Case Studies

Ron Payne co-facilitated a major initiative at the Clinical Laboratories Division of a global pharmaceutical company which was experiencing problems due to fragmentation and decentralization. The enterprise had grown exceedingly fast through acquisitions and each local lab had its own suppliers and preferences for expendable items, such as rubber gloves.

The Director of Purchasing invited consultants to help him develop a divisional procurement strategy to manage their $300 million annual procurement budget by designing and implementing three major business strategies: 1) Commodity Management, 2) Supplier Management, and 3) Transaction Management. Many of the scientists and professionals at the local sites were concerned their local needs would not receive the proper attention from a centralized purchasing group at the Division's headquarters. We blended a reasonable amount of standardization with considerations for local control and responsiveness. We did not have a problem convincing the operating managers that the utilization of over 200 types of rubber gloves was unwise and wasteful.

This intervention resulted in a 7% reduction in the purchased invoice cost in years one and two, and an additional 5% in year three. All of these were year to year reductions in which the lower cost base became the new baseline. Additionally, the inventory was reduced by more than 30% as the division became a corporate leader in its application of best practices in Supply Chain Management.