providing information for customers to maintain their loyalty to CVS.

References Pharmacy Service Improvement - Johns Hopkins Carey Business School . (n.d.). Retrieved October 18, 2022, from https://carey.jhu.edu/uploads/documents/brochures/pharmacy- service-improvement-cvs-case-study.pdf

MAN 5501 individual case report

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