Tallyfy Talks with Dan Howard: On Pharmaceutical Operations at H.D. Smith

Tallyfy Talks is a series of personal interviews with leaders in operations.

Dan Howard is the Vice President of Customer Delivery for H. D. Smith LLC in Springfield, Illinois. H. D. Smith is the nation’s largest privately held pharmaceutical wholesaler and provides retail, independent, and hospital pharmacies with prescription drugs as well as over the counter and home health care products.

Dan has been in the pharmaceutical industry for 18 years and previously held roles in operations with Cardinal Health, American Honda, John Deere, and Dell Computers. He received his B.B.A. in Management from East Tennessee State University and his M.B.A. from Ashland University.

Please tell us more about yourself and your role

Sure, I’m Dan Howard and I work in pharmaceutical operations at H.D. Smith. We distribute pharmaceuticals to retail, independents, hospital pharmacies, as well as long term care facilities like nursing homes and things like that. So, I’m responsible for those pharmaceutical operations for multiple distribution centers across the US. I’ve been in the industry doing something similar for about 20 years.

Do you distribute on behalf of manufacturers to your clients?

Yea that’s correct. So, a pharmacy might get materials and utilize pharmaceuticals, that are manufactured by hundreds of different vendors, but you certainly wouldn’t want hundreds of different deliveries, right? As a wholesaler, we provide that focal point of access to all those different materials.

The pharmaceutical operations team of course assists with the reverse logistics in the same manner, so they can return it all to us. We work with those vendors on returns and things of that nature.

How do you receive an order?

So the clients will provide us usage either directly or maybe a bit of transferring from another wholesaler. They will give us a usage history and our purchasing department will analyse that. If we need to add materials we’ll do that. The pharmaceutical operations team will also make sure to account for that demand in our system and buy in the quantities that will support their needs.

Do clients give you the needs in advance or do you have to predict the needs?

Well, it varies. At the highest service level in pharmaceutical operations, the more information we have and the more they tell us, the better. Sometimes it can be at a new pharmacy though. What we’ll do in that case is find a model pharmacy and leverage that usage information. But it’s always ideal in pharmaceutical operations to get actual usage.

Can you tell us about your pharmaceutical operations team?

Our facilities are run by what we refer to as distribution center managers. They are responsible for the PML for their pharmaceutical operations, which may consists of inventory control, transportation, facilities, or general warehousing functions. I have 7 of those managers and another position that report up to me, so I’ve got 8 directs and around 400 or so in directs within pharmaceutical operations.

Do they all directly report to you or do they have middle managers?

Under the distribution center managers, there will be a night warehouse manager, a day warehouse manager, and possibly inventory managers or inventory supervisors. There may be compliance specialists because we’re heavily regulated, so we deal a lot with the FDA and regulations. But it’s your general pharmaceutical operations setup, with a day warehouse worker, night warehouse worker, supervisors, warehouse leads, warehouse associates, and so on.

We’ve centralized most of our IT functions, so our pharmaceutical operations are supported by a shared services model, the IT department, and centralized human resources. Those functions generally aren’t residing within the distribution center managers but are rather corporate.

What exactly does running pharmaceutical operations mean to you?

Pharmaceutical operations is such a broad topic – it encompasses so many different responsibilities and it’s interacting with a lot of different stakeholders and functional areas. To me it means understanding our business, our customer, and their needs. It means ensuring that we’re providing value and supporting all of our customers’ needs.

There are various functions in pharmaceutical operations, whether it’s supporting our vendors, correct receipt of materials, or controlling inventory or properly managing that expensive asset. Whatever the function, meeting the service level needs of our customers is most important. Generally delivering the products they order on time without errors is the goal. Pharmaceutical operations also means managing expenses to ensure profitability.

Of course, as everyone else is doing, we’re continuously working to improve in all of these areas. Pharmaceutical operations is a huge team effort and the key is the people behind all of those activities. My job is just to ensure they understand the vision of our company. I ensure that everyone has the tools to accomplish our vision.

What does your typical day in pharmaceutical operations look like?

My role within pharmaceutical operations is rather corporate, so I’m generally not directly involved with operations at the distribution centers. If someone needs help with a task, assistance with policy logistics, or approving exceptions, I step in. Much of my time is spent interacting with other areas such as sales or finance and supporting initiatives.

I spend a lot of time with the pharmaceutical operations team looking for ways to optimize processes in order to increase service and decrease expense. Whenever we can reduce cost without adversely affecting service, our sales team can offer more competitive deals and win more business.

I travel about, probably 35-40% of the time depending on what’s going on at different locations. During this travel, I connect with various people involved in our pharmaceutical operations, making sure I’m plugged in and aware of any issues or opportunities. And then of course there are times spent reviewing metrics against our goals and working on counter measures for anything we’re falling short on.

What are the biggest problems you face in pharmaceutical operations?

Like everyone else, we’re always trying to do more with less. For example, it’s hard, in pharmaceutical operations, to find cost effective ways to service a new geographic area where we don’t currently have a lot of density in our delivery network.

If we aren’t constantly looking for ways to optimize that network, our expense structure can serve as a disadvantage to our sales. Our sales models make it hard for us to compete, so the pressure is constantly there to reduce cost while maintaining or improving service. That’s an ongoing challenge for our pharmaceutical operations team.

In terms of day-to-day operational challenges at facilities, one of the big issues is dealing with fluctuations in volume, whether it’s inbound receiving or outbound customer orders. In pharmaceutical operations, we have to ensure that we have the right quality and amount of resources to process that inbound and fill those outbound orders without carrying excess capacity, so we have to flex resources quite a bit. It’s something that were used to in pharmaceutical operations.

We’re not distributing widgets – we’re providing often lifesaving drugs for patients who have procedures and surgeries scheduled around their anticipated receipt. Everyone in pharmaceutical operations understands the importance of what we do and who we are serving. We’re used to flex and working longer hours and on weekends, or whatever it takes to adjust to the different needs and volumes.

What do you – frequently or infrequently – fear and worry about?

Generally I worry about a problem in our pharmaceutical operations that could interrupt our ability to service our customers or deliver our drugs. I worry about systems issues, for example, if something happens like an accident somewhere and your T1 gets cut, we can’t communicate.

Weather related issues can also disrupt pharmaceutical operations because they can impede us from completing our task, whether it’s hurricanes in Florida or snow storms in the North East.

Those are external fears – do you have any in-house worries as well?

Systems issues would be internal, for example if we had something go wrong in our IoT infrastructure. Another possible issue in pharmaceutical operations would be if a table fills up in our ERP system and clogs up our bandwidth. We would be unable to stream orders through and then stream those to our warehouse management system, so the order wouldn’t be filled.

The basic blocking and tackling we’ve got — people show up to work and people are engaged in our pharmaceutical operations. We can’t just throw temps in whenever we want because everyone has to be highly trained and sign off on all of the SOPs. We have a very able workforce and professionals who have been doing this for a long time, so there’s not a lot of instability as far as that goes.

What would you improve within your pharmaceutical operations given no resource constraints?

If I had a magic wand, I’d make customer usage information more accurate. If we had all the resources though, we’d have enough sales people out there in the field working with the customers to understand their needs and get the best possible information.

One of the things that causes inefficiency in our pharmaceutical operations is slow moving inventory. We have to handle, store, and dispose of inventory, so in an ideal situation we would buy only what our customers ordered, in the amount they ordered, and in the timeline in which they needed it. Ideally we would have complete visibility to customer needs to avoid having excess inventory or excess handling.

So how do you currently achieve visibility with customer needs?

Well some pharmacies, for example, have systems that can give us automatic feedback, which is great for our pharmaceutical operations team. As soon as a person picks up a prescription and the pharmacy sells that particular quantity of that particular drug, it’s possible to have that system message our system and create demand for that.

So, your pharmaceutical operations depend on the ultimate pharmacy or some entity to collect that final feedback?

Yea, it’s all about getting that transparency. It’s the same with our vendors. The more information we share with them, the less waste in their supply chain and the more they can be on time with deliveries and avoid excess inventories. So, timing that supply chain on both sides would help pharmaceutical operations run smoother.

What sort of tools and systems do you use to run pharmaceutical operations?

We utilize a ERP system for our finance, materials management, credit, and pharmaceutical operations. We interface this system with a WMS which is what I use to handle and manage the transactions on the floor of our warehouse. We also interface these systems with things such as smart conveyors, ASRS systems, automated pick modules, and other things of that nature.

Everything in our customers wholesale distribution is very competitive. A customer will have multiple ordering systems on one computer and if I don’t have something available they’ll toggle to our competitors’ website and order it there. Everything that is ordered today is received tomorrow. In pharmaceutical operations, you don’t have long lead times, so there is a lot of demand on our system for sub-second responses. Whether it’s the guy waiting for the shipping manifest of the customer waiting for their order confirmation, it has to be very robust.

Our pharmaceutical operations systems also have to be flexible and scalable to adjust for changes in volume. It has to be flexible so that it helps to maximize the efficiency of our processes.

What do you consider your competitive advantage, and if you had to double profits by next year, what would be in the way of that?

We’re very lean, and although that does create some challenges, we are very nimble and able to respond quickly. If an account has an issue, problem, or request, we don’t have to go through several committee meetings in order to get that done — we can go quickly and directly to decision makers. Our pharmaceutical operations are more nimble than our competition.

In terms of doubling profit – there definitely are a lot of market pressures on profitability. Wholesalers make their money on generics, and there aren’t as many generic drugs coming out as there have been in the recent past. Of course, there are also intense competitors; we just saw Amazon buy Pill Pack, an online pharmacy, so they’re gonna be a disruptor in the market.

We’re also always concerned with the legislative environment. Because we’re in pharmaceutical operations, we’re highly regulated so legislation can often affect business. We have the Drug Security Supply Chain Act, which mandates how we’re able to identify and track drugs through the supply chain. The level at which the act is enforced and how its applied will impact processes within pharmaceutical operations. Are we going to have to open every case and scan every piece inside? What’s that going to look like? There are definitely a lot of external forces that influence our pharmaceutical operations.

Who is your hero or heroine in your profession?

That’s tough. I can’t think of any one person, but I have had several mentors. I guess my heroes from that perspective are those folks who are all about getting their job done, but they always find a way to put people first. If it’s expense reduction initiatives, even if they have to reduce headcount for example, they’re doing it in a way that reduces the negative impact on people as much as possible and they treat people with respect.

As a pharmaceutical operations leader, where do you feel you’re underrated?

Due to the nature of my role, I have to make a lot of tough decisions in pharmaceutical operations, whether its headcount related or expense related or things of that nature. People probably don’t realize the amount of empathy that I have for the people involved or the fact that I am taking people into consideration when making tough decisions. The folks that know me well understand that. I hope I show others this through my actions and how I conduct my job.

Do you have any other thoughts that you want to add?

Well, for my first job in operations I drove a forklift in a million-square-foot warehouse for Rubbermaid Office Products, a big company. That’s how I got exposed to distribution operations. It struck me that there would be a lot of opportunity and so I’ve stayed with it.

I worked my way from distributing for other industries into pharmaceutical operations and I really enjoy being in the healthcare industry because you have a feeling of really accomplishing something and helping others. You know that what you’re distributing is having an impact on people’s health. I highly recommend a career in pharmaceutical operations.

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