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Tuesday, September 2, 2014

Good Procurement Operations Can Come Quickly

Astellas, a Tokyo-based pharmaceutical company, generated net revenue of $10.7 billion in 2012 and is among the 20 top pharma manufacturers in the world. It operates in more than 50 countries and employs 17,500 people yet is still bringing its procurement operation to maturity.

The current operation took shape in 2006 after the merger of two companies, Fujisawa and Yamanouchi, in the previous year that created Astellas, says Robert Saini, director of procurement for the U.S. business in Northbrook, Ill. Sophisticated practices were rapidly implemented to assure that supply chain management (SCM) became efficient, profitable, and, most import, aligned with company goals. If procurement is still in a learning curve at Astellas, the company is looking to make it a dwindling one.

Credit: Stuart Miles at FreeDigitalPhotos.net

Credit: Stuart Miles at FreeDigitalPhotos.net

Saini discussed the SCM approaches that he and his team used to drive value for the company and customers at last week’s Chief Procurement Officer Summit in Boston, which was presented by Aberdeen Group.

As covered in previous articles on the CPO summit here on ThomasNet News Procurement Journal, it is worthwhile to note how motivated companies and good leadership can revamp a procurement operation and achieve swift gains in SCM. Saini’s work at Astellas shows how a strategically focused operation run by talented procurement and SCM professionals can, in a relatively short period, make significant contributions to a company’s financial performance.

“Our charge is to drive value for the company,” Saini noted. Factors influencing this include developing trust and credibility within the company and among suppliers and customers, flexibility and agility in dealing with issues, reliable delivery, building real and perceived value among customers, and, of course, cultivating relationships.

To achieve these goals, Astellas developed a standardized approach to global procurement that is flexible and scalable. Saini said procurement at Astellas optimizes the total cost of goods and services “by promoting the principles of cost consciousness, due diligence, and cross-functional collaboration.”

The advantage that procurement has is its unique corporate perspective. “We have a sense of business, finance, procurement, operations, and the market,” he noted. In trying to anticipate challenges, Saini encourages his team to ask “So what?” questions. “Try and answer the question nobody knows how to answer,” Saini recommended, to see things before others do.

Additional tips he offered include:

- Always act with the end in mind

- Compare the effort to be expended in an activity with the possible return

- Make sure a budget exists prior to negotiations with a supplier

- Always fill in subject-matter gaps.

Saini also advised attendees to view requests for proposals (RFPs) as a tool for determining supply prices and supplier capabilities rather than an answer to a particular need. He added that, at times, auctions could be more effective than RFPs in rapidly generating supplier interest.

Deadlines are vital in SCM, but Saini said Astellas fits due diligence into the supply timeline. The company first looks to “constructively challenge” a supplier “to finalize the true deadline” and then “prioritize key ‘must’ versus ‘want’ elements of the procurement process based on the timeline and focus efforts accordingly.”

Prioritizing is essential. In his closing comments, Saini stressed the importance of knowing how many major initiatives can be addressed by procurement and establishing guidelines to manage active workloads while monitoring passive workloads.

As always, a critical component is executive backing, especially by senior leadership and spend decision-makers. CPOs and their teams need to maintain an “ongoing pulse of the organization” and “be aware of key initiatives and strategies to help navigate success.”

Think of yourself, he counseled, as a business adviser or entrepreneur, and, perhaps most important, “be visible” within the company.

 

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