pharma integrates 2013 - beyond account management
DESCRIPTION
Beyond Account Management. Leveraging Pharma supply-base capabilities to co-create value in the broader Healthcare sector A presentation at Pharma Integrates 2013, an event for senior management in the pharmaceutical industry created and run by Life Sciences Index.TRANSCRIPT
Beyond Account Management Leveraging Pharma supply-base
capabilities to co-create value in the broader Healthcare sector
11.35 – 12.35
Speakers include: Sammy Rashed
Detlef Behrens
Thilo Jaeckel
Giles Breault
Det le f Behrens Gi les Breaul t Thi lo Jaeckel Sammy Rashed
London, November 2013
Beyond Procurement the next step towards Productivity Excellence
3
Presentation Overview
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
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
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
3- Moving beyond SRM – Trading Relationship Management § 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
5
§ Broad theme: Move f rom Category Management to Value co-creat ion
§ Not on ly one so lu t ion… need to pr ior i t ize opt ions a long two d imensions: performance and feasibi l i ty
Procurement Transformation Understanding dr ivers and direct ion
§ Key changes in responsib i l i ty and pos i t ion ing
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
§ Growing expectat ions f rom management , and h igher asp i ra t ions f rom Procurement profess ionals
6
“Beyond Procurement” Roadmap Our in i t iat ive spans professions and geographies
FOCUS GROUP • Work s h op s e r ie s
t h roug h out 2 01 1 w i t h va r i o u s c o nt r i b u to r s f rom acade mia and d i f fe re n t i ndus t r i e s / compan ie s , a .o . P f i z e r, S anof i , B aye r, L inde , Novar t i s , Un iC re d i t
ACA D E M I C R E S E A RC H • C lo s e c o l labo ra t io n
w i t h EB S Un i ve r s i t y on in i t i a l re s e arc h ; e .g . I nnova t ion S ourc ing
• De e pe r re se arc h w i t h Te c h n ic a l U n i ve r s i t y o f Mun ic h to ide n t i f y top op t ions by indus t r y and g e og raphy
S URVEY • P r io r i t i z a t io n o f to p
op t ions fo r p rocure m e nt
• > 10 0 par t i c ipant s ac ros s t h e wor ld , now be ing conduc te d in 1 5 + s e para te m arket s
P RAC T IT ION ER D IS CUS S IONS • P re s e nt a t io ns and
workshop on “ B eyond P ro c ure m e nt ” a t doz e ns o f C P O/C FO con fe re nce s t h roug h out 2 01 1 / 1 2
G i le s B re au l t
M ic hae l H e nke
Dan ie l H o l lo s
Mat t h ias Kasse r
S am my Ras he d
7
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
3- Moving beyond SRM – Trading Relationship Management § 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
8
Evolution of productivity and its drivers Procurement 's past success can l imi t future contr ibut ion
Goals
Key levers
Traditional purchasing
Strategic procurement
Spend Optimization
What's Next?
▪ Secure stable supply at right price
▪ Ensure compliance
▪ Optimize costs/value generation across businesses
▪ Generate savings
▪ Generate higher returns per dollar spend
▪ Centralize process ▪ Efficient transactions ▪ Local buying ▪ Little or no category
management ▪ Process focus
I
II
III IV
• Top Line Contributor
• Innovation Sourcing
• Total Cost-Base Management
• Comprehensive Risk management
• Global Business Services
• Take over operational activities
• Next Level ”Collaborative Buying”
• Internal Consultant/ Project Managers
• SRM as Value Creation
• Embed function into business
10
▪ Drive demand management (what you buy)
▪ Process Management (how you buy)
▪ Internal focus
▪ Category management ▪ Aggregate global/
regional volume ▪ Long-term agreements ▪ Maximal use of
automated tendering ▪ External focus
Process & Systems Skills Acceptance
1
2
3
4
5
6
7
8
9
Top options identified
Path to master the productivity /cost challenge
9
Identified “Top Ten Options” For Procurement to dr ive company-wide product iv i ty, and beyond
Board Agenda
Innovation Productivity Growth
SUPPLIER BUYER CUSTOMER Who
Beyond Procurement Options
Innovation Sourcing 2
SRM as value creation 9
Total Cost-Base Management
Global business services
Comprehen- sive risk management
3
4
5
Take over operational activities
“Next level” collaborative buying
Internal consulting /Project management
Embed function into business
6
8
10
7
Top-line contributor 1
10
0
8
Take ove r ope ra t ions 1 5
C o m p. R i s k Mgmt
G lo ba l B us . S e r v i ce s 5 8
Tot a l C o s t - B as e Mgmt 57
S ourc ing innovat ion 87
To p - L ine C o nt r ibu to r 5 0
Em be d Func t ion in to bus 1 9
Ex te nde d S RM 1 3
In t . cons u l t an t /P M 4 4
Nex t - Leve l C o l lab . B uy ing
0
0
1 8
3 8
4 8
8 8
4 0
27
5 8
3 4
1 Based on implementation priority and return performance 2 Total Cost Base Management
Evaluating growth options Survey resul ts – Performance scale
The newcomer
Extended SRM shows the highest increase in importance. An average return of ~5% ist expected from this option
The veteran
Continuing to deliver high returns of ~5%, participants still highly value GBS, but do not expect further implementation efforts
The champions
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
Today Future
Four main productivity options to pursue Survey outcome: Importance rating Survey
▪ >100 participants from various industries and functions (procurement, finance, and other business stakeholders)
▪ Across Europe, North America, and Asia
Option with highest return expectation in Pharma Industry
11
Own & drive
Don’t invest Can the business need be grown?
Can the capability be developed?
Top-Line contributor
Collaborative Buying
Total Cost-Based Mgmt
Embed function
Ext. SRM
Internal Consulting
Sourcing Innovation
Take over operations
Risk Management
GBS
1
2
3
4
5
6
7
8
9
10
2
3
4
2 3 4
Org. readiness
Capabil i ty proficiency
2
4
5
1
6
7
8
9
10 3
Evaluating growth options Survey results - Feasibi l i ty scale
12
1
2
3
4
5
1 2 3 4 5 1 2 3 4 5Capabil i ty proficiency
2 x 2 by function
Procurement COO/CEO
Finance Business stakeholder
Undecided?
We need more
Needs convincing
Stay focused!
Top-Line contributor
Embed function
Ext. SRM
Internal Consulting
Collaborative Buying
Take over operations
Risk Management
GBS
Total Cost-Based Mgmt
Sourcing Innovation
1
2
3
4
5Org. readiness
13
2
3
4
2 3 4
Top-Line contributor
Collaborative Buying
Total Cost-Based Mgmt
Embed function
Ext. SRM
Internal Consulting
Sourcing Innovation
Take over operations
Risk Management
GBS
1
2
3
4
5
6
7
8
9
10
Org. readiness
Capabil i ty proficiency
2
4
5
1
6
7
8
9
10 3
Evaluating growth options Changes in 2013 Pharma resul ts vs . 2012 Global Survey resu l ts – Feasib i l i ty
7 8
4 4
6 1
9
5
2 3
X X
10
Deemed more feasible: • Sourcing Innovation • Total Cost-Base Mgmt • SRM as value-creation • Take over operations
14
Deep-Dive: SRM as Value-Creation Created «Product iv i ty in Pharma» th ink tank, combining industry, academia, and experts
Participants
Academia & Partners
¡ Smal l group of inv i ted senior business leaders f rom Procurement ¡ Part ic ipants f rom large / medium / smal l s ize Pharma companies ¡ Ser ies of three 1-day workshops focusing on lead quest ion:
“What are the key challenges & opportunities in the healthcare sector and pharmaceutical industry, and how to address by better
leveraging the unique capabilit ies within our supply base”
15
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
3- Moving beyond SRM – Trading Relationship Management § 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
16
Supplier Buyer
Patient
Physicians
Prescribers
Provider
Payors
D P C G
Value-Flow Looking upstream and external ly
17
“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” “Of course we need to measure the performance of our most important suppliers, but this “crowds out” a much more important dialogue” “Our systems do not encourage suppliers to evaluate us as customers of choice who actively are seeking innovation and co-created value” “Our own buyers often have neither the time nor the knowledge to manage a deeper discussion with our most important suppliers”
Why are value based relationships so difficult for Big Pharma?
Focus on Cost Savings - Metrics management –
Control vs. Collaboration – No Priority / No time –
18
The Relationship Map Current Relat ionships force Commodisat ion
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
Supplier Pharma Customer
1 2
3 4
Commercial Transaction Commercial Transaction
19
The Relationship Map The Buyer & Suppl ier sel l to the ul t imate customer
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
Supplier Buyer Customer
1
3
2
Commercial Transaction
Value-Added Services
4
20
TRM Canvas©
Trading Relat ionship Management: the Buyer ’s v iew
Supplier Buyer Customer
2 3
4 5
1
6
Understand Translate Seek & Share
Communicate Select & Implement Assess
Value generation
21
Shi$ing global markets
New Markets: • BRIC into top 10 by 2016 • UK & Spain drop out of top 10
New price points: • 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
Changing Product Por=olios
Replace Products: • Pressure to replace lost revenues
from products off patents
Rise of generics: • Generic growth in mature and emerging markets
• M&A in developing economies
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
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
Customer Engagement RevoluDon
New Customers: • 1.3bn new pa@ents • 1.27m more doctors
New Technologies: • Digital/cloud, Shi]ing from sales reps available from 9.00am-‐4.00pm to mul@ channel engagement (web, mobile apps, call centres, video)
• Rise of Social Channels: Physician Sites (e.g. Sermo.com, haoyisheng.cn) pa@ent sites (e.g. [email protected])
Changing cost base
EBIT and SG&A changes: • Shi]ing por`olios 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 por`olios
• Need for investment in new geographies and new product areas puts more pressure on core back office op@miza@on
“The new world of old Pharma” Transformat ion Themes in one page!
Source: Accenture
22
The value-chain feeding into Healthcare Trends f lowing f rom system create chal lenges and opportuni t ies at a l l levels
Healthcare System
Pharmaceutical Industry
Volume Quality Costs
Shifting Global
Markets
Changing Product Portfolio
Customer Engagement Revolution
Changing Cost Base
Changing Commercial Model
Mega trends & Factors
Key Challenges & Opportunities
Development
• Time to market • Study
efficiency in market
• More output / faster fails
Unique Capabilities to address unmet need
• xxx • xxx • …
Production
• Greater agility • Commercial
(not capacity) drive invest.
• Manufacturability of complex products
• xxx • xxx • …
Commercial
• Shifting markets & channels
• Value-Based outcomes
• Product launch • Regulations
• xxx • xxx • …
G & A
• Demonstrate increased value
• Reduce cost • Culture
• xxx • xxx • …
Supplier Base
23
Top options 1. Need greater agi l i ty in response to greater uncer ta inty
§ Switch from efficiency to effectiveness (f lexibil i ty) § Need to maintain quality despite improving productivity § Opportunity to outsource (not large PH's core competency)
2. Decis ions to bui ld p lants fo l low legis lat ive / investment considerat ions (e.g. China, Russia)
Other bra instormed ¡ Mfg h is tor ica l ly doing large volume products (b io ’s) :
now wi l l need to produce smal ler batches (100k 's) § Change mfg setting: increase change over (cleaning, set-up) § better planning required
¡ Spl i t t ing manufactur ing footpr in t is not effect ive ¡ Ensure specia l ized products coming f rom development
are "manufacturable" , par t icu lar ly when complex § requires more up-front involvement in product development
¡ Need to reta in knowledge wi th in funct ion (especia l ly i f becoming less of core competency)
¡ Opportuni ty to co-manufacture
Production Key Chal lenges & Opportuni t ies f rom breakout session
24
Demand Volatility How to deal with variability and uncertainty?
§ Accuracy (when it will happen)
§ Volume prospection (function of time)
Example 1 Example 2
Risk zone Forecast
Volu
me
Time 12-24 months
25
Ex 1: Gaining visibility Providing vis ib i l i ty & sol id planning hor izon
Volu
me
Time
Base- load In house
Peak outsourc ing
Traditional Roche
Base- load outsource
Peak in-house
§ 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?
26
Ex 1: Gaining visibility Requires a mindset shi f t
Drivers Objective Process § 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)
§ Strategically aligned with external manufacturing
§ Holistic view of capacity § Higher flexibility, better
supplying to the needs of end-customer
§ Measuring cost of quality § Applying different principle
of cost allocation § Providing transparency of
costs for non-supply § Changing incentive-system
Historical
§ Traditional KPIs § % utilisation § Unit cost
§ Profit center mentality § Incentives financially driven § Full costs § Preserve the kingdom
Need
§ New KPIs § Reliability of supply (CDI’s) § Cost of quality § # of incidents
§ Incentified by uninterupted supply of quality product
27
§ 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 know-
how in house
§ Can´t be seen as tactical outsourcing and is one of
the best examples of a strategic partnership
CMO Perspective on the Roche outsourcing model
28
Case Study A: Delivering supply chain value proposition (“Agility”)
Manufacturing of API and formulation (UK)
Formulation supply to EU
Key starting material (KSM) supply from EU
Cost reduction initiative as initial target: Sourcing of KSM from China Securing supply chain:
Process development to manufacture KSM in-house (UK)
Supply Chain stability initiative 2: KSM manufacturing – Process transfer to Indian facility
Final supply chain
Supply of KSM from India
Manufacturing of KSM in India
Benefits to customer Agile supply chain established + significant
cost saving via back integration of Key Starting Material
Customer requirement • Agility at supply chain on a product with high
sales variability combined with requirement of cost reduction due to upcoming competition
29
Ex 2: Achieving agility Unpredictable demand on short not ice
Issue
§ Baseload for seasonal demand is Y
§ Commitment to WHO for 40-50x of Y within first 9 months
§ With immediate decline thereafter
XXX
Risk zone
Forecast
Volu
me
Time 12-24 months
Panic zone
30
Ex 2: Achieving agility Stand on many feet
5
Need § Fully loaded SC, keeping intermediate inventory on all stages § 30+ sites engaged in SC § 80% externally& 20% internally supplied
2 3 1 4
Tradit ional
Flu treatment Unders tand
fu l l capab i l i t y
31
Ex 2: Achieving agility Contr ibut ing 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
32
Ex 2: Achieving agility Value creat ion achieved by ensur ing high-matur i ty in every dimension of TRM model
Understand Translate Seek & Share
Communicate Select & Implement Assess
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3 Deliver “Delighters”
Expectations set
Basic needs met
Strategic Alignment
Future Growth
Large Volume
Value Creation
Performance Mgmt
Risk Management
Value Engineering
Optimize cost & budget
Compliant Process
System in place
Plan established
KPIs reported
Identify unmet needs
Know expressed needs
Transaction focused
33
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
34
¡ 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?
Pharma 3.0 – a New Paradigm
35
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
3- Moving beyond SRM – Trading Relationship Management § 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
36
Raise Organization Readiness
Grow Capability Offering
Set Productivity Strategy
1 3
4 5
Transformational program foundation elements A structured path to accelerating delivery of productivity
¡ Assess cur ren t cond i t i on and match w i th key bus iness d r i ve rs
¡ Deve lop Opera t ing Mode l and requ i red capab i l i t i es
¡ Assemble road map and t ime l ines fo r o rgan iza t iona l t rans fo rmat ion
¡ Al ign and in tegra te p roduc t i v i t y p rocesses
¡ Cover end- to -end cos t base ( in case o f TCBM)
¡ Def ine sys tems and da ta requ i rements
¡ Crea te new organ iza t ion s t ruc tu re
¡ Deve lop new, sequenced de l i ve ry p rocess
¡ Bui ld Management p rocess to ensure cons is ten t va lue de l i ve ry
¡ Iden t i f y r igh t pos i t i on ing in o rgan iza t ion
¡ In tegra te w i th company p lann ing p rocess
¡ Overcome imp lementa t ion obs tac les us ing robus t change management p lan
¡ Deve lop new ro le p ro f i l es , assessment too ls , and career map
¡ Set -up p ragmat ic ta len t deve lopment p rogram
¡ Crea te a ta len t spo t t ing and management p lan to iden t i f y and a t t rac t l eaders
Total Cost-Base Management
SRM as value-creation
Select option(s) - illustrative
2
The outcome is a robust product iv i ty s t rategy, a l ign ing organizat ions wi th s t ructure & p lanning, and a process that del ivers breakthrough levels of va lue
37
1- Background
2- Highlights of “Beyond Procurement” global study
4- Implementation overview
5- Staying engaged / Q&A
3- Moving beyond SRM – Trading Relationship Management § 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
38
Staying engaged Four dist inct , integrated areas of act iv i t ies
Knowledge
Advisory
Think Tanks
Learning Conferences
R e s e a r c h
P u b l i c a t i o n s
T r a n s f o r m a t i o n
https://www.surveymonkey.com/s/bpsuk
https://www.surveymonkey.com/s/bpsgerman
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/
Half-day applicability workshops, followed by 2-day strategic retreat with Procurement Leadership Team
https://www.surveymonkey.com/s/bpsspain
https://www.surveymonkey.com/s/bpsnetherlands
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
http://www.bettersellingtopharma.com/Home.aspx
&
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“You miss 100% of the shots you don’t take”
- Wayne Gretzky
Huge opportunities to do more But first need to step up…
40
“Skate to where the puck is going – not where it is”
- Wayne Gretzky
Huge opportunities to do more …and build a solution to tomorrow’s problems
Q & A
42
Supplier Buyer Customer
2 3
4 5
1
6
Understand Translate Seek & Share
Communicate Select & Implement Assess