Supplier switch

Pharmaceutical giant manages little disruption with big supplier switch

PL Staff

PL Staff

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A pharmaceutical giant wanted to explore opportunities for replacing one of its longstanding suppliers. Until 2018, it had been using the same two advertising agencies for 25 years, seeing it as a good way to keep costs down.

But the advertising world has changed a lot over those 25 years, with tremendous advancements in technology and the rise of social media. This increased transparency, though positive in many ways, has created new concerns around brand safety. With a new CPO in place, the company decided it was time for a change.

What did they do?

Procurement decided to overhaul its entire agency model; a move that risked major disruption, given that media is one of the company’s largest category of spend and makes a vital contribution to revenue targets. So they took a cross-functional collaborative approach, to make sure they got stakeholder buy-in they need for a smooth changeover.

They assembled a cross-functional team with representatives from 90 markets led by a core team of 40 executives from marketing, legal, finance and procurement, who worked together to collaborate with internal stakeholders and external agencies to devise the new model. This team carried out legal and commercial negotiations and price benchmarking with suppliers, approaching six major agencies.

Supplier wars

After 9 months of preparation, they held a bidding summit which ran over one week at an off-site venue. This pitted 4 of the agencies against each other, with negotiations held over the five days in a range of key areas that needed to be addressed. The thorough preparation in the months before and the competitive atmosphere resulted in a fast decision-making process that meant they could replace the supplier before the end of their contract. At the end of the week, a decision was made and a contract awarded to the chosen supplier on the last day.

Everyone wins

This was a massive change, but by bringing internal stakeholders and suppliers together for a series of intense face-to-face meetings, the company helped to mitigate the challenge of disruption and resistance.

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