CVS retail pharmacy is experiencing poor operations and the number of customers is dwindling down due to unsatisfactory services. CVS formed the Pharmacy Services Initiative (PSI) to discover the root causes of such negative customer experiences and in order for CVS to resolve and settle these service-related issues.
Andrew McAfee
Harvard Business Review (606015-PDF-ENG)
December 14, 2005
Case questions answered:
- What changes do you recommend to CVS’s existing pharmacy fulfillment process? What IT changes, if any, are required to implement your changes?
- How can you be sure that the new process you propose will be an improvement over the existing one? How can you be sure that it won’t make things worse?
- What groups, if any, are likely to have problems with your proposed solution? How will you deal with their objections? users?
- How will you ensure that there’s no backsliding—that there won’t still be wooden boxes in use six months from now? How can technology be used to prevent or inhibit backsliding?
- Does PSI represent a significant opportunity for CVS? Would improving customer service be of significant financial benefit to the company?
- What percent of pharmacy defectors from CVS in 2000 were light versus heavy users?
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Pharmacy Service Improvement at CVS (A) Case Answers
Problem Statement:
CVS had grown to become one of the largest retail drugstores with $24.2B in revenue, of which $16.1B was generated by their pharmacies. Despite the growth in revenue and 8.5 million new customers, CVS lost 7.2 million customers during the same year. Growth potential was being held back by unhappy customers leaving CVS for another pharmacy.
Compounding the issue was that switching pharmacy services was relatively easy, but most customers did not realize this yet. This only added to the urgency of addressing the problem as soon as possible.
Executives at CVS formed the Pharmacy Services Initiative (PSI), which uncovered 67 different process-related issues and observed that staff would encounter issues with 40% of all customers they worked with during their shifts. Service-related issues affected 44% of heavy users who left while also affecting 13% of light users.
Most of the customer’s complaints revolved around wait time, which was often a result of various issues before reaching the pick-up window. The PSI team looked at each step in the fulfillment process and uncovered many inconsistencies and inefficiencies at the drop-off window, the data-entry process, and the pick-up window.
During fulfillment, 27% of all prescriptions encountered a “substantial problem” with Doctor approval, drug interaction safety checks, or third-party payment verification. Most of these issues were resolved by the technician or pharmacist during the fulfillment process, but this didn’t mean that they would be satisfied when they came to pick up their order.
16% of the customers at observed locations did not get what they expected when they arrived at the pick-up counter. Problems ranged from uninsured prescriptions at unreasonable prices to unfilled orders along with long wait times at the pick-up window line.
Customers typically requested pick-up times after work between the hours of 5-7 PM, which made it a stressful time for staff. A bottleneck formed at the pick-up window, which resulted in long lines and long wait times for customers arriving during these hours.
The Pharmacy Services Initiative (PSI) team was faced with the difficult task of changing the fulfillment process so staff could provide better service while maintaining safety precautions and preventing any backsliding into other issues.
Solution:
The PSI team needs to…
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