What Drives a Best Practice Sourcing Strategy?
In this interview, Karen Mansell, Head of Corporate Procurement and Business Process Outsourcing, AstraZeneca, speaks to Barbara Hodge, Premium Content Editor for SSON, about developing an intelligent sourcing strategy, leveraging inhouse expertise and optimising the sourcing process.
SSON: Karen, can you describe your new role at AstraZeneca, and what it means for the corporation’s sourcing strategy?
K Mansell: Mine is essentially a new role, and I wear two hats. One is corporate procurement, which is structured under a global Chief Procurement Officer and includes R&D, sales & marketing, operations, IS, all US business and corporate procurement units. I support the centralised functions such as HR, finance, tax, and treasury advisory, as well as all business travel services --I'm effectively the procurement lead for all indirect spend in those categories across the globe. So, I have corporate responsibility for P&L as well as global category responsibility for procurement.
The other hat is the BPO Center of Excellence. To explain how this evolved: when we started really looking across the business we realised that although many departments were starting to do outsourcing, there was no standardised approach. We wanted to ensure that we were optimizing all our outsourcing activities as well as reducing risk at the enterprise level. That effectively started us off in this direction. I have been developing a small team since March this year. We number three in total -- small but effective! Called the BPO Center of Excellence, we support all outsourcing activities with coaching, consultancy and project execution, where needed.
On a pan-AstraZeneca level, we're also monitoring all outsourcing activities, ensuring they deliver to promises, track metrics, and manage some of the strategic relationships. We've created a steering group at this level, which reports into the board. So we are able to represent, end-to-end, across the globe, and across all P&L units, what outsourcing looks like in AZ.
SSON: And what were the drivers, apart from the obvious 'optimisation'? Why was it important to develop a new sourcing strategy?
K Mansell: It's primarily about risk management, consistency, scale and leverage -- but also expertise and innovation. We've had a number of outsourcing contracts in the past, which suffered from inadequate sharing of best practice, overlapping roles, paying for advice and toolkits many times over, etc. Where we've not done very well previously is in ensuring, as a new area approaches BPO, that they are aware of what's gone before, in order to extract the best value and the lowest risk out of our knowledge base.
So, in the past we'd been in the habit of looking around internally, deciding that no-one had the outsourcing experience we were looking for, and then buying that in. We'd go to an outsourcing advisor and effectively purchase the entire team -- including procurement people -- to take the project forward, write the RFP (Request for Proposal), help with supplier evaluation, project management work, etc. We also had the tendency to constantly rewrite our contracts, instead of working from a standard template. So we'd carry the same up front costs for each new outsourcing deal.
Now we have a set of tools and templates sitting in a library, which is accessible to all. From a financial perspective we've already achieved considerable savings. Speed and time is also much improved. For example, in tax and treasury we have some withholding tax issues, which are complex. We've now set up some best practice work streams and we've tagged people -- experts -- who sit in tax, treasury, or the legal department, and who have the prior experience to answer these questions quickly. This effectively creates a COE.
SSON: How does your BPO work fit into AstraZeneca's overall sourcing plan?
K Mansell: We are replacing the sourcing advisory piece of the outsourcing lifecycle. So, as an area moves through the various stages of an outsourcing contract, we'll help with some of the up front diagnostics, decision-making tools, and make or buy decisions. At the end-to-end sourcing advisory level, we look at RMPs, supplier selection, evaluation, due diligence, market or competitor intelligence through to contract or post contract management, from a commercial perspective. My team is effectively replacing the reliance on third party advisory at that point.
SSON: How do you manage that with a staff of only three?
K Mansell: Yes, three is small! But we are building more of a virtual network model -- building capability and supporting existing project managers and procurement people. In other words: we are trying to teach people to fish rather than do it all for them.
SSON: How did the crisis of last year affect AZ's sourcing strategy deployment?
K Mansell: AZ had had outsourcing on its agenda for a while, but as the pharmaceutical industry tended to be cash rich, so there had not been the same pressure to pursue lean exercises, as was the case elsewhere. Top down focus seemed to concentrate more on addressing future talent needs and shaping the business for the future. With the events of last September, however, we've become almost radical in our approach. For example, R&D would never traditionally be an option for outsourcing, as it is heavily IP-focused and represents the crown jewels of the organization. But we are now working with that department to change strategies -- breaking down the end-to-end process and helping them understand that not every part of the process has to be ring-fenced; that elements of it can be taken out.
SSON: How are you seeing changes in sourcing behavior as a result of this new approach?
K Mansell: We have what we call a low cost country strategy -- so we are in China and India. We run small sourcing teams in both markets, which have traditionally looked at the active product ingredients or provided support for supply chain manufacturing, as part of the operational piece. As we move forward with our outsourcing strategy, we are looking at the growing capability in all our emerging markets, but especially from an original delivery center point of view. So we are re-evaluating what supplier relationship management looks like coming out of those areas.
Traditionally, when you put an offshore contract into a place like India, you then go ahead and try to manage it from the US or the UK, or wherever you are based. What we are looking at doing is to put some of that supplier management capability on the ground, alongside the preferred supplier relationship. That is actually more closely aligned with the ethos of our procurement methodology where we try to get closer to the supplier base and understand what the innovation and insights look like, so we can marry them up to the business requirements and really drive some aggressive supplier development programs.
SSON: What are your greatest challenges?
K Mansell: In theory we all understand the reasons for going through this change, but in practice it is hard navigating the organization. Also, as a traditional R&D organization -- where it can take 12 years to get a product to market -- we are used to operating at a slower pace. We're not like the financial services or telecoms industries, where things change fast. Our organizational culture is built on proving a business case before getting the go-ahead. So we are going through not insignificant changes.
SSON: So, what does the sourcing future look like?
K Mansell: We are looking at the future from a number of different aspects. The Center of Excellence is itself currently owned by sourcing -- but it really needs to be owned by the business, and driven by it. I believe it should become less of a procurement activity, and more driven by the business.
In terms of the procurement strategy, on the other hand, our aim is to ensure risk mitigation and to bring innovation and insight from the supplier base into the customer base. I think we are currently on that path, and expect that we'll be really good at it in a few years. The next thing will then be to challenge ourselves to bring more diversity into what we are doing, into our sourcing. We'll need to expand the supply base to stay ahead of the game. We're currently driving our strategy through our key hubs -- the UK, Sweden, and the US -- and are starting to drive it through India and China, as well. But the market is always moving and the challenge is to make sure you stay ahead, to benefit from new sourcing opportunities as these become available.
First published on the Shared Services & Outsourcing Network (SSON)
Written by: Barbara Hodge, Premium Content Editor for SSON.
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