Destruction At A Price

By Larry Dignan  |  Posted 2004-11-11 Print this article Print

CVS said there was only one way to deal with Eckerd's information systems: Burn 'em down.

The burning of Eckerd's systems comes at a price, of course. CVS plans to spend $300,000 to $350,000 on each store to integrate systems, remodel and change signage, CFO David Rickard said on the company's latest earnings conference call Aug. 4.

CVS is not commenting beyond DeAlmo's quip about Gen. William T. Sherman and his fiery conduct in what Atlantans often call the War of Northern Aggression.

But how CVS operates can be pieced together from the company's recent analyst meeting, filings with the Securities and Exchange Commission and Wall Street research reports.

For quick changeovers, CVS employs a strategy called "swarming." Plans for makeovers are made even before the ink touches paper on an acquisition. Once the ink starts to dry, employees are ready to descend on locations needing conversion.

For instance, one week after the Eckerd deal closed, CVS announced that three Eckerd distribution centers had been integrated with its own. CVS also had sync'ed up the two companies' supply chain, merchandising and purchasing systems.

To accomplish this, CVS employed what the company calls a "data bridge" where items such as prices, product availability, and payroll and benefits were swapped between the CVS and Eckerd systems. According to DeAlmo, CVS systems tell Eckerd's what to do-at least until the Eckerd systems are terminated.

According to J.C. Penney filings with the SEC, the company will operate Eckerd's information systems, accounting, banking, vendor contracting, and tax and other transition services for 12 months. Data management for pharmacy systems can last up to 15 months. CVS is on pace to cut over to its systems before the agreements with J.C. Penney expire.

Next Page: Wall Street is watching.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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