Strategic Beyond Savings - CIPS Speaker Prese… · Cost Optimization by developing simpler route of synthesis with cheaper raw materials & IP – process cost reduction >40% On-time

Business Leaders in Procurement – Are we Ready ?

Paula Gildert BSc(Hons) FRSA FCIPS MIET CEng

VP Head Global Development Strategic Sourcing, Novartis

CIPS Thames Valley Branch, 20th November 2014

Strategic Beyond Savings

| Strategic Value Beyond Savings | Paula Gildert | 28th October 2014 | Den Danske Logistikkonference SCM 2

Tesco procurement practices exposed and it’s not pretty Posted on September 29, 2014 by David Atkinson

“For years we have been bullied and browbeaten by Tesco’s

buyers, who demand a lowball price for our goods then keep

screwing us for more as the contract goes on.”

“Now compare that with Aldi. Don’t get me wrong, Aldi drives a very

hard bargain, but once you’ve agreed a deal for a year, it sticks for a

year. They don’t come back demanding new bonuses, discounts

and every other trick.”

“As a result – and this news will not go down well at Tesco HQ –

we’ll offer Aldi a better price at the outset. Yes, that’s right: for all its

aggressive behaviour and demands for retrospective rebates and

discounts, Tesco actually gets charged more than its bitterest

rivals.”

http://www.fourpillars.co/tesco-procurement-practices-exposed-and-its-not-pretty/

http://www.fourpillars.co/author/fourpillars/


Strategic Value Beyond Savings


Procurement & Supply Chain Professionals driving sustainable business

Why future business success depends on strategic sourcing & supply chain performance

What do we need to do differently going forward

How can we make it happen

Our focus is on patients

Our purpose is to care and cure. We provide medicines to treat and prevent diseases,

ease suffering and improve quality of life.

5 | Strategic Value Beyond Savings | Paula Gildert | 28th October 2014 | Den Danske Logistikkonference SCM

14 years and >2 billion USD to develop one drug Overview of drug development process


Pharma Sourcing have a strong track record in delivery : $2.6Bn since 2010 at ~7% per annum

7

Significant Savings

are reinvested into:

Development &

Manufacturing

(“pipeline”)

Marketing

Corporate Spend

6.3% 8.5% 7.4% 7.3% Cost reduction

Actual %

| Strategic Value Beyond Savings | Paula Gildert | 28th October 2014 | Den Danske Logistikkonference SCM

What does Value Beyond Savings look like?

Cost

Innovation & Insight

Quality & Service

Assurance of supply &

risk mitigation

Corporate responsibility

9

Biologics Bags – a complex solution


Bags to Bottles – a $m value decision Packaging & logistics design was totally re-engineered

Freezing at - 60C Ship under Dry Ice Thawed in situ


Bags to Bottles – a $m value decision Total Product Cost Reduced by over $140m

Challenge

New Drug Substance primary packaging in Bags had high failure rate, high unit cost & complexity

10 out of 21 bags thawed leaked

45% of thawed material lost ($2.7m

per batch)

Single sourced with high equipment

& consumable costs

Solution

Change of process & materials from Bags to Bottles

Identified new process for filling, freezing,

shipping, thawing & storing product

Material loss reduced from 45% to 0%

Reduced campaign size by improving

campaign efficiency

Elimination of bag freezing, thawing &

storing equipment & consumables

Set new standard for future projects


Freezing at - 60C Ship under Dry Ice Thawed in situ

New Oncology Drug – High Risk & Cost Sourcing & Business re-engineered chemistry working with new suppliers to reduce Target Product Price by 500%

12

Drug

Substance Drug

Product Packaging and

Distribution

Patients Raw

Materials

Chemistry Team Pharmaceutical Development Team Drug Supply Team Clinical Trial Team

Sourcing Team


New Oncology Drug – High Risk & Cost Sourcing & Business re-engineered chemistry working with new suppliers to reduce Target Product Price by 500%

13

Drug

Substance Drug

Product Packaging and

Distribution

Patients Raw

Materials

Chemistry Team Pharmaceutical Development Team Drug Supply Team Clinical Trial Team

Sourcing Team

Challenge

Initial cost of drug substance was >$750m (peak sales)

Custom molecule – opportunity to develop new market / new suppliers

Solution Cost Optimization by developing simpler route of

synthesis with cheaper raw materials & IP – process

cost reduction >40%

On-time Drug Substance Supply to Meet Clinical

Demand

Reduced supply-chain risk (technical &

geographical)

Built a diverse, quality supply chain for commercial

supplies








Being a Partner is at Heart of the Challenge

15

Pharma surveyed 400+ Sourcing Associates to understand their reality


90% Sourcing associates are doing business

partnering > 68% on a daily basis

32% have one significant relationship

68% have multiple relationships

Misaligned objectives

Sourcing behavior is driven by goals that may be counter

to good business partnering

Weak communication of a compelling ‘Sourcing Value

Proposition’

Lack of time and resource

54% have not had any training in business partnering. 9% had training in last year; 14% in the past three years

Lack of easily accessible, well-understood tools, systems and processes

55% of interactions are with a ‘business role’ rather than

an individual person

7% usually interact with a specific individual & 37% work

with a continually shifting mix of people and roles

Sourcing professionals believe they depend on their

Functional Business partners more than the partners

depend on them

What they wanted was...


77% want a compelling, easily

communicated ‘value proposition for

Sourcing’

74% want more formal training in

business partnering

73% want a ‘Best Practice toolkit’

Improve business knowledge, e.g.

through job rotations and ‘shadowing’

Supplier Relationship Management Global Survey


Survey of 425 organisations and 522 individuals in 2013

‘A discipline of working collaboratively with those

suppliers (and business leaders) that are vital to the

success of the organisation, to build trust and maximise

the mutual value of those relationships’

18 © 2014 State of Flux Ltd

Six pillars of SRM

State of Flux has developed a model for SRM consisting of six pillars of activity that combined represent best practice. Each pillar is important in its own right but is also related to and interdependent with the others. Our research reveals that leaders in SRM will be strong across all of the pillars.




• Risk

• Cost reduction

• Cost avoidance

• Customer of Choice

• 34% Leaders see >+6-8% of the contract value




• 43% respondents have a value proposition

expressed but only 14% have communicated

this

• Not even Leaders have >50% engagement

across executive , senior or operational

stakeholders or suppliers




• Increasingly single point accountability for development & implementation

of SRM through appointment of process owners

• Supplier segmentation & increasing proportion of external spend is within

scope of SRM (typically half of spend)

• Robust supplier performance & contract management is still missing for

52% of respondents




• Investment in training & development for talent and organisation is still a

major challenge

• Nearly 7/10 buy-side organisations use cross functional teams to

manage key supplier relationships

• Biggest gaps are in relationship management: influencing,

communication & strategic thinking




• Technology: systems, software or applications as a key enabler

remains a concern

• FCMG companies appear to b making most use of IT

• High Tech and IT sector making the least use




• Truly innovative relationships are rare

• Successful relationships are described as being open, transparent, innovative,

strategically & culturally aligned, trusting , collaborative & behaviourally

mature. Trust being identified as most important attribute

• The type of information being most openly shared is operational

• Yet Innovation remains one of most important elements of the SRM value

proposition

• Less than 1 in 5 use 360 degree relationship assessment tools to baseline &

improve

25 © 2014 State of Flux Ltd

To take part in the survey, please contact Alan Day at State of Flux: [email protected]

All survey participants will receive copies of the report

All participants will be offered a company SRM maturity analysis and an SRM index score

The report launched on November 6th

Next steps

mailto:[email protected]








• Stand as equals – belief and confidence

• Seeing and committing what it takes to be a Trusted Business partner

• Show up as expert through entire cycle of identification of opportunity, contracting through to delivery

Permission and Confidence

• Strategic Thinking, based upon business insight and organisational savvy

• Able to gain ownership of the agenda through listening to customers and weaving in sourcing agenda in a seamless way

• Able to jump between modes – expert, facilitator, coach, trainer

Change Agency • Supporting the business in a new way of working - ‘blow’ up the conventional

wisdom, assumptions and habits that limit

• Experts at shifting the perception of the business

Skills to lead the agenda’s

• Overcoming and navigating the dynamics of implementing change

• Creating an environment for innovation

• Turning resistance into a positive force going forward - enrolment

Executing the agenda

“From being Procurement people who happen to be in Business to being Business people who happen to be in Procurement”


Change Management – skills to drive outcomes that need

behavioural change

Facilitating – working with groups and teams to design

and manage interventions that are future-focussed and action-

driven

Coaching – uncovering people’s concerns and fears

and reframing action based on a future commitment

Presence of a true partner

• Active Listening

• Understanding different styles and ‘flexing’

• Managing your own self-orientation or agenda

Business expertise – understanding strategic drivers and issues for the organisation, to get buy in at right level and align on visions and priorities

Consulting skills – understanding how to use the right mix of tools – listening, questioning, communicating,

influencing – to create a trusted advisor presence

The goal is to develop a number of skills



Thank you

Documents

Strategic Beyond Savings - CIPS Speaker Prese… · Cost Optimization by developing simpler route of synthesis with cheaper raw materials & IP – process cost reduction >40% On-time