Leveraging Information Systems to Support Building Strategic Sourcing from Scratch

Transcription

1 Leveraging Information Systems to Support Building Strategic Sourcing from Scratch Presented by Mary Kachinsky Senior Director, Cubist Pharmaceuticals Richard Waugh VP Corporate Development, Zycus Inc.

2 Agenda 1 Cubist Overview 2 Enabling Strategic Sourcing Through Data Analysis 3 Zycus: The Value of Systems & Tools 4 Key Take Away 5 Q&A 2

3 Agenda 1 Cubist Overview 2 Enabling Strategic Sourcing Through Data Analysis 3 Zycus: The Value of Systems & Tools 4 Key Take Away 5 Q&A 3

4 About Cubist Cubist Pharmaceuticals is a public, biopharmaceutical company (NASDAQ: CBST) focused on the research, development and commercialization of products that address significant unmet medical needs in the acute care environment Founded in 1992, company headquartered in Lexington, MA, currently employs ~ 900 people with 2013 Revenue of $1.1B Recognized as a top-performing company: The Boston Globe s Top Places To Work, Fortune s 100 Fastest Growing Companies and Deloitte Technology Fast 500 Philanthropic efforts focused on supporting STEM education 4

5 Cubist Mission What sets us apart Through our highly differentiated products and culture, our mission is to be the global leader in transforming the lives of patients in the acute care / hospital environment. 5

6 Building Blocks of Growth 5 Year Goals $2 Billion in Global Revenue 4 Product Candidates in Late-Stage Clinical Trials $700 Million in Non-GAAP Adjusted Operating Income A Highly Differentiated Culture 6

7 Cubist Product and Pipeline Candidates Therapy / Candidate CUBICIN (daptomycin for injection) Phase 1 Phase 2 Phase 3 Filing Market Milestones/Highlights $1B in Revenue ENTEREG (alvimopan) DIFICID (fidaxomicin) SIVEXTRO TM (tedizolid phosphate) ABSSSI /cssti (IV/Oral)* SIVEXTRO TM (tedizolid phosphate) HABP/VABP (IV/Oral)* Ceftolozane/tazobactam cuti /ciai* Ceftolozane/tazobactam HABP/VABP* Surotomycin in CDAD* Bevenopran in OIC* PDUFA June 20, 2014; EU MAA filing accepted for review 1Q14 Initial sites open, patient screening underway NDA submitted April 21, 2014 Expect to initiate Phase 3 in 1H14 Ongoing; data mid-2015 Long-term safety trial fully enrolled CB-618 β-lactamase inhibitor* Dosing complete *Potential indications sought, pending outcomes of clinical trials and regulatory applications/approvals. Information as of April 22,

8 Agenda 1 Cubist Overview 2 Enabling Strategic Sourcing Through Data Analysis 3 Zycus: The Value of Systems & Tools 4 Key Take Away 5 Q&A 8

9 The Value of Data Opportunity Analysis Resulted in Recommended Path Forward Objective: Conduct opportunity analysis based on full year spend to identify sourcing opportunities, establish savings targets, and create roadmap and operating model Activities Data from GL, PO and supplier invoices were analyzed to create a spend cube for Cubist s purchased goods and services Developed detailed understanding of the procure to pay process (P2P) Conducted stakeholder interviews focused on where and how money was being spent Key business processes were mapped to identify potential Sourcing improvement opportunities Outcomes Developed opportunity overview for each category including spend, sourcing opportunities, savings estimates, implementation plan, etc. Sourced and purchased low cost tools/systems that could be implemented to automate data analysis, cost savings tracking and RFX capability Identified Oracle configuration changes and enhancements; outlined phased implementation plan Implemented catalogs for low value/high volume transaction suppliers 9

10 The Original Analysis Of ~2,100 Suppliers Was Performed Manually Illustrative View Of Cubist Supply Base 90% of Spend is with 10% of Suppliers N=~200 Total Spend 10% of Spend is with 90% of Suppliers N=~1,900 Largest Suppliers Smallest 10

11 There Were Three Pillars To Sourcing Recommendations At Conclusion Of OA Elements Of Approved Sourcing Charter Embed Professional Sourcing Execute Quick Win Negotiations Initiate Wave Plan for Category Sourcing Initiatives Conduct Supplier Summit with key suppliers Implement Processes & Systems Automate processes Invest in systems to improve spend transparency and spend management Invest in Research Tools to conduct Market Assessment & Benchmarking Sourcing Organization Construct Create a center-led Sourcing network Hire FTEs to perform Strategic Sourcing across Cubist with min bureaucracy 11

12 Lunch & Learn Promoted Sourcing Success And Helped Educate Colleagues Company-wide Meeting Illustrated Sourcing Process Shared Case Studies Interactive Q&A Celebrated Sourcing Successes 12

13 Communicate The Different Ways Sourcing Contributes To Savings Strategic Sourcing Savings Levers ( Demand & Strategic Process Savings = Requirements + X Sourcing + Improvement Management ( Behavior Change/ Compliance Increase spend awareness Perform strategic sourcing activities Streamline sourcing processes; eliminate waste Understand level of change required High Performing, Efficiency and Growth Oriented Companies Rely On Strategic Sourcing To Create Fuel For Growth And Contribute To EPS 13

14 Multiple Savings Types and Stages Are Used For Tracking And Reporting Cost Reduction Sourcing Savings Types Demand Management Process Improvement Cost Avoidance Sourcing Savings Stages Identified Savings Negotiated Savings Realized Savings 14

15 Savings Are Reviewed With Multiple Stakeholders Throughout The Year Audience and Frequency Sourcing Savings Timing and Activities Q1 Q2 Q3 Q4 C-Suite Report savings progress 2x / year Department Heads (quarterly) Progress against departmental goal Risks and roadblocks Compliance with Corporate Procurement Policy New opportunity identification Finance (ongoing) Update spend forecast Reprioritize programs Review savings 15

16 Agenda 1 Cubist Overview 2 Enabling Strategic Sourcing Through Data Analysis 3 Zycus: The Value of Systems & Tools 4 Key Take Away 5 Q&A 16

17 Zycus: The Value of Systems & Tools Technology Enablers for Procurement Transformation Zycus Overview Best Practices for Sequencing Technology Transformation Procurement Transformation Playbook 1. Start with Spend Analysis 2. Drive Sourcing Savings 3. Sustaining Savings 4. Track Savings 17

18 About Zycus Integrated S2P Suite Track Savings through to Financial Statements $ Ensure Compliant Procure-to-Pay cycle on a daily basis Get Visibility into your Spend Data Source-to-Pay suite Manage Suppliers and Track their Performance Use this Information to Source Efficiently Get into Contracts with chosen Suppliers and Track Compliance 18

19 Technology Transformation Sequencing Gartner s Best Practices for Sequencing Procurement Solution Investments (2012) Classic Sequence: Spend Analysis 1 1. Spend analysis opportunity identification 2. Strategic sourcing negotiate agreements and create a structured sourcing process 3. E-procurement manage compliance by making it easier for requisitioners to buy the right thing 4. CLM make agreements easy to find 5. SBM proactively manage supplier performance Supply Base Management 5 Contract Lifecycle Management 4 e- Procurement 3 Sourcing 2 Immediate Need May Necessitate Exceptions e.g., "Cut Costs Now Changes First Priority to e-procurement, Then Return to Classic 19

20 Step 1. Start with Spend 100% 50% 0% Spend Visibility % Spend With Line Item Visibility World-Class Peer Group World-Class Procurement Organizations Nearly 2X More Likely to Have Line Item Spend Analytics Source: Hackett Group Benchmarks Spend Analysis Refresh Frequency Source: Gartner Strategic Sourcing Suite Magic Quadrant Reference Survey

21 Spend Analysis How it Works CUSTOMER SOURCE SYSTEMS ZYCUS AUTOCLASS & ianalyze SAP Data Classification Spend Reporting Data from all source systems across all BU s Oracle P-card Secure FTP Area Spend Transactions (Input) Scheduler AI-Based AutoClass Staging Area ianalyze Others Key Features Patented, artificial intelligence data classification using statistical models Handles cryptic, abbreviated & misspelled data Multilingual classification capabilities Automated classification at K line items per hour AI Benefit Using artificial intelligence, these tools learn patterns that help them automate the process of cleansing and rationalizing the data. This is a very effective example of transforming inflexible legacy systems into something highly usable without having to modify the source system. The Hackett Group: 2014 CPO Agenda 21

22 Step 2: Drive Sourcing Savings Set Performance Targets Performance Area Laggards Average Best-in-Class Measurement Spend Under Management 22% 62% 80% Sourcing Effectiveness: Potential Savings Pipeline Realized/Implemented Savings Source: Aberdeen Group Benchmarks 2% 8% 12% Savings Verification: Finance-Approved Bottom Line Savings Deploy esourcing Tools RFQ/RFP RFI Auction Average Savings 12% 12% 23% 65% Average Cycle Time Reduced 17% Source: Zycus esourcing Usage Statistics 22

23 Category Sourcing Case Study Global Pharmaceutical Steps to Success Category Example: IT Staff Augmentation Step 1 - Spend Analysis 1. Spend Analysis shows $35M IT Staff Augmentation spend fragmented across 40 suppliers Step 4 - Supplier Consolidatio n Award Step 2 - Specification Definition 2. Standardized jobs classes and established consistency 3. Conducted multi-stage RFI/RFP/Auction 4. Consolidated Supplier Base (from 40 to 8) THE RESULTS Step 3 - Multi-Stage Sourcing Event Category Results $35 M $22.7 M $12.3M $12.3 M 35% Savings Generated 35% cost savings, expect > $500K rebates Implemented single point of control in supplier management Historic Low Bid Annual Savings Current compliance is 90+% 23

24 Step 3: Sustain Savings Set Performance Targets Performance Area Laggards Average Best-in-Class Measurement Procurement Contract Compliance Suppliers with On-Time Delivery/Project Completion 11% 30% 78% 48% 73% 88% Compliance: Avoids Savings Leakage Risk: Supplier Performance Source: Aberdeen Group Benchmarks Deploy Compliance Tools Contract Management Procure-to- Pay Supplier Management Best-in-Class has 15-20% faster contract creation and approval cycle time (~33 days) than all others Best-in-Class on-board Best-in-Class 71% more likely to suppliers in 2-3 days monitor supplier risk Invoice processing 82% (< 4 1% duplicated suppliers 27% for days) faster, at 92% lower cost lowest performers ($3.09 per invoice) than worst 2% suppliers catastrophic failure 5% performers for lowest performers 24

25 Step 4: Track Savings Set Performance Targets 2/3 of Best-in-Class track Procurement s impact to Financial Statements - well below 50% for all other Finance Collaboration 4.35 out of 5 for Best-in-Class Source: Aberdeen Group Benchmarks Deploy Financial Savings Management Process and Tools Source: Gartner/Rutgers Survey, 2013 Most Organizations Tracking with Spreadsheets/Homegrown Tools Lack Finance Collaboration and Approval Workflow Standardized Savings Calculations and Life-Cycle Tracking a Challenge 25

26 Key Take Away Through Data Analysis, Identify Opportunities Prioritized on Business Impact and Speed/Ability to Implement Achievable Savings Requires Decision on Balance between Behavioral Change and Preparation for Growth Showcase How Savings Generated Will Cover Investments of Resources This is a Journey; It Will Take Time!! 26