Beyond Procurement: Leveraging Pharma Supply-Base Capabilities

11.35 – 12.35
Beyond Account Management
Leveraging Pharma supply-base
capabilities to co-create value in the
broader Healthcare sector
Sammy
Rashed

Speakers include:
Detlef
Thilo
Behrens
Jaeckel

Giles
Breault

Beyond Procurement
the next step towards Productivity Excellence

Detlef Behrens
Giles Breault
Thilo Jaeckel
Sammy Rashed

London,
November 2013

Presentation Overview
1- Back ground
2- Highlights of “Beyond Procurement” global study
3- Moving beyond SRM – Trading Relationship Management
§ 
§ 
§ 
§ 

Customer’s view: Healthcare challenges and the impact on Pharma
Management view: Key challenges & opportunities for Manufacturing
Buyer’s view: 2 case studies from Roche
Supplier’s view: Raising the play by Piramal

4- Implementation over view
5- Staying engaged / Q&A

3

1- Back ground
§ 
§ 
§ 
§ 

Healthcare challenges and the impact on Pharma
Key challenges & opportunities for Manufacturing
The buyer’s view: 2 case studies from Roche
Raising the play: Piramal’s offer


4

Procurement Transformation
Understanding drivers and direction
§  G r o w i n g e x p e c t a t i o n s f r o m m a n a g e m e n t , a n d h i g h e r
aspirations from Procurement professionals
§  K e y c h a n g e s i n r e s p o n s i b i l i t y a n d p o s i t i o n i n g
Historical process
§  Spend penetration
§  Process compliance
§  Tactical negotiation with suppliers
§  Short-term savings
§  Reactive stand-alone role
§  Concentrated on back-end

Current direction
§  Spend optimization
§  Process efficiency
§  Driving demand mgmt with users
§  Multi-year savings plan
§  X-functional project leadership
§  Early decision involvement

§  B r o a d t h e m e : M o v e f r o m C a t e g o r y M a n a g e m e n t t o Va l u e c o creation
§  N o t o n l y o n e s o l u t i o n … n e e d t o p r i o r i t i z e o p t i o n s a l o n g t w o
dimensions: performance and feasibility
5

“Beyond Procurement” Roadmap
Our initiative spans professions and geographies
FOCUS GROUP
•  Wo r k s h o p s e r i e s
throughout 2011 with
various contributors
from academia and
different industries/
companies, a.o.
P f i z e r, S a n o f i , B a y e r,
Linde, Novartis,
UniCredit

ACADEMIC RESEARCH
•  C l o s e c o l l a b o r a t i o n
with EBS University on
initial research; e.g.
Innovation Sourcing
•  D e e p e r r e s e a r c h w i t h
Te c h n i c a l U n i v e r s i t y o f
Munich to identify top
options by industr y
and geography

SURVEY
•  P r i o r i t i z a t i o n o f t o p
options for
procurement
•  > 1 0 0 p a r t i c i p a n t s
across the world, now
being conducted in
15+ separate markets

PRACTITIONER
DISCUSSIONS
•  P r e s e n t a t i o n s a n d
workshop on “Beyond
Procurement” at
dozens of CPO/CFO
conferences
throughout 2011/1 2

Giles
Breault
6

Michael
Henke

Daniel
Hollos

Matthias
Kasser

Sammy
Rashed

1- Back ground
§ 
§ 
§ 
§ 



7

Evolution of productivity and its drivers
Procurement's past success can limit future contribution
Path to master the productivity /cost challenge
II Strategic procurement
I Traditional purchasing
Goals

▪ 
▪ 

Key
levers

▪ 
▪ 
▪ 
▪ 
▪ 

Secure stable supply
at right price
Ensure compliance
Centralize process
Efficient transactions
Local buying
Little or no category
management
Process focus

▪ 

III Spend
Optimization

▪ 

Generate savings

▪ 
▪ 
▪ 
▪ 
▪ 
▪ 

Category management
Aggregate global/
regional volume
Long-term agreements
Maximal use of
automated tendering
External focus

▪ 
▪ 

Generate higher
returns per dollar
spend
Drive demand
management (what
you buy)
Process
Management (how
you buy)
Internal focus

IV What's Next?

▪ 

Optimize costs/value
generation across
businesses

Top options identified
1
• 
• 
2
• 
3

Top Line Contributor
Innovation Sourcing
Total Cost-Base
Management

4
• 

Comprehensive Risk
management

• 
5
• 
6

Global Business Services
Take over operational
activities

• 
7
8
• 

Process &
Systems

8

Skills

Acceptance

Next Level ”Collaborative
Buying”
Internal Consultant/
Project Managers

9
• 
• 
10

SRM as Value Creation
Embed function into
business

Identified “Top Ten Options”
For Procurement to drive company-wide productivity, and
beyond
Board
Agenda

SUPPLIER

Who

Beyond
Procurement
Options

Productivity

Innovation

BUYER

2

Innovation
Sourcing

3

Total CostBase
Management

6

Take over
operational
activities

9

SRM as value
creation

4

Global
business
services

7

“Next level”
collaborative
buying

5

Comprehensive risk
management

Internal
consulting /
8 Project
management

10

9

Embed
function into
business

Growth
CUSTOMER

1

Top-line
contributor

Evaluating growth options
Sur vey results – Performance scale
Survey

Survey outcome: Importance rating

Four main productivity options to pursue

Today

The champions

To p - L i n e
Contributor

▪ 

▪ 

>100
participants
from various
industries and
functions
(procurement,
finance, and
other business
stakeholders)
Across Europe,
North America,
and Asia

50

Sourcing innovation

Comp. Risk Mgmt
Ta k e o v e r
operations
Next-Level Collab.
Buying

40
87

To t a l C o s t - B a s e
Mgmt
Global Bus.
Services

Int. consultant/PM

88

57

48

58

8

38

15

0

0

E m b e d Fu n c t i o n
into bus

19

34

13

1 Based on implementation priority and return performance
2 Total Cost Base Management

Continuing to deliver high returns of
~5%, participants still highly value
GBS, but do not expect further
implementation efforts

18
44

Both options Sourcing Innovation
and TCBM2 rank amongst the
highest in terms of implementation
priority as well as actual / expected
return (ranging from 4 – 5 %); today
as well as in the future1
The veteran

0

Extended SRM

10

Future

58
27

The newcomer
Extended SRM shows the highest
increase in importance. An average
return of ~5% ist expected from this
option

Option with highest return
expectation in Pharma Industry

1

Top-Line contributor

6

Take over operations


2

Sourcing Innovation

7

Collaborative Buying

3

Total Cost-Based Mgmt

8

Internal Consulting

Sur vey r e sults - Fe asibility scale

4
5

4
Org.
readiness

Can the capability be
developed?

GBS
Risk Management

9
10

Ext. SRM
Embed function

Own & drive

5
2

3
4

1

3
10

6

8

9
7
Don’t invest

2
2
11

Can the business need
be grown?

3

Capability proficiency

4


Org.
readiness


Embed function



GBS

5

Ext. SRM

Sourcing Innovation

2 x 2 by function

Risk Management

Internal Consulting

Procurement

COO/CEO
Needs
convincing

Undecided?

4
3
2
1
5

Business stakeholder

Finance
Stay
focused!

4
3
We need
more

2
1
1
12

2

3

4

5

1

2
3
4
5


1


6


2

Sourcing Innovation

7


Changes in 2013 Pharma results
vs. 2012 Global Survey results – Feasibility

3


8

Internal Consulting

4

GBS

9

Ext. SRM

5

Risk Management

X

X

4
Org.
readiness

3
4 6
7

9

Embed function

Deemed more feasible:
•  Sourcing Innovation
•  Total Cost-Base Mgmt
•  SRM as value-creation
•  Take over operations

5
2

10

2
3

1 5
3
6
4
1 10 8
4 10
8

9

7

2
2
13

3


4

Deep-Dive: SRM as Value-Creation
Created «Productivity in Pharma» think tank, combining
i n d u s t r y, a c a d e m i a , a n d e x p e r t s
Participants

Academia & Partners

¡  S m a l l g r o u p o f i n v i t e d s e n i o r b u s i n e s s l e a d e r s f r o m P r o c u r e m e n t
¡  P a r t i c i p a n t s f r o m l a r g e / m e d i u m / s m a l l s i z e P h a r m a c o m p a n i e s
¡  S e r i e s o f t h r e e 1 - d a y w o r k s h o p s f o c u s i n g o n l e a d q u e s t i o n :

“What are the key challenges & opportunities in the healthcare
sector and pharmaceutical industry, and how to address by better
leveraging the unique capabilities within our supply base”
14

1- Back ground
§ 
§ 
§ 
§ 



15

Value-Flow
L o o k i n g u p s t r e a m and e x t e r n a l l y

Patient

Physicians

Supplier

Buyer

D
P
C
G

Prescribers

Provider

Payors
16

Why are value based relationships so
difficult for Big Pharma?
Focus on Cost Savings - “We just can’t seem to escape this without
recognising that what we want to achieve is a route to lower costs, not
only a route to lower prices”

Metrics management – “Of course we need to measure the
performance of our most important suppliers, but this “crowds out” a much
more important dialogue”

Control vs. Collaboration – “Our systems do not encourage suppliers
to evaluate us as customers of choice who actively are seeking innovation
and co-created value”

No Priority / No time – “Our own buyers often have neither the time
nor the knowledge to manage a deeper discussion with our most
important suppliers”
17

The Relationship Map
Current Relationships force Commodisation
2

1

Commercial Transaction

Supplier


Pharma

3

Customer

4

Buyer and Seller collaboration is reduced to competitive performance
on specification (commodity)
•  Relationship is Price not Value based
•  Little understanding of the ultimate customer need

18

The Relationship Map
The Buyer & Supplier sell to the ultimate customer
2

1


Supplier

Buyer

Customer

Value-Added Services

4
3

Buyer and Seller are collaborating on how to meet the needs of the
ultimate customer?
•  Understanding the need
•  Creating a Set of Services that increases the buyer’s and
ultimate customer’s perception of value
•  Mutual Dependency

19

TRM Canvas ©
Tra d i n g R e l a ti o n sh i p Ma n a g e me n t: th e Buyer ’s view

Seek & Share

3

Supplier

20

2

1

Customer

Buyer

4

Assess

Understand

Translate

5

Select & Implement
Value generation

6

Communicate

“The new world of old Pharma”
Tra n sfo rma ti o n Th e me s i n o n e p a g e !
Macro
Economic
Influences

•  Healthcare
costs
rising
faster
than
GDP
in
many
countries

•  Mature
market
payers
(Governments
and
Payers)
forcing
generic
subsDtuDon
for
long
standing
therapies
and
requiring
evidence
of

outcomes
in
return
for
paying
higher
prices
for
specialized
therapies

•  Emerging
market
demand
rising
sharply

-‐
need
for
product
at
the
right
cost
for
growing
economies

Shi$ing
global
markets

Changing
Product

Por=olios

Customer
Engagement

RevoluDon

New
Markets:

Replace
Products:

New
Customers:

New
price
points:

Rise
of
generics:

New
Technologies:

•  Generic
growth
in
mature
and

emerging
markets

•  M&A
in
developing
economies

•  Digital/cloud,
Shi]ing
from
sales

reps
available
from

9.00am-‐4.00pm
to
mul@
channel

engagement
(web,
mobile
apps,

call
centres,
video)

•  BRIC
into
top
10

by
2016

•  UK
&
Spain
drop
out
of
top
10

•  15%-‐20%
price
reduc@on
in
top

line
product
sales
in
the
markets

growing
at
+20%

•  Slow
down
of
growth
to
1%-‐3%
in

mature
markets

New
Supply
chain
models:

•  West
to
East
movement
of
supply

chain

•  Need
to
operate
global
supply
to

service
growing
market
needs

•  Increased
use
of
contract

manufacturers
driving
need
for

more
orchestrated
supply
chain

control

21

•  Pressure
to
replace
lost
revenues
•  1.3bn
new
pa@ents

•  1.27m
more
doctors

from
products
off
patents

Rise
of
specialty
products:

•  Switch
from
mass
market

blockbusters
to
more
specialized

drugs
in
mature
markets

•  R&D
driven
at
more
niche

therapies
with
innova@ve

medicines

•  Requirement
for
evidence
of

outcomes/efficacy
for

reimbursement
for
new
drugs

coming
on
the
market

•  Rise
of
Social
Channels:
Physician

Sites
(e.g.
Sermo.com,

haoyisheng.cn)
pa@ent
sites

(e.g.
pa@entslikeme.com)

Source: Accenture

Changing
cost
base

EBIT
and
SG&A
changes:

•  Shi]ing
poròlios
to
a
mixture
of

generic
and
patented
products

result
in
a
lower
EBIT
for
many

companies

•  Pressure
to
reduce
SG&A
in
line

with
new
product
poròlios

•  Need
for
investment
in
new

geographies
and
new
product

areas
puts
more
pressure
on
core

back
office
op@miza@on

The value-chain feeding into Healthcare
Tr e n d s f l o w i n g f r o m s y s t e m c r e a t e c h a l l e n g e s a n d o p p o r t u n i t i e s
at all levels
Volume

Healthcare
System
Mega trends &
Factors

Pharmaceutical
Industry

Shifting
Global
Markets

Changing
Product
Portfolio

Quality

Costs

Customer
Engagement
Revolution

Changing
Cost
Base

Changing Commercial Model
Development

Production

Commercial

G&A

Key Challenges
& Opportunities

•  Time to market
•  Study
efficiency in
market
•  More output /
faster fails

•  Greater agility
•  Commercial
(not capacity)
drive invest.
•  Manufacturabi
lity of complex
products

•  Shifting
markets &
channels
•  Value-Based
outcomes
•  Product launch
•  Regulations

•  Demonstrate
increased
value
•  Reduce cost
•  Culture

Supplier Base

•  xxx
•  xxx
•  …

•  xxx
•  xxx
•  …

•  xxx
•  xxx
•  …

•  xxx
•  xxx
•  …

Unique Capabilities to
address unmet need
22

Production
Key C hallenges & Opportunities from b r e a k o u t session
To p o p t i o n s
1.  N e e d g r e a t e r a g i l i t y i n r e s p o n s e t o g r e a t e r u n c e r t a i n t y
§  Switch from efficiency to effectiveness (flexibility)
§  Need to maintain quality despite improving productivity
§  Opportunity to outsource (not large PH's core competency)

2. 

Decisions to build plants follow legislative /
investment considerations (e.g. China, Russia)

Other brainstormed
¡  M f g h i s t o r i c a l l y d o i n g l a r g e v o l u m e p r o d u c t s ( b i o ’s ) :
now will need to produce smaller batches (100k's)
§ 
§ 

Change mfg setting: increase change over (cleaning, set-up)
better planning required

¡  S p l i t t i n g m a n u f a c t u r i n g f o o t p r i n t i s n o t e ff e c t i v e
¡  E n s u r e s p e c i a l i z e d p r o d u c t s c o m i n g f r o m d e v e l o p m e n t
are "manufacturable", particularly when complex
§  requires more up-front involvement in product development

¡  N e e d t o r e t a i n k n o w l e d g e w i t h i n f u n c t i o n ( e s p e c i a l l y i f
becoming less of core competency)
¡  O p p o r t u n i t y t o c o - m a n u f a c t u r e
23

Demand Volatility
How to deal with variability and uncertainty?

Volume

Example 1

Example 2

Forecast

Risk zone

§  Accuracy (when it
will happen)
§  Volume
prospection
(function of time)

12-24 months

24

Time

Ex 1: Gaining visibility
Providing visibility & solid planning horizon
§  How do we achieve reliable and sustainable supply?
§  How can we simplify translation of demand into supply?
§  How to reduce lead time between end-customer and supplier?
§  How to deal with costs of idle capacity?

Roche

Volume

Traditional

Peak
outsourcing

Peak inhouse

Base-load
outsource

Base-load
In house
Time
25

Ex 1: Gaining visibility
R e q u i r e s a mindset shift
Drivers
§  Always late, reacting
instead of pro-acting
§  Cost intensive
§  Not value driven, purely
tactical ("just get it done")
§  Using all contingency and
got hit by 'Murphy’
§  Cold back-up (plant/ people
not trained)

Objective
§  Strategically aligned with
external manufacturing
§  Holistic view of capacity
§  Higher flexibility, better
supplying to the needs of
end-customer

Historical
§  Traditional KPIs
§  % utilisation
§  Unit cost
§  Profit center mentality
§  Incentives financially driven
§  Full costs
§  Preserve the kingdom
26

Process
§  Measuring cost of quality
§  Applying different principle
of cost allocation
§  Providing transparency of
costs for non-supply
§  Changing incentive-system

Need
§  New KPIs
§  Reliability of supply (CDI’s)
§  Cost of quality
§  # of incidents
§  Incentified by uninterupted supply
of quality product

CMO Perspective on the Roche
outsourcing model
§  Very unique and advanced model
§  Allows maximum planning at CMO
§  Will required open discussions upfront as Roche
also need to have a minimum quantity to keep knowhow in house
§  Can´t be seen as tactical outsourcing and is one of
the best examples of a strategic partnership

27

Case Study A: Delivering supply chain
value proposition (“Agility”)
Formulation
supply to EU

Key starting material
(KSM) supply from EU

Manufacturing of API and
formulation (UK)
Securing supply chain:
Process development to
manufacture KSM in-house (UK)

Cost reduction initiative as
initial target:
Sourcing of KSM from China
Supply of KSM
from India

Final supply chain
Manufacturing of
KSM in India
Supply Chain stability
initiative 2:
KSM manufacturing –
Process transfer to Indian
facility

Customer requirement
•  Agility at supply chain on a product with high
sales variability combined with requirement of
cost reduction due to upcoming competition
28

Benefits to customer
Agile supply chain established + significant
cost saving via back integration of Key
Starting Material

Ex 2: Achieving agility
U n p r e d i c t a b l e d e m a n d on short notice
XXX

Panic zone

Volume

Issue
§  Baseload for seasonal
demand is Y
§  Commitment to WHO
for 40-50x of Y within
first 9 months
§  With immediate
decline thereafter

Risk zone

Forecast

12-24 months

29

Time

Stand on many feet
Need
§  Fully loaded SC, keeping intermediate inventory on all stages
§  30+ sites engaged in SC
§  80% externally& 20% internally supplied
Tr a d i t i o n a l

1
Flu treatment

30

2

3

4

5
Understand
full capability

C o n t r i b u t i n g factors

Additional complexity
§  Not single or dual sourced, but
sometimes up to 5 vendors

§  How do you keep them busy
(profitable) and trained (ready)
§  offering a base load that is steady
(same product or same
technology)

§  prioritize for 9 months one or the
other product

§  leveraging inventory run down

31

Value creation a c h i e v e d by e n s u r i n g h i g h - m a t u r i t y
i n e v e r y dimension of TRM model

Seek & Share

Understand

Translate

3

Strategic Alignment

3

Value Engineering

3

Identify unmet needs

2

Future Growth

2

Optimize cost & budget

2

Know expressed needs

1

Large Volume

1

Compliant Process

1

Transaction focused

3

Value Creation

3

System in place

3

Deliver “Delighters”

2

Performance Mgmt

2

Plan established

2

Expectations set

1

Risk Management

1

KPIs reported

1

Basic needs met

Assess
32

Select & Implement

Communicate

Case Study B: Ensuring reliability
of supply
Customer need
•  Maintenance of 99% in-stock position for more than 500 SKUs
•  Assurance of zero quality and regulatory issues

What we did?
•  Ensured alignment of all stakeholders to the expectations and needs of customer through
daily meetings – clear shortening of communications paths
•  Oriented internal supply chain towards customer’s needs and give customer full insight
views
•  Established collective responsibility and ownership for actions
•  Provided monthly monitoring of performance and transparent result sharing with the
client

Value to the customer
•  Consistent achievement in-stock performance above target for more than 2 years and
consequently supply assurance to customer
•  Trusted supplier for the customer – among the top 2 suppliers for Europe

33

Pharma 3.0 – a New Paradigm
¡  With this kind of changes we need to rethink about our supply
chain and outsourcing models:
§  Should a CMO offer “just the manufacturing” or should a CMO get an
integrated part of the new more complex supply chain by adding additional
value to the supply chain?
§  Can Pharma Companies and CMOs achieve the new targets with tactical
models or will be strategic partnerships the required model?
§  Should Pharma Companies not define in depth the reasons for outsourcing
within their RFQs? There should be a move away from lowest price to best
value but this can be only achieved if the CMOs will be allowed to understand
the intention for outsourcing
§  More dedicated projects/products will require more flexibility (smaller batches,
more SKUs, global supply). Are CMOs prepared for it or is there still a focus
on larger products? What are the future expectations on CMOs?
34

1- Back ground
§ 
§ 
§ 
§ 



35

Transformational program foundation elements
A structured path to accelerating delivery of productivity
Select option(s) - illustrative
1

Set
Productivity
Strategy

3

Total Cost-Base Management
2

SRM as value-creation

¡ A s s e s s c u r r e n t
condition and
match with key
business drivers

¡ A l i g n a n d

¡ D e v e l o p
Operating Model
and required
capabilities

¡ C o v e r e n d - t o -

¡ A s s e m b l e r o a d
map and
timelines for
organizational
transformation

36

integrate
productivity
processes
end cost base
(in case of
TCBM)

¡ D e f i n e s y s t e m s
and data
requirements

4

Raise
Organization
Readiness

¡ C r e a t e n e w

¡ I d e n t i f y r i g h t

¡ D e v e l o p n e w,

¡ I n t e g r a t e w i t h

organization
structure
sequenced
delivery process

¡ B u i l d

Management
process to
ensure
consistent value
delivery

positioning in
organization

5

Grow
Capability
Offering

¡ D e v e l o p n e w

role profiles,
assessment
tools, and career
map

company
p l a n n i n g p r o c e s s ¡ S e t - u p p r a g m a t i c
talent
¡ O v e r c o m e
development
implementation
program
obstacles using
robust change
management
plan

T h e o u t c o m e i s a r o b u s t p r o d u c t i v i t y s t r a t e g y,
aligning organizations with structure & planning, and
a process that delivers breakthrough levels of value

¡ C r e a t e a t a l e n t

spotting and
management
plan to identify
and attract
leaders

1- Back ground
§ 
§ 
§ 
§ 



37

Staying engaged
Four distinct, integrated areas of activities
Knowledge

https://www.surveymonkey.com/s/bpsuk
Research
&
Publications

https://www.surveymonkey.com/s/bpsspain

https://www.surveymonkey.com/s/bpsgerman

https://www.surveymonkey.com/s/bpsnetherlands

Complete Series: http://www.procurementleaders.com/blog/my-blog--sammy-rashed
Beyond SRM: http://blog.oldstlabs.com/beyond-srm-co-creating-value-through-strategic-alignment/

Advisory
Tr a n s f o r m a t i o n

Half-day applicability workshops, followed by 2-day strategic
retreat with Procurement Leadership Team

Think Tanks

http://www.lfo.tu-dortmund.de/index.php?option=com_content&view=article&id=279&Itemid=200
http://www.lfo.tu-dortmund.de/index.php?option=com_content&view=article&id=297&Itemid=211

Learning Conferences

http://www.bettersellingtopharma.com/Home.aspx

38

Huge opportunities to do more
But first need to step up…

“You miss 100%
of the shots you
don’t take”
- Wayne Gretzky

39

Huge opportunities to do more
…and build a solution to tomorrow’s problems

“Skate to where
the puck is going
– not where it is”
- Wayne Gretzky

40

Seek & Share

3

Supplier

42

2

1

Customer

Buyer

4

Assess

Understand

Translate

5

Select & Implement

6

Communicate

Beyond Procurement: Leveraging Pharma Supply-Base Capabilities

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (6)

Similar a Beyond Procurement: Leveraging Pharma Supply-Base Capabilities

Similar a Beyond Procurement: Leveraging Pharma Supply-Base Capabilities (20)

Más de Christopher Watt

Más de Christopher Watt (6)

Último

Último (20)

Beyond Procurement: Leveraging Pharma Supply-Base Capabilities