Overcoming legacy structures and understanding local needs is vital for the success of the Procurement department says GlaxoSmithKline’s CPO.
GlaxoSmithKline’s (GSK) complex legacy structure can be a hindrance for its Procurement function.
The company’s Chief Procurement Officer, Jean-Yves Rotté-Geoffroy, overcame this obstacle by adopting a company-wide procurement strategy, which also enabled GSK to radically increase value from suppliers’ interactions.
Forming a strong Buying Goods and Services policy has also been essential, Rotté-Geoffroy adds. “Policy and strategy, as well as a rigorous execution through Category Councils, have been very successful. Procurement delivery has doubled in three years and the increase of P&L impact has increased by 54% in 2015 compared with the previous year.”
GSK’s global reach also brings its own challenge, but Rotté-Geoffroy is clear about how this challenge can be faced. “Increasingly we are making a difference between central and global. While some categories of spend can and should be managed centrally, most require a truly global mindset and, for me, global means understanding all the local needs. A global strategy needs to work in Japan, Nigeria and Brazil. The choice can be to buy locally.”
While some categories of spend can and should be managed centrally, most require a truly global mindset and, for me, global means understanding all the local needs. A global strategy needs to work in Japan, Nigeria and Brazil. The choice can be to buy locally.
Rotté-Geoffroy’s proudest achievement in his current role is “bringing the decision on the reinvestment of savings in indirects to the board of management via a finance-led spend management framework.
“A recent audit shows that the money is real – savings are brought to the bottom line and some can be reinvested, but the decision can be made at that level.”
Speaking broadly about the Procurement profession, Rotté-Geoffroy gives the following advice: “Procurement is not only a function, it is also an absolutely business-critical process. So a company should ask itself how it can best leverage the supply base – accessing that fantastic pool of knowledge, innovation and talent in the most financially optimal way?
“Procurement has the potential to contribute significantly to any business, because suppliers do. But it needs to move from a transactional and process approach to really help shape and deliver business strategy.
“To do this, Procurement must use great people and leadership skills to facilitate change across a diverse stakeholder group, and combine this with mastery of a complex skill set, including sophisticated analytical approaches to unlock value, such as design-to-value, should-cost analysis, and make vs. buy analysis, to name a few of the tools I have seen bring the most value to GSK.
“Mastery of these tools, a deep understanding of business needs and a unique knowledge of supplier markets are the fundamental components of good sourcing strategies for any company.”
GlaxoSmithKline’s procurement vision
The GSK Procurement function has an annual spend of £13.5 billion externally, across direct and indirect categories, broken down into:
- Core business services (CBS), which handles indirects
- Global manufacturing and supply (GMS) covering directs
- External Supply (ES)
- Contract Manufacturing Outsourcing (CMO)
- Vaccines (Vx) Procurement, which partners with the Vaccines business unit
There are more than 800 people involved in procurement, with a presence in more than 50 countries in a mix of category leadership and business partnering roles.
Formed in 2000 following the merger of Glaxo and SmithKline Beecham, the science-led global healthcare company reported a turnover of £23.9 billion in 2015, and an operating profit of £10.3 billion. GSK comprises three main business divisions:
- Pharmaceuticals – which accounts for 60% of the Group’s turnover
- Vaccines – GSK acquired Novartis’ vaccine business in January 2015, creating one of the largest vaccine operations in the world, developing, producing and distributing over 1.9 million vaccines every day
- Consumer healthcare division – which makes up a quarter of the Group turnover – developing and marketing products in Wellness, Oral health, Nutrition and Skin health, with a portfolio of some of the world’s most trusted and best-selling brands, which include Sensodyne, Voltaren, Horlicks and Panadol