AstraZeneca on the Role of Supplier Engagement and Development in Saving Billions (Part 2)

This post is a continuation of an earlier one highlighting AstraZeneca's supplier development efforts, which are currently helping to contribute to an overall procurement initiative aimed at saving the company billions (yes, you read that number correctly). How is AstraZeneca pursuing supplier development and engagement? First, they're taking a highly selective program approach, focusing on their largest and most important suppliers. Next, they're taking a specialized approach with those who make it into the program, which includes "workshop-driven" models. These tend to be "very labor intensive" and AstraZeneca acknowledges that they "can't do it for everyone." The model involves taking category specialists and embedding them with suppliers for weeks at a time.

For example, Samantha Covell, AstraZeneca's head of IS Procurement, noted during her presentation at the Forrester Sourcing and Vendor Management Summit last week that "A supplier might be buying travel poorly." In this case, AstraZeneca would send in their own category specialists to focus on cost reduction in the area, and would share in the savings. In other areas, the pharma giant might focus on other supply chain-focused areas such as eliminating unnecessary inventory, movement, waste, etc. One of the keys in all of these initiatives is enabling frontline team members to focus on constantly developing insight into "supplier analysis, market analysis, supplier capabilities, cost basis/total cost models and methods of contracting."

In other words, AstraZeneca's programs sound eerily reminiscent of the success that Honda -- and to a slightly lesser degree, Toyota -- have realized over the years by knowing as much (and ideally more) about their supplier's cost structures than the suppliers themselves, and also turning to supplier to tap innovation. In addition to analyzing supplier cost structures and collaboratively working on joint development ideas, from a specific supplier performance management perspective, AstraZeneca focuses on tracking a range of performance metrics, tracking KPIs, SLAs, scorecards and supplier audit. They also engage in a formal SRM process which includes "contract reviews, supplier performance reviews, dispute resolution and escalation, supplier collaboration, account plans plan, and formal issue logs," among other areas.

What lessons can we learn from AstraZeneca's efforts to apply to our own? Stay tuned for the final post in this series to find out.

Jason Busch

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