Transcript Slide 1

Collaborating
our way to
success
LFA PSM Expert workshop
28 – 30 January 2014
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Where do we start
36.8%
On time and in Full (OTIF)
How does that compare
97.4%
On time and in Full (OTIF) – Africa (complexity) & Laggards are 80.5%
Source PWC Pharmaceutical Supply Chain report
How does that compare ?
How does the private sector achieve this ?
Supply chain performance:
The leading Pharmaceuticals and Life sciences companies achieve average EBIT margins (16.9%)
with a high number of inventory turns (16.3) and excellent delivery performance (97.4%).
The gap between the Leaders and Laggards is relatively low when it comes to EBIT margins and
delivery performance but relatively high when it comes to inventory turns (16.3 turns versus 3.8
turns, respectively).
Organizational set-up:
Pharmaceuticals and Life Sciences companies typically manage their planning, operational procurement and
delivery functions regionally, and their enabling, manufacturing and assembly and strategic procurement functions
globally.
They outsource about 6% of their planning and sourcing activities; a relatively high, 25% of their new product
development activities; and 20%-40% of their delivery activities.
Leading practices:
The most important value drivers for Pharmaceuticals and Life sciences companies are minimised costs
(100%), maximum delivery performance (94%), maximum volume flexibility and responsiveness
(78%) and complexity management (78%).
The Leaders focus on collaboration with key customers and suppliers and end-to-end supply chain planning.
They also continue to place great weight on continuous improvements in manufacturing.
Source PWC Pharmaceutical Supply Chain report
What can we take from that ?
• Profit motive drives performance ?
• Even the poor performers are doing better than we are
• Regional structures are key to performance
• Up to 40% of distribution is outsourced
• Cost / process improvement is the key activity followed
closely by delivery performance
• Flexibility and complexity management are also
important drivers
• Supply Chain is end-to-end and suppliers are partners
Thinking Versus Doing
Market Dynamics
Strategy
Epidemiology
Funding models
Disbursement
Human rights
Thought Leadership
Politics
Parallel Systems
Simplicity
Our Focus is so often on
the Mechanism or
process for delivery that
we lose sight of both the
objective and speed to
deliver in a simple and yet
effective manner
Silos all over the place……
Even when working in
partnership, partners nod at
the table, and all too
frequently go off and
develop their own solution.
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Reducing speed
Adding complexity
Reducing leverage
Adding fragmentation
Pilots often stay pilots
But the fact that many end up talking about a topic does
prepare the road for those who are likely to act on it
Pulling away from the pack
What started as a distraction
HEY…That’s
my Job !!
Became a
Benefit !
Every step forward was soon being replicated by multiple partners, especially
thought leadership and strategy….but as soon as we realized that timelines
were years rather than months we knew that we had a real chance of making a
difference…………….
Insourcing versus Outsourcing
And then everyone hires a consultant,
very often from the same pool
• Same old black suits
• Slow
• Can be dated in terms of
drug lifecycles
• Difficult to refresh
• Academic focus
Snapshot in time versus DNA
Snapshot or Project based work often
lacks the consideration of the evolution of
product lifecycles, data, funding, potential
for industrialization and scale up etc.
Capability needs to be
embedded, part of or
organizational DNA
Introduction….why transform ?
Old State Health Products:
Grant
Negotiation
Phase
VPP
PSA
Sourcing
Vendors
Country
What needed to improve :
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Poor Penetration (Punitive / Voluntary)
Lack of Control
High Agency Costs
Wrong Agency Incentive model
Agency ‘local versus Global’ expertise
Poor visibility of innovation
Lack of ownership / supplier relationships
Poor funds flow
Time / difficult to plan
Mediocre internal customer service
Little competition in pricing
Role of Global Fund largely executional
No volume leverage/Many spot purchases
‘It felt as though the roles were reversed and
we had the agencies performing the sourcing,
and the Global Fund was executing’
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Introduction….why transform ? – Indirect spend
We are:
GF Buyers
GF Buyers
GF Suppliers
Region
Region
Region
To :
Region
Region
Regionally
Managed
Procurement
Region
From :
Region
Launching a cost optimization program across the organization
Creating a category matrix, region versus category
Creating category strategies & improvement plans
Categorizing into Global categories and introducing category management
Taking strategic ownership of spend categories outside of the current portfolio
Building a simple front end user interface
Spend
GF
GF
Penetration
Stakeholders
Stakeholders
Region
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Globally
Leveraged
Categories
within a
Matrix
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Procurement 4 Impact: Our Objectives
Are directly aligned to the Global Fund’ s strategy
The Global Fund will become the benchmark organisation in the
sector for Sourcing and Procurement
Using simple, clear leading
edge processes and tools
designed by and for
the organisation
Minimising waste and
eliminating non value adding
activities
With measurable
performance
in value and lives saved
Ensuring effective governance
and watertight compliance
Building collaborative relationships with partner agencies
suppliers and donors
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Sourcing Achievements 2013
Organization
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New organization created by merging AMFm, Corporate & Voluntary Pooled Procurement
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New capabilities created, Business Planning and analysis, Active Pharmaceutical Ingredients and Formulation
Process
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Sourcing in-sourced from the Procurement Agents
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Procurement Agents re-purposed as Logistics Agents and placed in-house. New contracts to KPI Logistics agents
further downstream and increase accountability
Market Dynamics
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All outstanding Market Dynamics performance issues resolved (WHO ARV guidelines & Paed. ARV’s)
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Coalitions / consortiums formed with other donors and funders to leverage spend, specification and demand
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Indirect spend control initiated with grant teams (vehicles, civil works, IT & Lab supplies)
Performance
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137 Million value / savings delivered in year to-date
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Lead-times reduced from 9 to 6 months
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LLIN global strategy successfully rolled out with tender savings of $ 70Mil/annum)
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Training produced and delivered to FPM’s and PSM’s
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Spend through pooled procurement increased from $300M to $1Bn.
Supply Chain
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Supply Chain capabilities :
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Ability to forecast
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Track and trace system up and running
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Ability to measure delivery performance (OTIF)
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In country supply mapping for hi-impact countries under-way
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Rapid Supply Mechanism defined for all three diseases and in process
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Sourcing Objectives 2014
Organization
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Integrate Purchasing and Supply Managers(PSM’s) into Sourcing organization
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Re-structure to segregate operations from strategy
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Strengthen Indirect spend area
Process
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Launch E-Procurement toolset (reverse auctions etc.)
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Launch country catalogue / application tool and implement in High-Impact countries
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Launch pooled disbursement
Market Dynamics
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Complete market strategy for Tenofovir combination drugs
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Leverage Indirect spend into partner organizations
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Introduce new Chinese and Indian vendors to the Aid sector
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Create repeatable capability by partnering in depth with Market Dynamic focused organizations
Performance
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Deliver 8% value / savings
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Achieve 60% OTIF
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Lead-times reduced from 6 to 5 months
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Roll out Global strategies on ACT’s, Diagnostics & ARV’s
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Implement Rapid Supply Mechanism
Supply Chain
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Complete Supply Chain mapping for High-Impact Countries
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Establish common platforms for traceability at beneficiary level (Counterfeit /theft /diversion)
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Create base level training for in-country partners
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Overall Progress to Plan - Procurement 4 Impact – Goals
1. Develop and implement comprehensive
reengineering of the Procurement
Operating Model and Organization.
2. Develop Procurement as a strong
partner to create and facilitate Best in
Class solutions and delivery for the
Global Fund.
3. Create additional Value of 8% per
annum
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Just over $ 131M value added
5 more countries have asked to join pooled
procurement
Current OTIF disappointing at 36.8%
4. Increase spend penetration by 20% per
annum
5. On Time and In Full (OTIF) service to
countries to exceed 75 %
What does this mean…………
4.1 Insourcing of Sourcing
4.2 Pooled disbursement
4.3 Scale & Leverage
Become a
customer
Of choice
4.4 Organization and Tools
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4.1 Insourcing of Sourcing
• Voluntary Pooled Procurement has evolved into a Sourcing
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Team with greater capability
• Spend under control is increasing
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• We have created product, market and supply experts
• Relationships upstream and downstream are “owned”
• Reduced agency costs
• Changing the locus of control from manufacturer to buyer
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4.2 Pooled disbursement
• The award of framework agreements based upon
multiple requirements from multiple countries
• Direct payment to vendors = improved funds flow
• The ability to leverage fragmented spends
• The ability to incentivize desirable behaviors or
performance
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4.3 Scale & Leverage
• Partnering at various levels with donors and partner organizations
• Harmonized specification
• Harmonized demand
• Control – GF and partners dictate parameters
• Protecting Innovation
• Reduced Lead times 9mths-6mths-4mths
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4.4 Organization and Tools
• Comprehensive market intelligence
• Upstream Active Pharmaceutical Ingredient and
Formulation
• Cost of goods sold transparency
• Downstream supply chain
• Track and trace
• i-Fund
• Reference App.
• Tender and E-Procurement capability
• Rapid response mechanism
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Counterfeit / Theft / Diversion
Slight change of direction………..Aligned to FDA language and past activities and output based
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3 work streams
Data Driven
Prevent, Detect,
Respond
Prevent = Top 50 drugs,
with listed measures vs
cost vs effectiveness
………Identify
improvement
opportunities (direct
funding, Supply Chain
transparency,
technology)
Detect = Top x
measures, solutions
deployed in countries
based on cost
effectiveness, scalability,
platform, ease of
implementation…………
…..leading to a roadmap
Respond = contract
terms around reporting,
comm’s plans, PR
involvement, AU &
SADC
Working Group
- Reg. bodies / Health Ministries
- Global Fund / Partners
Prevent
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Identify TOP 50 aid funded
drugs into Africa and create
a matrix
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List manufacturer
counter measures
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Plot against
incidence
Look for improvements in
prevention
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Direct Funding
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Supply chain
online tracking
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Technology –
Harmonization of
prevention
measures / new
tech. i.e. random
serialization
Detect
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Respond
List Top 10 Measures /
systems with service or
technology providers
List solutions deployed in
Top 20 (High Impact)
countries, in a matrix:
• Cost effectiveness
• Scalability
• Platform
• Ease of
Implementation
Roadmap
Other tests per country
(minilab etc.)
Interfaces with prevention
Data Integrity underpinned by WHO
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Contract terms to
encourage data collection
at both country and
manufacturer level
Communication Plans for
PR’s and Governments /
better information of
prevention and
enforcement
Promotion through local
champions, AU / SADC
Dashboard reporting of
progress
• To include manufacturer data
• Dashboard reflecting trends
• Several levels
Supply Chain
Improving our forecasting accuracy
To support our planning process we are leverage the
way that we interact with our primary recipients.
Today
The Future
Demands are triggered by
PSM plans which are
presented in an
inconsistent format.
Overall demand will be
calculated from available
funding for successful grant
applicants
Overall demand is
calculated reactively by
hand, this in effect means
that we purchase on a spot
basis in most instances,
creating long lead times.
This demand will be placed
on manufacturers as an
underwritten volume
Orders are placed on PSA
for onward transmission to
manufacturers
Detailed PR requirements
will be presented in a
consistent format
We will use a planning tool
to convert our forecast in
to specific orders by type
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i-Fund for The Global Fund
Knowledge & Collaboration
Partners
Suppliers
GF PSM’s
Suppliers
Equipment ,
Goods and
Services
team
Health
Products
Team
The Support
Group
Country Ownership & Supply
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