Procurement Leaders in Chicago: The Johnson & Johnson Experience — A CPO Perspective (Dispatch 2)

Hans Melotte, Worldwide VP and Chief Procurement Officer for J&J, gave the first opening keynote at the Procurement Leaders Forum this morning. He began his talk by sharing a range of metrics and numbers at J&J within procurement. To start, J&J has a truly giant procurement organization, with some 1,521 FTEs procurement globally. Employees are split geographically as follows: 53% NA, 24% European, 8% Latin America, and 15% Asia (largely based on the size of businesses in global markets). In total, J&J has $25.6 billion in spend, a number representing 40% of revenue overall.

Melotte shared he does not like the classic "direct vs. indirect" spend segmentation. Rather, in his words, J&J "talks about supply chain categories, R&D categories and services categories." Based on this, J&J's spend is segmented as follows: $11.1 billion within the supply chain area (direct materials + categories such as logistics, facilities management, etc.), $12.1 billion within R&D and $2.3 billion in "other."

More curious is the sheer number of suppliers J&J has in driving a "business-centric" procurement organization: 87,000 suppliers overall. This, in Melotte's words, is an "obscenely high number" that "drives an awful lot of complexity." Specifically, suppliers are broken out as follows: 8,000 in Latin America, 26,000 in NA, 35,000 in EMEA, and 18,000 in Asia Pacific. A giant vendor master indeed!

In terms of strategy to drive effective (and efficient) procurement, Melotte suggested that J&J is focusing on a corporate shared services approach for areas like market intelligence (category/commodity, etc.), compliance tracking, training, people development, etc. In his words, "at middle office level or back office level, we will aggregate from both an efficiency and effectiveness perspective." However, areas such as supplier enabled innovation, supplier management and category spend management remain at the core of driving "differential" capability for J&J.

Stay tuned as our coverage of the Procurement Leaders Forum (Chicago) continues.

- Jason Busch

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