AstraZeneca is a global, science-led biopharmaceutical company that focuses on the discovery, development and commercialisation of prescription medicines in Oncology, Rare Diseases, and BioPharmaceuticals, including Cardiovascular, Renal & Metabolism, and Respiratory & Immunology. Based in Cambridge, UK, AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide.
Chief Procurement Officer John Dickson’s initial ambition upon his arrival at AstraZeneca in 2018 was to move the procurement function “out of the shadows” at the global, science-led biopharmaceutical enterprise. But just over a year into his tenure, AstraZeneca became one of the most talked about companies on earth. Suddenly, procurement was an integral part of a solution for an enterprise fighting on the frontline of a global pandemic.
The challenges facing many procurement strategists right now have never been more multifarious with enterprises battling rising inflation, fuel, and resource costs as the move towards sustainability and diversity gathers pace – and then there was the disruption of COVID-19. Of course, AstraZeneca could add a few more concerns to that list as it raced to respond to the pandemic. In Dickson, however, AstraZeneca could rely on a CPO with a rich experience in spearheading procurement strategies at some of the world’s biggest companies across a number of different sectors.
AstraZeneca is a fast-growing global enterprise that spends approximately $14bn a year with third parties and employs around 450 people in procurement working across a complex geographic landscape. “We’re an enterprise-wide procurement function, supporting the total breadth of the company,” Dickson explains, from AstraZeneca’s London office. “We support R&D, Commercial, the Operations business (manu-facturing), as well as the enabling functions of Legal, HR, and Finance. It’s a very broad and deep remit with a lot of money being spent externally.”
According to Dickson, his initial task, back in 2018, was to improve the credibility of the function and increase the visibility of procurement. “Like in many organisations, despite its importance to the business, procurement tends to sit underneath the water line, often misunderstood.” Dickson explains. “I think enhancing the credibility, making sure we were more visible, had a clear identity and improving the ease of doing business with procurement was important. Often, some of our processes, reputationally, are quite complex and difficult for users to navigate and with AstraZeneca being heavily science-based, you need people to be focusing on the science rather than engaged in navigating some complex, time-consuming processes. Improving the ease of doing business was key, as is being more transparent and visible around the value that procurement brings to the table while also challenging the business in terms of how they spend that $14bn worth of expenditure with the external network.”
Dickson has almost 40 years of experience in procurement working for the likes of Diageo, Heinz, Rolls Royce, Network Rail, and BP, among others. With regards to pharmaceuticals, Dickson is not unfamiliar with the landscape, having spent 13 years at GlaxoSmithKline in a number of senior procurement positions. It’s been a career that has witnessed a dramatic evolution of the procurement function. “At the very start of my career the function was more often referred to as purchasing rather than procurement,” he explains. “Yet procurement has evolved to be a more professional aspect of managing third party spend, whereas purchasing tends to be more about the process of buying. There’s much more to your modern-day procurement function than just buying. It’s still a critical part of what we do, but that elevation, placing it much more in the front office of a business, has been a significant shift.”
Covid-19
Dickson started his current role in 2018 and by 2020, everything had changed dramatically, as COVID-19 spread across the globe. But what was it like to be the CPO at a company like AstraZeneca when something of that size and significance happens? After all, AstraZeneca was having to adapt to the spread of the virus just like everyone else. “One of the great things about this organisation is that one of our key values is to do the right thing,” he says. “And if you look at how the organisation responded, collectively across R&D, Global Operations as well as our external manufacturers, and the commercial business, in terms of getting product to the patient, it was just phenomenal. The pace at which we operated and the alignment across the organisation was just second to none. The other thing to bear in mind is that although a lot of people emphasise our response to the pandemic activity across those two years, we also had other medicines to provide to patients. And that was business-as-usual. However, the organisation performed heroically to maintain that business-as-usual flow of life changing medicines to people. So, I think collectively, those two years of excitement, exhaustion, and all those things combined, mean we’re rightly proud of what we did as a company and for me I am incredibly privileged to have led the procurement function during this historic period.”
The Patient in Mind
Many business leaders, digital leaders and strategists have spoken about the acceleration and innovation of processes during the pandemic and how many things they’d maybe planned to do in two to three years’ time, were brought right forward. In some respects, COVID displayed just how quickly organisations can move and adapt. The pace of change at AstraZeneca during the pandemic was incredible.
“Well, pace was key,” Dickson explains. “When you have a common goal, things are more easily attained, regardless of the challenge. If you look at what we had to do as an organisation, we had to harness the external network to leverage all the partnerships across the value chain. Innovation was a key part of that in terms of doing things differently, but we are in a highly regulated environment and so it wasn’t innovation to cut corners. We had to do the right thing. At the end of the day, whatever activity we did over that period was consistent to our normal practice of having the patient in mind.”
Procurement post COVID-19
In terms of the current procurement strategy at AstraZeneca, Dickson is eager to discuss the five-year Procurement Value Proposition, which sets out the key areas of focus going forward. ‘Supporting growth through innovation by optimising our ecosystem of partners across the value chain to maximise patient outcomes by performing as ONEProcurement’ says the document. According to Dickson, the important thing here is not to keep changing course every year. “But if we do need to adapt to the environment of the business that we’re supporting, then we need to be able to do that,” he reveals. The procurement strategy is also closely aligned to the overarching corporate strategy. “At the end of the day, our Value Proposition and strategy connects closely to AstraZeneca’s Growth Through Innovation strategy. So, we’ve lent on the corporate strategy and that direction to be able to create a meaningful and connected strategy for the procurement function.”
AstraZeneca procurement has a vision which talks about optimising its ecosystem of partners, both internal and external. “Our partnerships are multi-dimensional, internal with our stakeholders, because they’re the ones we’re seeking to satisfy with regards to their demands and requirements. And then secondly, how do you leverage an external complex supply network to make sure we satisfy those needs of the internal customers? So, that’s the ecosystem, if you like, a blend of partnerships. We also look at the broad value chain. We’re not just a manufacturing procurement function, but an enterprise-wide organisation. The entire value chain at AstraZeneca, incorporating R&D, through Operations and Commercial are also supported by critical enabling functions that we fulfil the needs of. In this organisation the patient is critical. One of the things I observed when I came in four years ago was that procurement didn’t really talk about the patient that much. And if you think about why people come and work for a company like AstraZeneca, it is in service of the patient. So, we’ve elevated the patient, we talk more about patient stories in our meetings and I think that has enhanced a level of pride and visibility of what we do across the procurement function.”
The Procurement Value Proposition
The Procurement Value Proposition comprises four key elements that guide the procurement function at AstraZeneca:
- Generate Financial Value
- Optimise Supplier Collaboration
- Achieve Sustainable Business
- Enable Business Agility.
Of course, the primary purpose of procurement is to generate financial value and that is underlined by Dickson. “That is probably our core purpose,” he explains. “Because you’re a custodian of $14bn worth of spend, there’s a huge emphasis and drive towards maximising the value that spend can bring. We recognise that value comes in many forms. And yes, cost reduction is critical; the more you can drive to the bottom line, the better. But as we see a shift in the market dynamics now, where inflation is escalating, where assurance of supply requires absolute attention – and there are growing risk management challenges for us – the dimensions of value will arrive in many different forms. It’s beyond just the unit price of a product from one year to the next. What we’ve tried to do with the four Value Proposition elements is to make sure that they are all interrelated and not be seen to stand alone. That they have interdependency.”
The Procurement Value Proposition also looks to optimise supplier collaboration and innovation to create the most competitive supplier ecosystem. By aligning suppliers and partners around the business strategy, companies can deliver on key goals while driving mutual value through collaboration. On the front end, with respects to source to contracting, AstraZeneca has adopted the JAGGAER platform. “This is essentially the foundation, or the backbone, if you like, of providing insights for us to make better commercial decisions,” Dickson explains. “For us to be able to monitor and track how we’re developing category strategies and tracking the value we’re bringing to the organisation. All things that we really didn’t have a clear enough handle on previously. This is a critical best-in-class solution that provides a strong repository as well as forecasting capability with regards future value tracking and reinforces the collaboration we have formed with JAGGAER to make our lives easier and more transparent.”
A Data-Driven Strategy
Another key part of the Value Proposition aims to better enable business agility through new, digital, streamlined systems, processes and operations.
“Sometimes when you are competing for investment in these spaces, you have to make sure that the business case stacks up by being very selective around where you focus your investment. Increasing efficiency, or effectiveness, is going to be key in terms of how we invest in those arenas to help us demonstrate a use of data to justify the investment…But data in itself is not enough. It’s how you analyse and create insights around the data and then fold those insights into your strategic view of spend management in that space.”
Procurement thrives on good data. According to Dickson, sometimes we use lack of data as an excuse not to do things as effectively as we can. “I have never heard of a procurement function say they have access to perfect data yet many continue to drive strategy and delivery to a high level. That said, I do think there’s an opportunity for us to be much more data-driven with analytics focused to provide that insight. An understanding of what’s happening within a particular category shouldn’t just be reinforcing what we’ve done for the past 10 years. We need to bring in innovative thinking and potential changes to the way we manage some of those categories moving forward, transforming our historic perspectives. Without data and without insight, that’s going to be difficult. Our governance has been incredibly powerful over the past two years.
The Circular Economy
Another key element to the procurement Value Proposition addresses sustainability and diversity. AstraZeneca recently released its Ambition Zero Carbon initiative, which outlines its company-wide greenhouse emissions target. “So, we’re making significant progress around Scope 1 and Scope 2. As for Scope 3… we have a huge ambition to be carbon negative by 2030. And that’s going to require procurement to really interface and engage with the supplier network not just at the Tier 1 level, but also the suppliers of the supplier. So, it’s going to become a critical part of procurement’s strategy moving forward.
We’ve just come off the back of a supplier conference where we’ve touched over a thousand suppliers to outline expectations. And it’s easy to say, ‘Well, that’s 2030, we can wait and engage with it closer to the date.’ We all must start now. We have to be clear on what the expectations of a supplier community providing goods and services to AstraZeneca will need to meet around their sustainability agenda.”
Dickson is buoyed by the response from his suppliers. “We’ve had calls for help in terms of how a supplier can position themselves as positively and collaboratively as possible. For me, I think sustainability isn’t about competitive advantage; it comes back to doing the right things for society, communities and the planet. And that’s the reason we’re becoming much more collaborative across the pharmaceutical industry. So, I’m connected with nine of my CPO colleagues across the pharmaceutical industry around renewable energy through the Energize Program. We’re becoming much more collaborative and sharing best practice. And we’re doing that because, as I said, it’s not about competitive advantage, or profit, or revenue. It’s about doing the right thing for the planet. And it’s not that we all have the answer to solving the challenge, but I think it’s great that we’re talking to each other in a very open manner.”
AstraZeneca needs to become a sustainable business, which is about more than just greenhouse emissions. Diversity and inclusion is also a critical pillar for the company. “We’ve won some significant awards, both internally and externally actually, in terms of our supplier diversity program. And historically, supplier diversity programs tended to exist within North America. They’ve been very much American driven in terms of improving the position of small minority owned businesses. And what we’ve managed to do with a fantastic team internally is to broaden that to eight markets (with an ambition to be 10 markets beyond the North America core). And it’s brilliant that it’s been recognised that we’ve raised our own bar in the field of supplier diversity, with more to come.”
If we don’t address the management of inflationary cost pressure, then organisations will pay much more for things. So, it’s critical that procurement makes a stand when they have conversations internally, that say ‘yes, we understand the importance of cost reduction
A Great Place To Work
Dickson is keen to stress the value that people mean to the enterprise. AstraZeneca encourages its workforce to voice its concerns and challenges through a ‘Speak Up’ culture providing a platform for people to voice what they think. “We have a very effective employee survey twice a year too. We have very strong actions certainly within the procurement function in terms of how we respond and listen to the input we get from those pulse surveys. People are our greatest resource. ‘Be A Great Place To Work’ is one of the three key strategic pillars that exists within our company’s Growth Through Innovation strategy at the corporate level. And that runs throughout the whole organisation. So, whatever functional or business unit scorecard you use, our great place to work status is monitored and measured. It’s not just about what we do internally for our own people; our external society and community programs span across multiple communities, multiple geographies, and we’re doing the best we can to support areas of the world in most need of support. Whether it’s through philanthropic activity, whether it’s about taking education and awareness of health with our Healthy Heart Africa initiative, we have a lot of programmes that touch on communities in need of help from an organisation such as ours.”
Externally, ethical treatment of workers within its supplier ecosystem is just as important to AstraZeneca as its internal employees. “Now, some people may say, well, it’s none of your business how we operate our operations. But if you are a supplier to AstraZeneca, you will come under scrutiny as we assess your suitability to partner with us based on how you treat your workforce.” AstraZeneca is also driven by a very strong internal diversity and inclusion programme and procurement is at the forefront of this drive too. “If I look at the procurement organisation, we are 51% female,” Dickson enthuses. “What we are focusing on is making sure we open up the pathway, if you like, to more senior leader roles for women. When I joined the organisation four years ago, the makeup of my leadership team was lacking in diversity. It’s very different now. But it’s something we need to continually monitor and push forward to make sure we give opportunities across all tiers within the organisation, and across all genders. But the diversity piece goes beyond gender of course. So, ethnicity is obviously a definite focus as well as we drive programmes for improvement. I’ve also been involved in reverse mentorship programmes with people from under-represented groups and that’s really opened my eyes to some significant opportunities moving forward.”
Challenges Ahead
There is no doubt that the world is changing just as quickly as the procurement function. Aside from COVID, procurement professionals are also having to face rising costs, particularly with fuel and with that, higher inflation that affects every single purchase as we emerge out of COVID. Of the geopolitical challenges we see across the world at the moment, inflation on cost is going to be a key dynamic, according to Dickson. “Now, you can get the best commercial deal, but if you can’t assure the supply of the goods or service that you are buying, then it doesn’t matter how good your commercial deal was. We are already seeing an increased focus on the management of risk throughout the value chain and this will scale up further over the next couple of years becoming even more important for procurement.”
“Procurement functions need to be brave enough to have the conversation about what the breadth of value is,” Dickson explains. “And value is made up of many different forms. If we don’t address the management of inflationary cost pressure, then organisations will pay much more for things. So, it’s critical that procurement makes a stand when they have conversations internally, that say ‘we only recognise the metric of cost reduction’. The mitigation of cost increase is going to play a big part of what we do.”
“Risk management, force majeure, making sure that we engage with suppliers in need of help, or are distressed, or are small and need to be paid more promptly – these are the kind of things we are going to be all over during the next couple of years. The headwinds that are coming our way will be challenging for us and we’ve got to be focused on making sure that total value is maximised. It is important however that as people raise the spectre of headwinds we do not become the place where suppliers pass through their cost automatically, reinforcing the need to optimise our supplier collaborations to jointly mitigate the challenges ahead.”
There is no doubt that these are challenging times for CPOs and CSCOs, so how does Dickson define the kind of procurement needed for the battles ahead? “Good procurement is really about understanding your business,” he explains. “It’s making sure you deliver consistently to a changing business landscape whilst continuing to educate the business on the role of procurement. If I look back across my nearly 40 years of procurement experience, I think that’s often been a challenge in terms of how you make people truly appreciate the value of great procurement functions. We are much more than just a negotiating function and whilst people may shop personally, corporate procurement has a whole level of complexity to it that needs to be understood by our business partners. It’s a constant challenge, but I think we’re getting there.”
“It’s not about competitive advantage, or profit, or revenue. It’s about doing the right thing for the planet.”
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