Inside Logistics

McKesson realigns Ontario network

Closing one DC, building another


July 24, 2013
by Carolyn Gruske

TRENTON, Ontario—Pharmaceutical and medical supplies distributor McKesson Canada, is making a major change to its Ontario operations—one that will result in both job gains and job losses.

The Montreal, Quebec-based company, which has operated in Canada for over 100 years, is closing its distribution centre located in Mississauga, Ontario. The facility is scheduled to shut down in spring 2014.

The company also plans to close a small DC in Trenton, Ontario, and move its operations into a large, new, state-of-the-art distribution centre currently under construction in the same city.

Alain Champagne, senior vice-president of pharmaceutical distribution and operations at McKesson, says the changing nature of the healthcare market and industry has caused the company to re-examine its operations in the province.

“If you look at the overall healthcare landscape, certain market conditions and regulatory requirements have and continue to shape the industry. What we’ve done is take a pro-active approach to ensure our distribution network in general, and specifically in Ontario, remains optimized and appropriately positioned to adapt to transforming environments and have long-term viability in the process.”

Specifically, he said McKesson hopes to gain cost-reductions, improve overall efficiencies and increase its network flexibility from the realignment.

“Over the last few years, our volumes certainly have increased, and our capacity, to a large degree, has increased as well, but there comes a time when we do require flexibility in how we can operate within that environment, and as such we had to step back and look at the entire network.”

Currently the company operates five Ontario distribution centres located in Mississauga, Trenton, Chatham, Brampton and Ottawa. After next year’s changes, that number will be reduced to four.

As to why Mississauga was selected as the DC to be closed, Champagne said it because of the product inventory.

“The facility in Trenton will carry most of the products available within the network. What we currently carry in Mississauga is sharply focused on front-shop items, and those products will also be carried in Trenton. But it will also carry our Rx line-ups as well as OTC—over the counter—products.”

When the Mississauga operations close, 190 people will lose their jobs. And according to a statement issued by McKesson, “additional job losses are also expected to occur at the Brampton, Chatham and Ottawa distribution centres in the coming months.”

Champagne says employees currently working in the existing Trenton facility will have their jobs transferred to the new DC, but they don’t constitute a large enough staff for the new building.

“I can certainly confirm we will be hiring people in Trenton. Honestly, we are still conducting due diligence to determine what will be our overall network needs, so I can’t speak to exact numbers as of now. We will be creating a fair number of jobs in Trenton,” says Champagne.

He adds there is a large pool of workers in the area to draw upon.

“There are a number of distribution-related businesses in Trenton that offer an opportunity for recruitment for sure. And in the greater Trenton-Belleville area as well.”

Champagne says the new warehouse—which will be 48,310sqm (520,000sqf) when completed—will be the result of a comprehensive search for the latest DC technologies.

“It’s too early to talk about specifics in terms of equipment, but whatever you can think about in terms of the latest technology will be part of the design from the warehouse layout but also from the automation equipment and support operations perspectives. We’ve literally toured the globe, not to be facetious, to identify those technologies and find the right partners to put it all together. What we qualify as state-of the-art will involve the actual flow and the equipment that’s part of the building—so the design and the equipment.”

Asked to provide a bit more detail about the type of equipment likely to be installed, Champagne answered: “Anything that’s got to do with automating the product flow within the building has been considered and will be part of the design, so order shuttle retrievers and things of that nature.”

Champagne says for now, the network changes will only affect operations internally with the province.

“It doesn’t mean anything outside of Ontario. But by way of reference, two years ago we initiated this approach when we moved from three locations down to two locations in the Atlantic. We initially had a facility in Moncton, Halifax and St John’s, and we closed down Halifax and combined it into a new a facility in Moncton.

“For the time being, the Ontario network optimization is really in isolation, but as we look at capacity nationally, those inter-relations are important. But at this point it’s only an Ontario announcement.”