Creating Value by Driving Sourcing Under Tightening Conditions
Drawing on a broad global base, the Procurement team played a vital role in cost-effectively providing to more than 70 manufacturing and research & development sites worldwide the raw materials, services and other support they needed to grow.
Close internal collaboration across all disciplines, as well as new and tailored go-to-market approaches, yielded a strong savings performance for Procurement, which added to Lonza’s competitive position and profitability. Together with stakeholders from the different businesses and functions, Procurement developed solid strategies for spend categories across a diverse range of strategic raw materials and services. The team enhanced data quality, analytics and dashboards to track and communicate progress. This approach allows our different businesses to make their choices in a more timely manner. In tight alignment with our business leadership and value-chain management professionals, Procurement continued our progress on our breakthrough initiative known as DIVER – Drive and Improve Vendor Results. During the last 18 months, this initiative reassessed almost CHF 1 billion of Lonza’s external spend and ensured a highly competitive sourcing process to secure inputs with positive results.
« Our Procurement team drove business performance by establishing best-in-class processes and procedures that could provide cost benefits for the whole group and be tracked with concrete metrics. »
Rodolfo Savitzky, CFO of Lonza
Ensuring Seamless Supplies
At any particular time, the Procurement team must be ready to respond to everything from unexpected disruptions to rising costs for vital raw materials in order to assure reliable, competitive external supplies. The Procurement team faced various and significant challenges in 2018. Newly established trade barriers started to have an impact on global supply chains. In addition, extremely tightened environmental policies in China created strong knock-on effects on global commodity markets. Demand and supply imbalances resulted in unfavorable price effects on raw materials. However, Lonza responded to such challenges appropriately and effectively; and we managed to step up our level of excellence in Procurement even further during the year. In addition, the team successfully navigated several unexpected force majeure events at some major suppliers. Those events and the geopolitical challenges around us encouraged us to sharpen our risk management and mitigation processes and tools.
Supporting Business Growth
The Procurement team helped facilitate Lonza’s growth in serving the strategic Healthcare Continuum® markets by directing growing demand to the right sourcing market segments, by identifying new supply sources and by scaling-up existing sources. For example, the team stepped-up support in Lonza’s main growth areas in the Pharma & Biotech segment, as well as in the Consumer Health division. In 2019 the Procurement team is set to continue realizing the vision of a One Purchasing Community that features greater coordination with local sites through regional hubs. We plan to capitalize on Lonza’s Global Business Service Centers in Manchester (UK) and San José (CR) as we drive effective business support at all levels while capturing efficiency gains.
Suppliers to Lonza must adhere to the requirements defined in Lonza’s Supplier Code of Conduct. This code defines standards of business ethics, as well as labor, health, environmental and safety practices. We routinely conduct visits of suppliers to monitor adherence to this code. These strict ethical requirements are of utmost value when sourcing compliant materials for medicines and therapies, as well as natural and organic ingredients for consumer health and nutrition products. One highlight of 2018 was when Lonza became a full member of the Pharmaceutical Supply Chain Initiative (PSCI). PSCI is an association of pharmaceutical/biotech/medical devices industries. Its aim is to establish and promote responsible practices that will continuously improve ethics, labor, health, safety and environmentally sustainable outcomes, as well as to improve supplier capability for the members’ supply chains.