In November, Vizibl’s CEO Mark Perera joined Jenny Draper, GM Europe of Spend Matters and Stephen Cobham, Chief Procurement Officer of Sanofi, to examine how one of the world’s leading pharmaceutical companies is revolutionising its approach to supplier relationships.
Given his long background on the commercial side of the pharma industry, when Stephen Cobham moved to procurement he brought a fresh pair of eyes to the function – and to Sanofi. This new outlook drove the progressive CPO to overhaul the procurement function and establish a transformational Supplier Collaboration and Innovation (SC&I) programme.
Not only has this programme generated tens of millions of euros of cost-optimisation in the short to medium term from just a handful of projects, it has clearly demonstrated the role that procurement can play in driving growth and long-term value to an enterprise as a whole. At Vizibl we are working with Sanofi on their SC&I journey, enabling procurement to scale their programme, capture more innovative ideas, and deliver supercharged savings back to the business through the use of the Vizibl technology platform.
We covered a lot in an hour (including where Stephen’s mysterious accent comes from), but here we’ve singled out some key snippets we’re keen to share.
1. Your supplier base is a huge source of untapped value
As Stephen states, suppliers are the ‘lifeblood’ of procurement. However, this fact – along with the critical role suppliers have to play in overall business health – is too often ignored. While all senior executives can name their top three customers, many struggle to do the same when it comes to their suppliers.
Considering that the top 5-10% of a business’s supply base is likely to be where up to 80% of their total spend is going, this oversight is all the more outrageous. Indeed, Stephen believes he had missed a trick in the past by not spending enough time understanding his supplier base and extracting its value to drive growth.
For Sanofi the value lies in the wealth of knowledge their suppliers have about their business, their competitors, and their industry as a whole.
One supplier, for example, approached Sanofi to let them know their over-specification of a product meant they were spending 30% more on the same item than their key competitor. This allowed Sanofi to tweak their specification and reduce their spend on the product. Sounds easy, but Sanofi wouldn’t have received this inside information without cementing a strong collaborative relationship with that supplier.
2. Work with your suppliers to bring the outside in
This insider information is a ‘lever you will not find through negotiation or commercial discussions’. Put simply, the classic adversarial relationship model between procurement and vendors is limiting your ability to tap their value.
Mark noted that if procurement continues pitting itself against suppliers, ‘you might get the savings, but it doesn’t mean that you’re going to be the customer of choice’. Instead, he suggests working collaboratively, as Sanofi is doing. Not only does this bring bigger quick-win savings through inside knowledge, it opens further opportunities for cost optimisation. This might mean working with suppliers to reduce prices in their own cost base, or tapping into their R&D to discover new opportunities and solve unmet needs within the company.
Stephen terms this new way of working ‘bringing the outside in’. It requires businesses to be more ‘open and humble’ – to recognise that they can, and should, outsource ideation. This paves the way for more meaningful relationships with suppliers, unlocking innovation potential that will ultimately drive growth.
3. Prioritise strategy over tactics: keeping the lights on vs. illuminating the future
Actively working with our suppliers helps enable another shift in our mindset. Both Stephen and Mark stress the need for procurement to move away from tactical operations towards a more strategic approach. A business has to ‘play to win’. But, as Stephen succinctly puts it: ‘you need to know where to play’.
When Stephen joined the procurement function at Sanofi, he noticed most of their time was spent on operational aspects of managing supplier relationships: RFP processes, supplier assessment grids, risk management, and the like. Together, he terms this tactical activity ‘keeping the lights on’: necessary day to day, but not sufficient to impact the business significantly.
Coming from the commercial side, Stephen was accustomed to having a clear vision of how his function contributed to the overall business strategy – what he calls ‘illuminating the future’. The startling lack of depth he observed in the top line value being driven by procurement, in comparison, led him to put a change management roadmap in place.
So he set out a change management roadmap. The first step? Moving towards a Supplier Collaboration model for procurement, repositioning supplier relationships. Instead of suppliers being ‘procurement’s problem’, they are now owned by the business and facilitated by procurement. This brings supplier strategy and business strategy into direct alignment.
4. Instil the new mindset
Whole-business collaboration with suppliers and a switch to strategic procurement practices doesn’t happen by itself. In order for a culture shift to occur, all key stakeholders must be aligned.
So Sanofi practiced what Stephen was preaching, hosting a supplier day that brought senior excom members from both Sanofi and their suppliers together. Incumbent and insurgent suppliers alike were invited to pitch their ideas, competing for their share of Sanofi’s new business opportunities.
Not only did this event create significant enthusiasm around the collaboration programme, it yielded 67 innovative ideas in just one morning, 35 of which have since been implemented. Those ideas, unknown to Sanofi before their SC&I journey, are now generating circa €40 million in annualised savings.
5. Mindset + tool = successful, scalable supplier collaboration
The mindset is a great start, but there’s little use generating ideas if you can’t act on them.
With the culture in place, key stakeholders engaged, and the ideas flowing in, Stephen realised ‘the need for a more systematic platform’. When he moved into the procurement function, he was struck by the ‘limited and rudimentary’ supplier management systems compared to what he was used to in sales.
To scale their programme, Sanofi needed a tool that could:
- Formalise idea collection
- Nurture ideas through the project stage
- Allow teams to work seamlessly and align cross-functionally
- Measure success with ‘ferocious discipline’
- Report performance back to key stakeholders
Working out of countless Excel sheets wasn’t going to cut it, and most supplier management tools were, in Stephen’s opinion, ‘static and operational’. With that, he turned to Vizibl.
We want to make this not just a one-time event – make sure it’s part of a journey. We came across the need for a more systematic platform. We need a tool. We need technology to help us. And this is how we came across Mark’s company.
At Vizibl we have created the leading Supplier Collaboration and Innovation platform which enables enterprise organisations and their suppliers to manage their relationship more effectively. Vizibl makes every aspect of the relationship life-cycle transparent, so companies can align with suppliers on their governance and strategy, optimise costs, and develop great new ideas that bring value back to the business. We are proud to work as a technology partner to Sanofi and other enterprise businesses to shape and supercharge their Supplier Collaboration programmes.
For access to the full Sanofi webinar, you can find the recording and a transcript here.