Pharmaceuticals firm Astellas Pharma carried out a procurement transformation “underpinned around risk” to resolve regulatory issues and mitigate third party supplier risk.
The transformation was founded on a “holistic, multifaceted” approach which included targeted change management, rationalisation of suppliers and use of risk technology.
Speaking at the CIPS Best in Procurement event in London, Nick Jenkinson, senior director of procurement and CRE, said: “We underpinned a lot of the transformation programme around risk and then tried to look at the whole value proposition. The overall risk programme linked to that was a multifaceted approach, including looking much more holistically at risk.”
The Japanese firm operates globally including Europe, Africa, Asia, the the US, with around $12bn in sales and a spend of $3.7bn.
The company had to rethink its procurement strategy following “a much-publicised major regulatory issue” which resulted in temporary suspension of its operating license in 2016.
Astellas was suspended between 2016 and 218 following violations of the Association of the British Pharmaceutical Industry's code of practice, including lack of training of agency nurses and failure to provide up-to-date prescribing information for a number of medicines.
The process to transform procurement involved assessing what was already in place and developing an approved supplier risk framework, working with the business to improve corporate accountability, rationalising high-risk category suppliers, and implementing a technology platform globally to support third-party supplier risk mitigation.
Jenkinson said the changes were about procurement bringing value beyond savings. Change management and communication played a key role in bringing more understanding of the importance of accountability and responsibility for suppliers.
He added: “In specific high-risk areas, there were way too many suppliers so rationalising down became the next thing.”
Astellas used a risk programme supported by technology and automation, including contract and sourcing technology, procurement-to-pay technology, and new delivery centres in India and Romania.
Jenkinson said: “The core factor for technology was having a good source-to-contract foundation, which we implemented quickly, probably in the first nine months we rolled out globally.”
Machine learning and artificial intelligence tools are used to gather data from “a million different articles and 600,000 different data sources” to create targeted reports on identified risk areas and monitor existing suppliers.
The transformation programme has been rolled out across 35 countries, including in the US and Europe, and is currently being set up in Asia and Japan.
Previously, the procurement department didn’t have much involvement in supplier risk, it was run by the ethics, compliance and legal team, according to Jenkinson.
“It was very focused on standard operating procedures and policies. So, it was, ‘Have we got the right paper in place?’ as opposed to trying to mitigate through risk,” he said.
However, Jenkinson said that now: “We own the strategic direction, we own the operating model, and we own the risk. We haven't outsourced any of that, we have the risk expertise in-house.”