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GSK looks to a global future

A global business needs a global outlook, and the pharma giant’s procurement function had to adapt, writes Lindsay Clark

effort that had built up in its international procurement operations. “The support that we give our North American business is provided by a North American procurement team while there has been some equivalent work done in Europe,” says Akhtar.

“We were developing strategies within those

procurement groups for the same categories of spend,” he adds. “They could be the same or they could be different strategies, but there should only be one strategy on a category-by-category basis.”

To address these two objectives, the GSK procurement team began a proof-of-concept project in 2012. It picked 12 categories which were significant in terms of spend and complexity but also provided a good opportunity for a single global approach to offer savings.

These categories were then managed as a single entity across North America, South America, Europe, Asia-Pacific, India, Middle East and Africa. “We were trialling a single global lead for each category with teams spread around the other regions all pulling in the same direction, rather than working in silos, as may have happened, to an extent, in the past,” says Akhtar.

ONly ThOSE inhabiting caves could have avoided the rise of the BRIC economies in recent years. As David Cameron’s February trip to India demonstrated, even the UK prime minister has succumbed to the allure of emerging markets in Brazil, Russia, India and China as the greatest promise for growth at a time when both the European and US economies are struggling.

But for British pharmaceuticals giant GlaxoSmithKline (GSK), the structure in procurement of indirect goods and services did not reflect the company’s global outlook.

“historically we have been very US and UK-focused,” says procurement director Malik Akhtar. “Proportionately there has been more resource in those markets and to all intents and purposes, that was global. We are now looking to redistribute resources to allow us to focus better in emerging markets.”

GSK is also seeking to reduce duplicated

Case study GLaxosmithkLine

n Including emerging markets in the strategy for indirect procurement requires global category management.

n The new strategy aims to avoid duplicated effort and pool resources for a more detailed focus on supplier markets and stakeholder needs.

n Procurement professions become part of global category teams, which could be led from outside the UK or US.

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in which we work with them, and the structure of the agreements that we will have will be consistent with an overall global strategy. The new strategy is about consistency and our desire in procurement to simplify the way in which we work, to only invent things once if we possibly can,” he says.

Building realistic standardsFrom his experience leading events management category during the trial project, Akhtar says the most challenging part of the job was creating sensible standards, while allowing for regional differences.

“It is important we understand that the purpose of, say, a meeting in China may be different to a meeting in France. If it’s a tool which is used by our organisation and it has different priorities in different areas then we need to be conscious of that,” he says.

While GSK had to manage change carefully in introducing the new structure, the benefits

were so obvious, the hundreds of procurement professionals affected are likely to adopt new ways of working without difficulty, says Akhtar. “With any change management, some people have been very keen, and for some it has been more of a struggle. But it was plain that by adopting this approach there was a very tangible benefit both financially and in improved relations with our business stakeholders. It’s very difficult to argue why you would not do it.”

Finally, as an added benefit, some in the procurement team could end up with new business cards. “It is just formalising that there will be single point of contact globally. There will be more people with global in their job title than there have been,” says Akhtar. n

The new approach meant that all the resources in a single category across the globe could be used to gain a deeper understanding of supply markets and stakeholders.

“Maybe we’ve been guilty of trying to do lots of things simultaneously to a superficial level of detail,” says Akhtar. “By focusing the mind on those specific projects and by having a very robust programme management approach, with improved stakeholder engagement throughout the business, we were able to deliver a significant uplift in performance.”

Akhtar adds that all 12 categories were able to achieve “significant incremental benefits”, although he declined to reveal the specific savings figures for each one.

Throughout 2013, GSK’s procurement organisation will be introducing the new structure across all of its indirect spending categories. The team recognised that global leads could be placed anywhere in the business

including emerging markets such as Brazil.Although the global approach is looking for

cost savings, it does not seek to impose a single supplier on all regions or eliminate flexibility in buying. “We have suffered in the past by trying to force some markets to take single global contracts, and as a result they have failed, as a lot of our peers have also experienced around the world,” says Akhtar.

“Something that we have said consistently to all our key stakeholders is that managing a category with a single global strategy does not mean a single global supplier. In very few circumstances that is the case, but in the majority of cases we will probably use suppliers on a regional basis or on a local basis.

“But the approach that we take, the manner

CompanyGlaxoSmithKline (GSK)

nature of businessHeadquartered in the UK, GSK is a science-led global healthcare company that researches and develops a range of medicines and well-known branded products. The company has three primary areas of business in pharmaceuticals, vaccines and consumer healthcare.

Cost-saving programmesA major change programme will be launched, which will include a series of technological advances and opportunities to eliminate complexity, to transform long-term cost competitiveness in manufacturing and R&D. The programme is also expected to simplify supply chain processes, shorten cycle times, lower inventory levels and reduce its carbon footprint. Plans are also in place to initiate further restructuring of its European pharmaceuticals business to reduce costs, improve efficiencies and reallocate resources to support identified growth opportunities.

supply chain sustainabilitySuppliers to GSK are required to adhere to a Third Party Code of Conduct and demonstrate ethical standards within their business and supply chains. In 2012 GSK carried out environment and health and safety audits of critical suppliers to improve sustainability and strengthen supplier relationships.

Cost savings£2.5bn delivered through an Operational Excellence programme while the new change programme is expect to produce incremental annual cost savings of at least £1bn by 2016.

target savings£2.8bn of annual savings through the Operational Excellence programme by 2014.

total group turnover£26.4bn

annual spend£9.2bn

STATS AND FACTS

“Something that we have said consistently to all our key stakeholders is that managing a category with a single global strategy does not mean a single global supplier.”

Case study GLaxosmithkLine

CREATInG A GLObAL OUTLOOK

Procurement professionals in GSK must adopt a global approach to indirect categories, forging links with colleagues from around the world, says procurement director Malik Akhtar. “by formalising the structure of the teams, we’ve made sure that people are making best use of the information and resources available,” he says.

“People need to be comfortable with picking up the phone to the purchasing director in

Singapore to understand what the market is like in Asia Pacific.”

However, there has also been outside support from consultants to help get the programme up and running.

The new structure underwent a successful proof-of-concept project during 2012. All those responsible for managing GSK’s indirect procurement will be transferred to the new structure by the end of 2013.

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