How DCAT Is Helping To Sharpen Your Pharmaceutical Sourcing Saw
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
Traditionally, procurement is viewed as the acquisition of goods and services from an external source with a focus on obtaining the best possible cost. If the traditional procurement model is how you are approaching managing your supply chain, then your business may soon be dead. Companies of the future are seeking ways to create value for their strategic partners, not just cut costs. This was quite evident at the Drug, Chemical & Associated Technologies Association’s (DCAT) first ever sharp sourcing event, held in New York City. Don’t think sourcing is a big deal? Think again.
Global Megatrends Create Global Challenges And Global Opportunities
The event was keynoted by Bill Rancic, author, TV host, and winner of The Apprentice, who served up the three key characteristics of an innovator — practical execution, agility, and risk. Rancic believes innovators have a drive to get things done, adapt quickly to a changing environment, and finally having a willingness not just to take risks, but understand and respect risk, and manage appropriately so as to be able to convert into success. It was a fitting introduction to Bill Michels, president of ADR North America, who discussed global megatrends and how companies will need to change their sourcing strategies to be successful. Within his presentation, Michels shared a sobering video on how the world will look in 2020. For sourcing professionals to succeed in the world of the future they will need to be innovative in their thinking. Companies will need to have a value-focused supply chain with extended global networks, green supply, and sustainability serving as cornerstones of their sourcing efforts. This will require previously unforeseen levels of companies integrating their supply chain. Michels believes that for this to be successful, companies must first have a solid feedback mechanism from meetings with suppliers or nothing will happen. Consider the lessons learned by J&J.
Managing The Massive J&J Supply Chain
Hans Melotte, VP and chief procurement officer (CPO) for J&J, is one of the 10 most influential CPOs in the U.S. Melotte created a supplier feedback mechanism via a supplier-enabled innovation program, which he described as being a bit of a disappointment. According to Melotte, the team learned quickly the important role a Fortune 500 company the size of J&J has in not just managing suppliers, but helping them to connect the dots between all of its members. In 2012, J&J spent $30 billion acquiring service and supplies from its over 100,000 member network. Though the company has 140 key relationships, the bulk of its supplier network (2,565 vendors) receive 80 percent of J&J’s business. Yet, the company still has the daunting task of working with 81,000 suppliers from which it purchases $50,000 or less annually. This translates into managing +1 million purchase orders and +2.5 million invoices by a globally dispersed J&J team of 1,521 employees. To provide a better feedback mechanism, J&J developed a supplier roundtable initiative, whereby 50 of the company’s biggest suppliers are brought together to meet with senior J&J leadership across the industry to learn from each other. The company still has hopes of revamping is supplier-enabled innovation program web portal with a problem/solution orientation. One company has recently taken this concept to the next level.
From Supplier To Value Creation Partner
Prior to sharp sourcing, I had the opportunity to interview Clive Heal, team leader and value creation agent of the Roche/Genentech Pharmaceuticals supplier relationship center (SRC). Despite interviewing him before, I still learned a great deal from attending Heal’s presentation. For example, there was much emphasis on recruiting T-shaped people to serve as value creation agents (VCA) at the SRC. According to Heal, these people have a depth of knowledge and expertise in a particular field, but are also good at collaborating across disciplines. Citing a Harvard study to back his claims, Heal likes the idea of pairing a subject matter expert with T-shaped people who don’t fully understand the topic. This is one of the keys to getting truly innovative ideas, because nonsubject matter experts will ask the wickedly naïve questions that a subject matter expert probably won’t, because of an established bias. Heal and his value creation counterpart, Dr. Dietmar Engels, Ph.D., VP of business development at West Pharmaceutical Services, shared their lessons learned along the way — one being the concept of partner versus competitor is a slowly adopted notion. Want to learn more? Here is a link to the Q&A conducted with Heal. Heal stated that other companies are trying something similar to what is being done at Roche/Genentech. Perhaps you, too, should risk trying something different — or you may find yourself left behind.