This story is for CEOs and PE firms who:
- Are trying to complete on a global scale and need to keep margins under control
- Are faced with difficult make vs. buy decisions
- Are unfamiliar with strategic procurement
The Challenge
Based on a recommendation by another SGS Maine Pointe client, a generic pharmaceutical company asked for help in growing their ability to meet savings goals, become competitive on a global scale, and reach CA$1 billion in revenue. They had fallen short of savings targets for several years, a situation exacerbated by supply chain disruptions, cyber attacks, and other market headwinds.
To compete internationally, they were anxious to capture all the opportunities available to save costs and keep prices low for patients. They had also expanded their original site and opened a second site and were rethinking their organization.
In addition, they had to decide whether they would continue to depend on third-party manufacturers or should make their products in-house, especially for a new product they were introducing in competition with China.
Shoring up a weak procurement organization with PMOS, training, and supplier optionality
SGS Maine Pointe:
- Created benchmarks that the company needed to meet to compete globally and expanded their knowledge of their market
- Set up a procurement management operations system (PMOS)
- Adjusted organization to allow consolidation of direct and indirect procurement under a strong, central leader
- Trained and upskilled the staff in strategic, rather than merely tactical, procurement
- Increased supplier optionality, accelerating decisions on previously qualified suppliers
- Advised on decreasing inventory levels and strengthening forecast tracking
- Strengthened trust in procurement and its role in the organization so that it was involved earlier in the decision making process
- Created a playbook that identified the route to tens of thousands of additional savings
Lessons learned for other executives
- True change must include in changes in the culture and organization
- Procurement is a strategic function that should have a seat at the decision making table
The Results
- Captured millions of dollars in savings on direct and indirect spend
- Closed competitive gap by 10% to 45%
- Set a new, lower-priced benchmark for packaging
- Developed a proprietary tool and model for determining the P&L impact of changes
- Provided visibility into the link between operational and financial improvements
- Conducted a 360-degree assessment of the entire organizational structure
- Provided a procurement management operations system (PMOS) for the first time
- Trained procurement staff in a six-step strategic procurement process
Driving competitive global growth through strategic procurement (CS306)
