Pharma Integrates 2013 - Beyond Account Management

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

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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

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1- Background




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

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§ 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

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“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

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1- Background





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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

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▪  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

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Top options identified

Path to master the productivity /cost challenge

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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

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8

10

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Top-line contributor 1

10

0

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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

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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

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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

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2 3 4

Org. readiness

Capabil i ty proficiency

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10 3

Evaluating growth options Survey results - Feasibi l i ty scale

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1

2

3

4

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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!


Embed function

Ext. SRM

Internal Consulting



Risk Management

GBS


Sourcing Innovation

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2

3

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5Org. readiness

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3

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2 3 4




Embed function

Ext. SRM

Internal Consulting

Sourcing Innovation


Risk Management

GBS

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5

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7

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Org. readiness

Capabil i ty proficiency

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5

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10 3

Evaluating growth options Changes in 2013 Pharma resul ts vs . 2012 Global Survey resu l ts – Feasib i l i ty

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4 4

6 1

9

5

2 3

X X

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

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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”

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1- Background





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Supplier Buyer

Patient

Physicians

Prescribers

Provider

Payors

D P C G

Value-Flow Looking upstream and external ly

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“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 –

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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

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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

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3

2

Commercial Transaction

Value-Added Services

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TRM Canvas©

Trading Relat ionship Management: the Buyer ’s v iew


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4 5

1

6

Understand Translate Seek & Share

Communicate Select & Implement Assess

Value generation

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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

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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

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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

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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

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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?

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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

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§  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

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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

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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

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Ex 2: Achieving agility Stand on many feet

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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

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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

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Ex 2: Achieving agility Value creat ion achieved by ensur ing high-matur i ty in every dimension of TRM model



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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

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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

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¡  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

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1- Background





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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

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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

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1- Background





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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…

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“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

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Pharma Integrates 2013 - Beyond Account Management

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Transcript of Pharma Integrates 2013 - Beyond Account Management