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A ‘Value Proposition’ based on a ‘Community’ model
for supplier qualification, risk management and
supply chain mapping for the Pharmaceutical
Industry
For the attention of: ‘The Tower Group’
Attendees of the CP Roundtable event
25
thNovember 2014, London
Prepared by: Robert Brooks, Global Sector Director
Table of Contents:
1. Our Understanding of the Pharma Industry Drivers and Requirements ... 3
2. Achilles Overview ... 5
3. The Community Solution: ... 6
4.
Stages to setup a ‘Community’ solution for the Pharma Industry ... 8
5. Funding and Resources ... 10
1.
Our Understanding of the Pharma Industry Drivers and Requirements
During the Nov’14 CPO Roundtable meeting, the essence of the challenge currently faced by the industry was encapsulated by the following two statements made by two of the attendees:
“The business approach now is that you have to know who you are doing business with – the pendulum has swung and there needs to be proportionality and identification as to where the risks are - what stops people sleeping at night!”
“90% of suppliers do not need the high level technical scrutiny of a GMP (Good Manufacturing Practice – USA Regulation) audits but they need some form of proper qualification/certification.”
The Challenge as Achilles sees it is:
“You have to know who you are doing business with and the suppliers / 3rd
parties need some form of qualification / certification” – This premise forms the platform for all
procurement and 3rd party engagement. All the other drivers and requirements (see below) also raised in the CPO Roundtable discussion can only be addressed once the above is known. But because of the scope and scale of the issue of collecting and managing the supplier information is large and is not directly contributing to the bottom line this issue has not been properly addressed. Based on our experience the challenge can be solved by working together in an industry community and using a service provider like Achilles who implements the platform and provides the service to significantly reduce the effort for buyers and suppliers.
Summary of raised Pharma Industry Requirements during the CPO roundtable Categorised for the Sector (in alphabetical order):
Change Management - changing core technology from chemical production to ‘biotechnology’ and sourcing and qualifying new suppliers and understanding a new supply chain. Managing in a dynamic environment is difficult and a challenge.
Compliance – the emphasis now goes beyond the requirements of GMP (or GxP) but cannot be based on self-certification without validation/verification. For the 90% of suppliers that are not GxP assessed there needs to be some form of certification for the products and services that are provided by suppliers.
Complexity - ‘Patient Centricity’ and a diversified healthcare approach means it is a challenge to serve the complexity and presents traps for risk to the business – so need to simplify processes and have checks and balances for 3rd party suppliers.
Corporate Social Responsibility – global companies have to be able to show that they act responsibly and that their suppliers do too. The consequences can be significant at the product or corporate ‘brand’ level with shareholder value affected and sales reduced.
Corruption - is a global issue (not just China, India or Asia). Also of increasing concern are counterfeiting and theft as the commercialisation and commoditisation of medical treatment accelerates. Supplier and third party risk management is a key to reduce corruption.
Effort- managing supply chain disruption from suppliers in Asia/India is disproportionate in effort and cost; also the problem is not faced by just one company. Understanding and managing down the supply chain is a challenge but an increasing requirement.
Focus – Scandals have made ‘Due Diligence’ of 3rd party organisations a major focus at Executive board level. Operational focus is on discrete risks such as new suppliers and distributors, CROs and reducing overall risk by reducing the numbers of suppliers and increasing the requirement for ‘due diligence’. There is also regulatory body focus on the industry to deal with these issues and the involvement of the regulators is desired.
Efficiency and Cost Reduction – Procurement needs to ‘Lean’ its processes and reduce the supplier base. Companies are challenged to go beyond a responsible sourcing program and have one ‘holistic’ solution based on best practice and the removal of duplication.
Maturity – different levels of procurement organisational development across the sector with the trend to integrate risk management into the procurement process to reduce the risk to as low as possible. How to speed up getting to a level of maturity consistent with best practice and peers is a driver for change.
In order to address these business issues and meet individual corporate objectives members of CPO Roundtable have requested Achilles to present a ‘Value Proposition’ and proposal for them to identify and evaluate the availability, capabilities and costs of using Achilles to assist them in forming a ‘community’. The Achilles start up ‘Value Proposition’ is:
“Achilles, as a proven operator of regional and global networked communities of
buyers and suppliers for industry sectors, will work with the Pharma Industry to help
the industry form, manage and achieve the benefits from a global networked
community committed to the qualification of suppliers to agreed industry requirements
in a fast, efficient and effective way.”
How and why Achilles is able to put this ‘Value Proposition’ to the CPO Roundtable members and the wider Pharma community is given in the following sections that describe the company and a proposal for how a ‘Community’ solution for the Pharma Industry could be launched within a year of the first Steering Group meeting. The ‘Long Term’ Achilles ‘Value Proposition is given at the end of this document.
2.
Achilles Overview
Achilles is the world’s leading supplier risk and performance management provider with over 20 years’ experience delivering supplier qualification solutions to improve organisational performance in sourcing and supplier management.
The Oil and Gas sector was the first industry to adopt our supplier risk management model and since then it has been adopted by several other highly regulated industry sectors such as Utilities, Transport, Mining & Cement, Automotive, Building & Construction, FMCG and Power & Technology. Several of our major ‘Buyer’ clients are active in the Pharma & Healthcare sector which has become a primary area of focus for Achilles. Our established solutions serve over 800 of the world’s largest buying organisations and over 133,000 supply side businesses across 22 countries. Our process for developing a deep understanding of the specific needs of the sector, and established global delivery infrastructure give Achilles a powerful and unique combination of attributes to deliver solutions for the Pharma Industry sector.
Our core supplier solutions and services are the identification, qualification, evaluation and monitoring of suppliers and mapping of supply chains on behalf of buyers worldwide. We improve safety, sustainability and reduce risk in the supply chain for major organisations and industry sectors. We enable organisations to manage their supply chains effectively, reduce risk, drive economies of scale and improve data quality and consistency.
The Achilles delivery model has four pillars:
1. Platform – our user friendly Software as a Service (SaaS) platform is based on a modular technology solution that provides a single secure portal to access detailed supplier information.
2. People – a global team to support the community buyers and suppliers from 7 service hubs in >40
languages, from initial supplier on-boarding activities, user training and data validation to annual renewals, date-sensitive alerting and problem solving.
3. Processes – Achilles provides large scale supplier risk management services to blue chip organisations with mature and continually improved processes from supplier on-boarding, supplier qualification, supplier assessment to supply chain mapping.
4. Programme Management – Customer-tailored programmes using world-class techniques and
comprehensive change management strategies, including both internal and external messaging, together with resourcing and regular campaign reporting.
Through qualification via validated online questionnaires, third-party data feeds and our qualified auditors we assess suppliers’ capabilities and support compliance with legislation and corporate policies and standards for buying organisations and sector communities globally providing:
Systematic supplier qualification with data capture through standardized processes and/or questionnaires e.g. entity identification, financial background checks, sanctions and watch lists checks, adverse affiliations, involvement with government or politically exposed persons, EHSS requirements, etc.
Processing and risk categorization (high, medium or low risk)
Rigorous validation and additional due diligence through assessment teams and qualified auditors, where necessary.
Tools to enhance review of performance and risk across the supply base.
3.
The Community Solution:
Achilles proposes a community solution because it brings many advantages to the Pharma Industry and its suppliers. It delivers a wider pool of pre-screened, pre-qualified and pre-audited suppliers onto the system and into supplier searches. It also lessens the costs for suppliers as the pre-qualification costs time and effort is reduced to ‘once’ for the community not once for each buyer or once for each procurement event.
The Achilles Community model
The Achilles supplier risk management services are based on a community model that provides for sharing of non-commercial, non-competitive information through a single entry point. This eliminates significant duplication of effort normally experienced by suppliers.
Each member of the Pharma community will absolutely retain the ability to address its own supply chain
specific requirements in a private area, whilst at the same time realising the benefits that arise from being a part of the broader community.
Achilles has the experience to create, enable and develop such a community for the Pharma Industry operating such a community in conjunction with a Steering Group representing the member buying organisations. As a buyer member each has access to a wider choice of pre-qualified suppliers, access to benchmarking data and directly benefits from best practice models and qualification standards developed and proven within the sector. The buying community develops best practice approaches to community-wide decisions:
The scope of supplier qualification criteria and standards for the Community
The audit scope & rules for the community (if applicable)
A supplier’s entry to the community is subject to the completion of the community’s qualification questionnaire which Achilles checks and validates. Validated suppliers (and their products and services) are then visible online to all community buyers. The model provides a range of benefits, efficiencies, opportunities and standards for our buyers and suppliers.
4.
Stages to setup a ‘Community’ solution for the Pharma Industry
To reach the point where a ‘Community’ can go live, Achilles is proposing the following stages:1. Forming Stage – where buy-in from key industry players is made
2. Foundation Stage – where the requirements are agreed by the members for the members
3. Building Stage – where the platform, processes and people are put in place and suppliers nominated 4. Launch Stage – where the functionality for the members and the on-boarding of suppliers is made live 5. Post Launch Stage – on-boarding of remaining suppliers to be nominated and performance
management of the community
Achilles is very pleased to that a senior executive from one of the major companies present has offered to take a leading role in the organisation of the formation of the Community should there be agreement to move forward.
Forming Stage:
We propose that the participants of the Pharma Roundtable and potentially 2-3 other senior procurement executives are invited to form a supplier / 3rd party risk management community.
We ask for commitment from two or more companies to work with us to define a few principles for a Pharma industry community. This will include objective, high level scope of risk management, high level commercial model, role & service of Achilles and high level time frame.
The proposal is for Achilles to act as the Secretariat in the Forming Stage facilitating the invitation process and coordinating this meeting. In addition, Achilles, will provide its experience in forming 35 community and will contribute to the principles mentioned above.
At the end of this stage the participants will decide to go ahead to the next stage and to form a Steering Group.
Foundation Stage:
The Steering Group will meet to decide the terms of reference for the ‘Community’ and to establish the resources required to plan out how to achieve the aims of the community approach. A Working Group will be established to detail out the industry common requirements in line with the Steering Group guidance. This should include the following:
Detailed requirements for supplier & third party risk management
Service definition
Commercial model for buyers and suppliers Project milestones
Achilles will play a facilitator role in this and will provide specialists to advise the Working Group.
This end of this stage requires a financial commitment to the ‘set up’ and ‘annual subscription’ fees from the member companies.
Building Stage:
This stage is where the industry requirements are converted into the configuration of the Achilles platform and are tested (UAT) and the resource and support structure for the project in terms of agreed processes and people are identified.
Member companies will then provide a number of suppliers they each want to be included in the initial launch phase. Typically this would be a minimum of 500; the selection of these suppliers and on what basis is also part of the Building Stage.
Achilles will be working on the common elements of the platform and will also engage with each individual member to establish their specific requirements to enable the configuration at the individual company level too. We will prepare the following key elements:
Supplier risk model
Self-assessment questionnaires. Onsite audit content and protocols
Launch Stage:
This includes activities around deploying the marketing and communications material (both internal and to the supplier base) and training personnel in the individual member companies in advance of go-live.
Suppliers will then be contacted with the agreed messaging and the on-boarding process starts with support from the Achilles On-boarding Team.
There will be progress monitoring of the on-boarding process and the platform go-live will allow members to see the supplier information as it is ‘published to the platform post validation by the Achilles Validation Team. Individual company requirements will also be made live during this phase.
There will be an agreed period for the launch to be monitored over and for process feedback after which we will be in the Post Launch Stage.
Post Launch Stage:
Once the community process has established itself as operational then the member companies will be able to nominate their remaining suppliers and Achilles will work to on-board them to the community.
Audit protocols are deployed.
The Steering Group will continue to meet every 6 months and the Working Group and any sub-groups can be instigated as required for the development of the core community. Individual companies will still be able to work with Achilles on their specific requirements. New Pharma company members will be actively sought and their suppliers on-boarded.
The expansion of the community across all regions of the world will also be actively pursued and where new members are established these will be networked with the community so that information regarding suppliers is available to all Pharma community members regardless of region.
5.
Funding and Resources
Achilles is proposing to commit to the Secretariat a dedicated Program Manager supported by input from specialists from the following Achilles functions:
Product Support - Configuration Supplier On-boarding
Validation
Marketing & Communications Audit
Amounting to 6 person-months of dedicated time plus all other expenses associated with organising and attending meetings of the Steering Group and Working Group respectively.
In order to begin this process and to ensure commitment and the resource allocation required to drive success, Achilles proposes that there should be an initial phase membership fee paid by each Pharma company who signs up to be a member of the Steering Committee (by ‘Letter of Intent’). This fee is proposed to be set at €15,000. It is deductible or it will replace the one-off implementation fee.
Supplier Qualification
Achilles operates a collaborative community model in which buyers and suppliers defray the cost of the system in line with the common value and benefits received via the service.
Achilles invests ‘up-front’ assuming commercial risk • Resources
• Platform
Commercial Return based on Program Success
The Buyer fees applicable to the Pharma Industry include: • One off Implementation Fee - TBC
• Annual Subscription Fee – TBC
Tiered Suppliers Fees range from $800 - $2,000 typically as determined by the Pharma Industry qualification requirements
Additional Audit and ‘Due Diligence’ screening fees may apply for suppliers defined as sufficiently “high” risk. The Pharma Industry resource commitments and operational impact are limited to project oversight and governance.
6.
Value and Benefits for the Pharma Industry
The Pharma ‘Community’ Solution will cover the listed requirements raised in the CPO roundtable as follows: Change - allows sourcing & qualification of new suppliers as well easy access and integration of acquired businesses.
Compliance – ensure that new supplier are compliant with Pharma requirements prior contracting and secures ongoing compliance of existing suppliers by monitoring / renewal process
Complexity – establishes a standard process for 3rd party supplier management; reduces complexity by simplification and unification.
Corporate Social Responsibility – Allows an ongoing improvement in CSR rankings for supplier management by deploying the supplier qualification process and its CSR part step by step in all business units
Corruption – As a consequence 3rd party risk management and qualification reduces by nature corruption. In addition, black listed companies can be identified automatically.
Effort - Economies of scale and removal of duplication of effort and a global view of alternative suppliers at tier 1 and below in tiers 2, 3 etc., means that managing the supplier base and supply chain disruptions is less effort for all.
Focus – targeted, accurate, up to date validated information so that analysis and reporting to the Executive Board and other stakeholders is fast and delivered ‘on demand’. Issues can be identified and tackled by the ‘Industry’.
Efficiency and Cost Reduction – Working in a collaborative way for the release of value back to the members for their Operations, R&D pipeline development and ultimately the patients.
Maturity – All members share the same minimum qualification standard and level of best practice. New suppliers can understand what it takes to work with the Pharma Industry with fair and equitable procurement processes.
The community is a voice for the ‘Procurement’ function within the Pharma Industry and can be developed and become responsible for standardisation and best practice across the industry and dialogue with regulators and other relevant bodies.
Achilles is an example of what is described by Gartner as a “multi-enterprise grid functionality solution” which is recognised by them as one of the solution types on the rise for procurement and sourcing in their latest Hyper Cycle report (available from: https://www.gartner.com/doc/2811019/hype-cycle-multienterprise-solutions- Gartner, Hype Cycle for Multi-enterprise Solutions, 2014, Deborah Wilson, Benoit Lheureux, Andrew White, July 29, 2014):
“Business Impact: The benefit of multi-enterprise grid functionality is high,
because it lowers costs for an entire community of buyers and sellers, rather
than shifting costs from one set of parties to another. More importantly, the
ability to mine common data for market-wide trend analysis, risk management
and market intelligence has the potential to transform the value of B2B
The community approach will allow the member companies to leverage the benefits of confidential, non-competitive best practices from the Pharma sector. To this end the ‘Long Term’ value proposition from Achilles is:
