McKesson's monster 1-2-3 profitability models. (McKesson Corp.) (company profile)

McKESSON'S MONSTER 1-2-3 PROFITABILITY MODELS

When McKesson Corp. battles for business, its warriors carry the best weapons they can lay their hands on. Those weapons include a full array of the latest mainframe technology and a handful of 1-2-3 customer-profitability models. With fiscal 1990 revenues of $7.8 billion, the giant San Francisco-based drug distributor used 1-2-3 to help solidify its position as one of the most formidable competitors in the industry.

McKesson's high-tech arsenal includes scanner-equipped automated warehouses, computerized inventory systems, paperless office transactions, and its own satellite communications system. All of this brings a certain excitement and efficiency to what is basically a mundane distribution business. Among its far-flung operations, McKesson wholesales pharmaceuticals, over-the-counter drugs, and beauty aids to some 20,000 independent and chain supermarkets and drugstores, such as Walgreen Co. and Longs Drugstores. It also distributes Alhambra and Sparkletts bottled water, and it sells Armor All car-care products.

But it is the PC-based profitability models that have been the not-so-secret weapon behind McKesson's success in a service business where razor-thin margins reduce profit to pennies on each sales dollar. "The concept of analyzing customer and product profitability is not new," says Dave Malmberg, vice president of planning for McKesson's $6 billion wholesale drug operation. "Most companies try to do it in some way, but to do it with the level of detail we do has been invaluable," …