Description
The sourcing plan is the result of all planning efforts on strategic sourcing. Into this planning all sourcing events are organized and detailed with all tactical and operational information such as, the sourcing team responsible for each event
Rapid Progression from Tactical Buying to Global Strategic Sourcing
Paul Anderson Vice President, Planning & Procurement
Agenda: Strategic Sourcing Journey
? Life Technologies Overview ? Tactical Buying vs. Strategic Sourcing ? Benefits of Strategic Sourcing ? Strategic Sourcing Journey ? Team organization ? Talent requirements ? Global commodity management methods ? Information systems enablers ? Indirect Spend Sourcing Example ? Expansion to New Product Introduction (NPI) sourcing ? Vision of the Future: Progressing Beyond Traditional Strategic Sourcing ? Q&A
2
What We Do and Who We Serve Our Business We make, distribute and service: – essential life science technologies – through systems, products, services and expertise We serve
Communities where understanding biology and applying that knowledge can make a difference – a $20B market
|
Life Technologies Proprietary & Confidential
|
11/25/2010
3
The Creation of Life Technologies
20102+ Profitable growth
2006-20081 Solidified foundation
$3.3B
$3.6B+
1987 Invitrogen founded
$750M $2.4K
$1.15B
2009 Life Technologies created through merger of Applied Biosystems and Invitrogen 2003-20051 Aggressive investment through acquisitions
Note: 1) Revenue numbers in circles are at beginning of period 2) Consensus revenue estimates as of May 17, 2010
4
Now a Leading Player in Life Sciences
Revenue
~$3.3B ~50,000 ~75,000 160
Products
Customers Countries Employees
~9,000
~3,900
Patents and licenses
5
… And Spans Multiple Technology Areas
Customers
Government & Academic Research Institutions, Pharma, Biotech, Forensics Labs, Food Safety Labs, Diagnostics Companies
GENETIC SYSTEMS
~$900M in revenue • CE Systems • Forensics • SOLiDTM (DNA
sequencing)
MOLECULAR SYSTEMS
~$1.6B in revenue • qPCR • Genomic Assays • Biology Reagents
CELL SYSTEMS
~$800M in revenue • Cell Culture Essentials • Primary and Stem Cells • Cellular Analysis • Beads Based Products • BioProduction
• Ion Torrent
The broadest proprietary product offering
6
Our Company’s Stability Comes From Diversification
By Geography By End Markets By Product Mix
Europe 32%
Comm’l Apps1 15% Americas 48% Pharma & Biotech 30%
Instruments 20%
Academic / Gov’t 55%
APAC 10% Japan 10%
Consumables & Services 80%
Note:
1) Comm’l Apps = Commercial Applications, such as forensics, diagnostics, water and food safety testing
7
…and Scale
Sales and Support
• ~1,900 field sales and service employees • Local customer service and technical support personnel
eCommerce
• ~13M website visits • ~50% of all transactions • $800M in e-commerce revenue; growing 20% per year • Multiple electronic channels for customers to choose from •
R&D
• • • •
Unparalleled scale & scope
• • • • •
~1,400 R&D employees >$300M per year investment ~3,900 patents ~1,000+ products launched in 2009
Supply Chain & Operations
~160 countries served ~8,000 shipments per day ~11,000 orders processed per day ~35 manufacturing sites ~35 distribution centers
8
Maintaining a Top Ranking from Customers
Strongest Products
Strongest Service & Support
Best Customer Service2 Best Technical Support2 Best Website1,2 Best Sales Force1
Best Instrument Supplier1,2
Best Reagent Supplier1
Best Gene Expression Analysis2
Best Cell Biology2 Best Cell Culture2
200 9
Note: 1) 2009 blind customer survey of 415 researchers worldwide; 2) 2009 LSIA Awards
9
…By Addressing Customer Needs with Innovative Products
Gibco Boxy Bottles Attune Flow Cytometer 7500 Fast Dx PCR ViiA 7 PCR System
• Breathing new life into a slow growth product through packaging designs TaqMan® Gene Expression Cells-to-CT™ Kit
• Entry into a new market with a disruptive technology
• Rapid response to global flu Pandemic
• Most productivity enhancing PCR instrument available
Countess Cell Counter
SOLiD PI
3500 CE
• Innovative solution that is 4X faster than any product on the market
• Our most successful launch to date
• A bench top solution for next generation sequencing
• Specifically designed for commercial use
Reagents
Instruments and Bench Top Devices
Full System Solutions
10
Strategic Sourcing At Life Technologies
11
Typical Characteristics
Tactical Buying
? Little involvement in long-term product sourcing strategy development ? Tends to buy for single site ? Limited view of global requirements ? Generally involved late in the sourcing process ? Little time or incentive to drive consolidation of suppliers ? May handle a wide varied of products with limited expertise in any one area ? Perceived as mainly administrative
Strategic Sourcing
? Systematic, data-driven and fact-based
? Drives long-term supply strategy development & execution for a commodity or group of related products ? Global responsibility. Has technical expertise and business acumen. ? Full visibility of global spend and future requirements ? Leads the sourcing process well in advance of actual buying execution ? Perpetually updates strategy, taking into account changes to global conditions ? Selects best fit sourcing strategy from multitude of approaches
? May be a part-time role
? Focus on strategy development, supplier selection, negotiations, vendor and cross-functional stakeholder partnerships. Limited tactical duties.
12
Benefits of Effective Strategic Sourcing Area Impact
Savings (direct cost, indirect cost, cost Large initial savings plus ongoing avoidance, cash flow optimization) optimization to market pricing
Business Requirements Alignment to supplier network capabilities
Risk management
Ensures maximum revenue realized and capital properly utilized
Proactive risk mitigation. Drives executive visibility to key issues. Drive decision-making
Supplier relationship management Analytical supplier selection and consolidation with global coordination. Product standardization Global programs and processes New Product Introductions Drive use of standard materials from qualified suppliers; higher volumes drives down cost Develops standardized enhancement programs and drives global implementation Speeds up NPI TTM and TTM$ through engineering standards and validated suppliers
13
Our Life Story: Evolution of Strategic Sourcing
? Invitrogen history:
? ? ? ? ? ? ? ? ? ?
growth through many acquisitions plus organic acquisitions not centralized for manufacturing no global spend database minimal central sourcing functions
?
Applied Biosystems history:
growth mainly organic mostly centralized manufacturing one global ERP system; high degree of control global sourcing for Direct within Operations partial global sourcing for Indirect within Corporate long history of global strategic sourcing for direct materials
14
Our Life Story: Evolution of Strategic Sourcing
? Life Technologies Procurement Today
? Centralized the procurement function within Global Operations ? Global Procurement organization includes:
> > > > > Global Direct Strategic Sourcing Global Indirect Strategic Sourcing Local site buying teams at factories around the world New Product Introduction sourcing/execution team Global Contracts team
? Recently Combined Global Procurement with Global Planning to also include:
> Sales & Operations Planning > Production Planning & Inventory Management
15
Team Organization
Global Operations
Strategic Sourcing
Operational Buying
Cross-site Responsibility
Primarily Site-specific Responsibility
16
Talent ? Global Sourcing Managers:
? Technical and business knowledge of product/service area (e.g. chemicals, biologicals, plastics, filtration, PCB, packaging, computers, temp labor, professional services, IT, facilities, travel, etc.) ? Financial/business analysis skills ? Negotiation & contracting expertise ? “Selling” skills for marketing of key programs (e.g. consignment inventory) ? Communication and interpersonal skills for Supplier Relationship Management and stakeholder management ? Project management skills
17
Global Strategic Sourcing Process ? Follow Your Choice of Traditional Multi-Step Process
18
Global Strategic Sourcing Process (cont’d) ? Apply Appropriate Sourcing Strategy
19
Key Information Management Tools
? Global Spend Database ? Item, quantity, price, supplier ? Tiered commodity classification (harmonized) ? Vendor parent/child relationships automated ? Ideally linked to contract compliance monitoring
? Supplier Portal ? Automated communication of forecast and firm orders ? Broadcast communications ? Metrics and process access ? Potentially provide specification repository ? May include an online auction tool ? Internal “Amazon.com” Marketplace ? Directed spend to negotiated catalogs ? Reduces internal buyer resource requirements
20
Example: Simple Indirect Sourcing Category
Promotions & Fulfillment
21
Category Data Gathering • Insufficient data via Spend Database
• Data gathering via business units & accounts payable required for historical and projected
• Historic spend - $4.4M/year • Approximately 20 primary suppliers • Baseline pricing = Historic spend with incumbent suppliers (already discounted)
22
Strategy Selection
Strategy Applicability Rationale
Driven by specific requirements Improved reporting process and better spend management As commoditized in nature Potential to source from suppliers in countries such as China Significant competition in this space Significant fragmentation of spend across multiple suppliers
23
Sourcing strategy
Demand Management
Process Improvement Relationship restructuring
?
Low cost country sourcing
?
Competitive bidding
?
Spend consolidation
Selected Online Auctions as Negotiation Strategy
Characteristic
Market basket
• High value & high frequency purchases • Categorized into apparel, electronics, stationery, accessories,…
Negotiation tactic
• Suppliers to bid final prices for each category & for multiple order sizes
Promotions & Fulfillment category
Non-market basket
• Miscellaneous items • Specialized requirements
• Suppliers to bid on discounts off catalog prices
24
Online Reverse Auction = Significant Competition
25
Forward Auction on Non-Market Basket Items
26
Suppliers Chosen Based on Pricing & Service Offerings Selection Criteria
Competitive bids received for each category in auction
+
Ability to meet service level requirements
Suppliers Chosen:
Promo 1**
Promo 2 Promo 3
+
Ability to service all LT locations
**Will host company store
+
Past experience with supplier
Consolidated from 20+ suppliers to 3
27
Award Scenario – expected annual savings $1.4 M (~33%)
Annualized savings ($ M)
1.44
0.18
1.01
0.25
Promo 1
Promo 2
Promo 3
Total
28
Additional Benefits for Life Technologies
No freight to be incurred on shipments to California; LT’s rates to be used on all other shipments
1.44
1.54
0.10
Volume rebates
+
Price savings Freight savings Total
Service level guarantees defined with each supplier Monthly spend reports will allow for tracking of spend
Total quantified savings ($ M)
All selected suppliers are also minority business enterprises!
29
Steps to Ensure Compliance
• Authorization of procurement department required for purchases above a set dollar amount (i.e. orders over $2,000) • Selected suppliers & company eStore awards to be communicated to the organization and posted on Integration Central
Process control
Communication
• Monthly spend reports from suppliers allow for tracking contract compliance
Monitoring
• Partner with A/P to ensure use preferred suppliers
30
New Product Sourcing Specialist Team
? Partner with R&D and Engineering ? Physically embedded in R&D “space” ? Specialist knowledge in multiple product technical areas ? Experts in sourcing of prototypes ? Expertise in navigating swiftly through internal processes and systems ? Adept at handling many engineering changes
? Great at getting suppliers to “go the extra mile” for rapid turnaround
? Guide R&D and Engineering to use preferred suppliers and qualified common materials
? Plan ahead for smooth transition from prototype to full production
31
Next Step: Adding More Value
? Supplier Collaboration & Lean builds on “mature” procurement practices to unlock 10-20% incremental COGS opportunity
Source: McKinsey & Company, October 2010
32
Value Levers Beyond Basic Strategic Sourcing
Source: McKinsey & Company, October 2010
33
Questions?
? Contact information:
Paul Anderson Life Technologies [email protected]
34
doc_453477576.pdf
The sourcing plan is the result of all planning efforts on strategic sourcing. Into this planning all sourcing events are organized and detailed with all tactical and operational information such as, the sourcing team responsible for each event
Rapid Progression from Tactical Buying to Global Strategic Sourcing
Paul Anderson Vice President, Planning & Procurement
Agenda: Strategic Sourcing Journey
? Life Technologies Overview ? Tactical Buying vs. Strategic Sourcing ? Benefits of Strategic Sourcing ? Strategic Sourcing Journey ? Team organization ? Talent requirements ? Global commodity management methods ? Information systems enablers ? Indirect Spend Sourcing Example ? Expansion to New Product Introduction (NPI) sourcing ? Vision of the Future: Progressing Beyond Traditional Strategic Sourcing ? Q&A
2
What We Do and Who We Serve Our Business We make, distribute and service: – essential life science technologies – through systems, products, services and expertise We serve
Communities where understanding biology and applying that knowledge can make a difference – a $20B market
|
Life Technologies Proprietary & Confidential
|
11/25/2010
3
The Creation of Life Technologies
20102+ Profitable growth
2006-20081 Solidified foundation
$3.3B
$3.6B+
1987 Invitrogen founded
$750M $2.4K
$1.15B
2009 Life Technologies created through merger of Applied Biosystems and Invitrogen 2003-20051 Aggressive investment through acquisitions
Note: 1) Revenue numbers in circles are at beginning of period 2) Consensus revenue estimates as of May 17, 2010
4
Now a Leading Player in Life Sciences
Revenue
~$3.3B ~50,000 ~75,000 160
Products
Customers Countries Employees
~9,000
~3,900
Patents and licenses
5
… And Spans Multiple Technology Areas
Customers
Government & Academic Research Institutions, Pharma, Biotech, Forensics Labs, Food Safety Labs, Diagnostics Companies
GENETIC SYSTEMS
~$900M in revenue • CE Systems • Forensics • SOLiDTM (DNA
sequencing)
MOLECULAR SYSTEMS
~$1.6B in revenue • qPCR • Genomic Assays • Biology Reagents
CELL SYSTEMS
~$800M in revenue • Cell Culture Essentials • Primary and Stem Cells • Cellular Analysis • Beads Based Products • BioProduction
• Ion Torrent
The broadest proprietary product offering
6
Our Company’s Stability Comes From Diversification
By Geography By End Markets By Product Mix
Europe 32%
Comm’l Apps1 15% Americas 48% Pharma & Biotech 30%
Instruments 20%
Academic / Gov’t 55%
APAC 10% Japan 10%
Consumables & Services 80%
Note:
1) Comm’l Apps = Commercial Applications, such as forensics, diagnostics, water and food safety testing
7
…and Scale
Sales and Support
• ~1,900 field sales and service employees • Local customer service and technical support personnel
eCommerce
• ~13M website visits • ~50% of all transactions • $800M in e-commerce revenue; growing 20% per year • Multiple electronic channels for customers to choose from •
R&D
• • • •
Unparalleled scale & scope
• • • • •
~1,400 R&D employees >$300M per year investment ~3,900 patents ~1,000+ products launched in 2009
Supply Chain & Operations
~160 countries served ~8,000 shipments per day ~11,000 orders processed per day ~35 manufacturing sites ~35 distribution centers
8
Maintaining a Top Ranking from Customers
Strongest Products
Strongest Service & Support
Best Customer Service2 Best Technical Support2 Best Website1,2 Best Sales Force1
Best Instrument Supplier1,2
Best Reagent Supplier1
Best Gene Expression Analysis2
Best Cell Biology2 Best Cell Culture2
200 9
Note: 1) 2009 blind customer survey of 415 researchers worldwide; 2) 2009 LSIA Awards
9
…By Addressing Customer Needs with Innovative Products
Gibco Boxy Bottles Attune Flow Cytometer 7500 Fast Dx PCR ViiA 7 PCR System
• Breathing new life into a slow growth product through packaging designs TaqMan® Gene Expression Cells-to-CT™ Kit
• Entry into a new market with a disruptive technology
• Rapid response to global flu Pandemic
• Most productivity enhancing PCR instrument available
Countess Cell Counter
SOLiD PI
3500 CE
• Innovative solution that is 4X faster than any product on the market
• Our most successful launch to date
• A bench top solution for next generation sequencing
• Specifically designed for commercial use
Reagents
Instruments and Bench Top Devices
Full System Solutions
10
Strategic Sourcing At Life Technologies
11
Typical Characteristics
Tactical Buying
? Little involvement in long-term product sourcing strategy development ? Tends to buy for single site ? Limited view of global requirements ? Generally involved late in the sourcing process ? Little time or incentive to drive consolidation of suppliers ? May handle a wide varied of products with limited expertise in any one area ? Perceived as mainly administrative
Strategic Sourcing
? Systematic, data-driven and fact-based
? Drives long-term supply strategy development & execution for a commodity or group of related products ? Global responsibility. Has technical expertise and business acumen. ? Full visibility of global spend and future requirements ? Leads the sourcing process well in advance of actual buying execution ? Perpetually updates strategy, taking into account changes to global conditions ? Selects best fit sourcing strategy from multitude of approaches
? May be a part-time role
? Focus on strategy development, supplier selection, negotiations, vendor and cross-functional stakeholder partnerships. Limited tactical duties.
12
Benefits of Effective Strategic Sourcing Area Impact
Savings (direct cost, indirect cost, cost Large initial savings plus ongoing avoidance, cash flow optimization) optimization to market pricing
Business Requirements Alignment to supplier network capabilities
Risk management
Ensures maximum revenue realized and capital properly utilized
Proactive risk mitigation. Drives executive visibility to key issues. Drive decision-making
Supplier relationship management Analytical supplier selection and consolidation with global coordination. Product standardization Global programs and processes New Product Introductions Drive use of standard materials from qualified suppliers; higher volumes drives down cost Develops standardized enhancement programs and drives global implementation Speeds up NPI TTM and TTM$ through engineering standards and validated suppliers
13
Our Life Story: Evolution of Strategic Sourcing
? Invitrogen history:
? ? ? ? ? ? ? ? ? ?
growth through many acquisitions plus organic acquisitions not centralized for manufacturing no global spend database minimal central sourcing functions
?
Applied Biosystems history:
growth mainly organic mostly centralized manufacturing one global ERP system; high degree of control global sourcing for Direct within Operations partial global sourcing for Indirect within Corporate long history of global strategic sourcing for direct materials
14
Our Life Story: Evolution of Strategic Sourcing
? Life Technologies Procurement Today
? Centralized the procurement function within Global Operations ? Global Procurement organization includes:
> > > > > Global Direct Strategic Sourcing Global Indirect Strategic Sourcing Local site buying teams at factories around the world New Product Introduction sourcing/execution team Global Contracts team
? Recently Combined Global Procurement with Global Planning to also include:
> Sales & Operations Planning > Production Planning & Inventory Management
15
Team Organization
Global Operations
Strategic Sourcing
Operational Buying
Cross-site Responsibility
Primarily Site-specific Responsibility
16
Talent ? Global Sourcing Managers:
? Technical and business knowledge of product/service area (e.g. chemicals, biologicals, plastics, filtration, PCB, packaging, computers, temp labor, professional services, IT, facilities, travel, etc.) ? Financial/business analysis skills ? Negotiation & contracting expertise ? “Selling” skills for marketing of key programs (e.g. consignment inventory) ? Communication and interpersonal skills for Supplier Relationship Management and stakeholder management ? Project management skills
17
Global Strategic Sourcing Process ? Follow Your Choice of Traditional Multi-Step Process
18
Global Strategic Sourcing Process (cont’d) ? Apply Appropriate Sourcing Strategy
19
Key Information Management Tools
? Global Spend Database ? Item, quantity, price, supplier ? Tiered commodity classification (harmonized) ? Vendor parent/child relationships automated ? Ideally linked to contract compliance monitoring
? Supplier Portal ? Automated communication of forecast and firm orders ? Broadcast communications ? Metrics and process access ? Potentially provide specification repository ? May include an online auction tool ? Internal “Amazon.com” Marketplace ? Directed spend to negotiated catalogs ? Reduces internal buyer resource requirements
20
Example: Simple Indirect Sourcing Category
Promotions & Fulfillment
21
Category Data Gathering • Insufficient data via Spend Database
• Data gathering via business units & accounts payable required for historical and projected
• Historic spend - $4.4M/year • Approximately 20 primary suppliers • Baseline pricing = Historic spend with incumbent suppliers (already discounted)
22
Strategy Selection
Strategy Applicability Rationale
Driven by specific requirements Improved reporting process and better spend management As commoditized in nature Potential to source from suppliers in countries such as China Significant competition in this space Significant fragmentation of spend across multiple suppliers
23
Sourcing strategy
Demand Management
Process Improvement Relationship restructuring
?
Low cost country sourcing
?
Competitive bidding
?
Spend consolidation
Selected Online Auctions as Negotiation Strategy
Characteristic
Market basket
• High value & high frequency purchases • Categorized into apparel, electronics, stationery, accessories,…
Negotiation tactic
• Suppliers to bid final prices for each category & for multiple order sizes
Promotions & Fulfillment category
Non-market basket
• Miscellaneous items • Specialized requirements
• Suppliers to bid on discounts off catalog prices
24
Online Reverse Auction = Significant Competition
25
Forward Auction on Non-Market Basket Items
26
Suppliers Chosen Based on Pricing & Service Offerings Selection Criteria
Competitive bids received for each category in auction
+
Ability to meet service level requirements
Suppliers Chosen:
Promo 1**
Promo 2 Promo 3
+
Ability to service all LT locations
**Will host company store
+
Past experience with supplier
Consolidated from 20+ suppliers to 3
27
Award Scenario – expected annual savings $1.4 M (~33%)
Annualized savings ($ M)
1.44
0.18
1.01
0.25
Promo 1
Promo 2
Promo 3
Total
28
Additional Benefits for Life Technologies
No freight to be incurred on shipments to California; LT’s rates to be used on all other shipments
1.44
1.54
0.10
Volume rebates
+
Price savings Freight savings Total
Service level guarantees defined with each supplier Monthly spend reports will allow for tracking of spend
Total quantified savings ($ M)
All selected suppliers are also minority business enterprises!
29
Steps to Ensure Compliance
• Authorization of procurement department required for purchases above a set dollar amount (i.e. orders over $2,000) • Selected suppliers & company eStore awards to be communicated to the organization and posted on Integration Central
Process control
Communication
• Monthly spend reports from suppliers allow for tracking contract compliance
Monitoring
• Partner with A/P to ensure use preferred suppliers
30
New Product Sourcing Specialist Team
? Partner with R&D and Engineering ? Physically embedded in R&D “space” ? Specialist knowledge in multiple product technical areas ? Experts in sourcing of prototypes ? Expertise in navigating swiftly through internal processes and systems ? Adept at handling many engineering changes
? Great at getting suppliers to “go the extra mile” for rapid turnaround
? Guide R&D and Engineering to use preferred suppliers and qualified common materials
? Plan ahead for smooth transition from prototype to full production
31
Next Step: Adding More Value
? Supplier Collaboration & Lean builds on “mature” procurement practices to unlock 10-20% incremental COGS opportunity
Source: McKinsey & Company, October 2010
32
Value Levers Beyond Basic Strategic Sourcing
Source: McKinsey & Company, October 2010
33
Questions?
? Contact information:
Paul Anderson Life Technologies [email protected]
34
doc_453477576.pdf