AstraZeneca on the Role of Supplier Engagement/Development in Saving Billions (Part 1)

At the Forrester Sourcing and Vendor Management Summit last week in Chicago, Samantha Covell, Head of IT Procurement at AstraZeneca, shared a number of details outlining her company's efforts at driving significant procurement savings through better supplier engagement and development. AstraZeneca has set some fairly lofty goals for savings in recent years, owing to the ambition of CPO/CIO Jon Kirby. According to Samantha, after Jon came on board, AstraZeneca made the commitment to save $1.2 billion (on a total spend of over $8 billion) over three years. Yet owing to the early success made in tracking to reach this goal, the company doubled-down on its savings efforts (yes, you read that correctly). But they're going about it in a largely unorthodox method, as Samantha explained.

For one, AstraZeneca is focusing not just on category-based savings goals through strategic sourcing, but rather on engaging team members in ways that fundamentally alter the approach and role of procurement. In this regard, AstraZeneca procurement team members now follow a "2, 2, 1" approach to managing their time each week. This guideline suggests that each member of the team should spend 2 days per week working with suppliers, 2 days engaging the business and 1 day doing everything else. As you can probably tell already, supplier development figures prominently into their model to drive savings. In this regard, AstraZeneca has currently taken 10 suppliers through rigorous supplier development initiatives and an additional 34 are currently going through the same process.

This program entails a number of objectives including, "joint target setting based on elimination of waste, inflexibility and variability, development and transfer of world class capabilities from buyer to supplier, joint resource investment from both suppliers and buyers and driving change in behaviors to raise aspirations and long-term commitment." In short, AstraZeneca's objective in this development model is to change behaviors across the whole supplier relationship. And it's not about cutting margins through sourcing. In this regard, Samantha suggests, "We don't go after supplier margins unless they're ridiculous." Rather, "We are entering into a partnership" in these efforts, she suggests.

How do supplier development initiatives look in practice at AstraZeneca? Stay tuned for Part 2 of this post.

Jason Busch

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