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How procurement can add value to the wider business - Novartis' approach.

Category managementBlog

In the first presentation in the Procurement Forum in Zurich, Wolfgang Rauch, CPO of Novartis Pharma explained how his organisation sought to provide more value to the business.

 

Purchasing is often considered an administrative and transactional element in business. This notion appears to pertain both inside and outside the function. But those in the supply chain may have a trump card.

 

“Procurement is the best networked function in any industry,” Rauch maintained. “So the question is: how do we position ourselves to leverage that network?”

 

Novatis Pharma has launched a programme to push the function to the next level of performance and drive savings and productivity enhancements. The key to this is managing internal business requirements and managing the supply chains to service these needs.

 

“We collect business problems and organise solutions around those problems.”

 

The results have been impressive. From average savings generated in 2006 – before the programme’s implementation – procurement was recording annual savings of 2%. Now, they are exceeding 6%

 

In 2013, they have reported $700 million in hard savings, which, given Novartis’ annual spend of $10 billion global, represents a significant achievement.

 

The key enabler in this process is through the skills and capabilities of staff. Clearly, positioning the function not just as a protector of productivity but as a trusted advisor to maximise output is a sharp change.

 

This requires a radical change of thinking for many in procurement as, to delivery growth and innovation, the historic emphasis on productivity may be trumped by the needs for speed-to-market. In terms of training, this required a career ‘relaunch’ for some, with new behaviours demanded of buyers.

 

This was further enabled by structuring the team around the business. “Procurement needs to mirror the global organisation to implement demand management,” Rauch stated.

 

However, these initiatives, should further the aim of Rauch to speed the “transformation of procurement from a back office function to a service provider of real value for the business.”

Jonathan Webb
Posted by Jonathan Webb