Case studies
European Strategic Savings Programme
SECTOR
Pharmaceuticals
SPECIALISM
Procurement
FOCUS
Cost reduction to support global patient-centric mission
OVERVIEW
This global pharmaceuticals organisation had a portfolio which included drugs used for the treatment of acute and chronic medical conditions, for which there is currently no cure.
The extremely high R&D and manufacturing costs led to the client being the only organisation supplying these products, with the risk that the drugs could become orphaned - the active compounds and successful drug formulation have been discovered, but they would no longer be produced due to low profit margins and would leave patients with unmet debilitating medical needs.
To improve the affordability of these products whilst also protecting its bottom-line profitability the company decided to reduce its global operating costs as a means of freeing-up cash to support its commercial model.
We led the European region activities within this global cost reduction programme.
VISIBILTY
Working closely with Finance, Accounts Payable, and IT departments £380M of external spend data was extracted from Finance and Purchase-To-Pay systems across Europe (15 countries) and integrated into a bespoke European Spend Cube which included a spend categorisation structure and the ability to analyse data to multiple levels of hierarchy.
Master data was then cleansed, completed, and validated in collaboration with budget holders for operations departments and Shared Service functions to provide an agreed data set.
Analysis of the Spend Cube in consultation with all relevant departments across the organisation resulted in £170M in-scope spend, of which £67M was addressable for the purposes of the cost reduction programme.
VALUE
This programme unlocked annualised cost reductions of £9.3M, equating to 14% (target range 7-12%) of total in-scope spend in 18 months.
In-Category cost reductions were in the range of 12-70%, with spend cessation of 100% for promotional give-aways.
Return On Investment for this programme was 12:1 .
£9.3M
Annual cost reductions
12-70%
In-Category savings
12:1
Return On Investment
EFFECTIVENESS
We set out, and managed to completion, the Procurement strategy and programme including targets, resourcing, and timelines phased activities according to the scale of opportunities, complexity, and risks.
The Category-focussed Sourcing programme comprised 12 Primary Categories and 80 Sub-Categories. Procurement Category Leads formed cross-functional Sourcing teams comprising business stakeholders, and were responsible for creating Category-level strategies required to achieve or exceed targets.
Spend categories included the following :
Print & print management
IT, networks & telecoms
Phase IV clinical trials
Facilities management
Haulage/Pre-wholesaler
Capex
Energy
Marketing
Medical Communications
Sourcing activities included coordinating the definition of business requirements and key operational milestones, formal enquiries, evaluation of supplier proposals, commercial and contractual negotiations, recommendations, as well as supplier selection, onboarding, and the transition of supply arrangements for goods and services.