The encyclopedia · Software & IT · Technical decision · 1975–1987
McKesson's handheld ordering terminals saved independent pharmacies
McKesson gave 14,000 drugstores a handheld computer that dialed in orders around the clock, letting independents match chains on price and stock.
McKesson (Foremost-McKesson)
The solution
In 1975 independent pharmacists looked doomed: chains had buying power, computerized inventory and better prices. McKesson (then Foremost-McKesson) decided the independents were its market — and gave them the tool to compete.
McKesson invested more than $100 million in a computer network linking 14,000 drugstores through a handheld programmable terminal that plugged into a phone line. Economost let pharmacists place orders 24 hours a day, instantly, with fewer errors, better prices and fresher stock than telephone orders.
Economost was the hook, not the whole product: McKesson added ECONOPLAN for inventory and shelf-space planning, ECONOCHARGE consumer credit, and PHARMASERV in-store computers — services that made the pharmacy better and progressively harder to leave.
Why it worked
- Instant electronic orders beat phone ordering
- It let independents match chain pricing and availability
- Ancillary services deepened the customer relationship
- McKesson's market grew while independents recovered
What can be applied
A strategic information system wins when it makes the customer's own operation better; the resulting switching costs then look like loyalty.
Aftermath
By 1987 McKesson's drug division had grown from under $1 billion to nearly $5 billion in annual sales, independent pharmacies were growing again at 5 percent a year, and archrival Bergen Brunswig copied the model — making Economost the textbook strategic information system.
Sources
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