How to Use Big Data Analytics to Drive Business Value in Procurement Forward (Part 2)
JAGGAER InsideSpend Thought leadership Series – In this blog series we profile leaders in the procurement industry. We hope their insights and experiences inspire you to achieve greatness in procurement.
A conversation with Walter Charles, Chief Procurement Officer at Biogen
With REV 2019 approaching, we’re revisiting the interview with supply chain and procurement platform thought leader, Walter Charles, Chief Procurement Officer (CPO). Originally recorded at the REV2018 Conference on procurement challenges and trends for manufacturing companies – the second in a two-part series of our conversation with Mr. Charles.
Meeting Today’s Challenges Head On with Big Data Analysis
Q: What challenges do you see today that are extensible to every CPO?
Every CPO is still doing tail-spend assessments that are constrained. Our partners conducted a survey that indicated roughly all procurement teams are on average staffed to handle 60% of the spend they are working through. So, we’re always looking at how to dynamically prioritize teams to get after the biggest set of opportunities.
We have, what I believe to be, the first “opportunity analytics engine” that allows us to look into the future of spend.
For example for a clinical trial at Biogen, we have to find 2,000 patients that meet a specific medical protocol architype. For us, and anyone in the pharmaceutical study industry, it can take up to two years to find 2,000 patients. But we can’t afford two years. So, I am desperately looking for more data externally to help speed up the process. I look at historical channels like telephone, 75 years; radio, 38 years; television, 13 years; the internet, 4 years; Facebook, 3.5 years; email, 2.5 years. Did you know that it only took 35 days for the game app Angry Birds to reach 2,000 people and Pokémon Go just 2 days?
So imagine if you could throw that data into view for the pharmaceutical industry. There has to be a digital channel where we can find the 2,000 patients we need in nanoseconds given those types of stats. And, not only can we find them in lightning speed, we can then collapse the time it will take to bring new life-saving medicines to market by two years. That is the opportunity that is before us in our business.
Big data analytics is fundamentally transforming how we think about all of the processes that have materially, manual constructs and we’re seeing costs evaporating as a function of the invention that’s going on in those spaces. We’re seeing meaningfully different cost dynamics from IT in every single category that it is touching. People are considering a machine first, outcomes-based construct. We just did a materials IT bid, and shaved 50% of our historical costs because we pivoted from a manpower to a outcomes-based model.
Q: What about the problem of tail spend?
If you use big data analytics, the problem of having 60% resource going after 100%of the spend blows up because now you have bandwidth—the individuals who were manually crunching analytics can now do something else. Big data analytics provides the ability to refocus resources on things you are not able touch in tail spend.
This means, the question now is: how do you no longer accept the reality of writing off 20% of spend simply because you don’t have the bandwidth to chase it? And by the way, every time you touch the tail spend, you get a double-digit savings lift from it. For example 10%on a $2 billion is a $200 million lift for a company the size of a Kellogg’s—that’s huge.
Q: What do you say to the Doubting Thomases that are nervous about putting information out in the cloud—let alone big data analytics?
I’ve had the privilege of delivering differentiated outcomes at Kraft, Kelloggs, Johnson & Johnson, and now Biogen, typically in the range between 150 to 250% of our historical savings rates. I don’t think it’s prudent to leave 20% of tail spend on the cutting room floor because of process. With the right tools, modality and methodology, you’ll have the bandwidth with the team you’ve got and you can eliminate tail spend and bring that under control.
A Word of Advice to Spend Analytics Companies
Q: Are the spend management companies moving fast enough?
I think there those that actually see the larger opportunity but some companies are not selling it in a way that is meaningful. Instead of selling the technology on the basis of a feature benefits profile, they should sell it on the basis of what it will mean to the procurement team. Sell the point that you can have 10 times the savings without the burden. The benefits should be around freeing up resources as opposed to the bells and whistles it has.
I want to know how big data analytics is going to help me with tail spend, forwarding value propositions and improving the effectiveness of my team. And, I want to know that there’s someone that I can ask to show me the way.
In the end, we’ve got to better marketeers in what we do by demonstrating the value we unlock and the opportunities we create in partnership with our businesses. Our goal is to have news they can use to drive the business forward and we’ve got to have the best possible lens of the external marketplace to share what that can be.
Walter Charles is the Chief Procurement Officer at Biogen, where his global procurement teams support billions of dollars in purchases annually. Walter has previously held chief procurement roles at Kraft Foods, Kellogg’s, Johnson & Johnson Consumer Supply Chain, and Cordis.