Boston Scientific aligns sourcing organization with corporate goals
By William Atkinson -- Purchasing, 5/3/2007 2:00:00 AM
Procurement executives today are tasked with making sure that their globally flung functions and organizations are tightly aligned with the overall strategic objectives of their companies across the globe. This is particularly true for companies in highly competitive industries where technology and requirements are changing almost daily, and where challenges and opportunities present themselves on a regular basis.
Case in point: Boston Scientific Corp., a medical device maker in Natick, Mass., where the sourcing organization is challenged to deliver more value to the company's overall performance in a continually changing and highly regulated environment.
"Savings come in at a diminished rate if we don't continually look at the way we do things," notes Karen Weinstein-Millson, vice president of global sourcing at Boston Scientific and member of Purchasing's editorial advisory board.
Boston Scientific's decentralized organization creates cultural hurdles to overcome. And the recent acquisition of Guidant Corp. in 2006 created post-merger integration challenges and opportunities (capturing synergies and building a strategic platform without negatively impacting financial performance and vendor performance). And yet another challenge is coping with increasing FDA oversight into the medical device industry, implicit in which is value-added procurement activity.
With these challenges and opportunities in mind, Weinstein-Millson realized it was time to identify improvements to the global sourcing value proposition at the company. She arranged for an outside firm to conduct surveys to determine where the sourcing functions within the organization were not aligned with the most value-added activities.
The result was a matrix identifying the value-added best practices, which included mission and strategy, organization structure, staffing and skills, analytical support, supplier management, customer management, and strategic sourcing. The matrix also identified the gaps between current status and best practice for each of the functions in the organization. From there, the global sourcing organization was realigned to increase value without increasing headcount.
The result is a global sourcing team is now driven by key workstreams. These include realigning the organization, confirming the global sourcing organization's strategy, improving global sourcing activities, validating and bolstering the diagnostic findings by accelerating value-added activities, improving the value to the customer through internal training and talent transition, developing a clear alignment between the global-sourcing organization and the overall company strategy by using aligning metrics and goals with the customers, and then implementing organizational strategies to capture the improved value.
The newly realigned organization was finalized in January and its value-added activities will be measured across four dimensions: cost reduction, risk management, quality and growth/innovation.
 Weinstein-Millson: “Continued savings require continual review.” |
Cost reduction is focused on improving the bottom line and creating competitive advantage.
Quality efforts focus on time, such as delivery windows and production schedules being met by suppliers; making sure that product specifications and standards are met; and ensuring consistent service levels, especially for value services such as vendor-managed inventory and inventory targets, Weinstein-Millson says.
Risk management is focused on mitigating and managing category risk around cost in multiple dimensions, such as supply interruptions, contract development, operational mitigation techniques, offset (backup) inventory, and price volatility and inflation (using hedging strategies, financial instruments, etc. to dampen that volatility and offset that inflation).
The growth and innovation dimension is focused on supporting growth and innovation through creative supplier management and marketing trends and technologies, introducing supplier concepts and technologies to the idea process, and supporting new product development via active supplier team engagement and early supplier involvement.
"The restructuring allows for a defined span of control and more time to support strategic initiatives," she states. That is, once it determined where strategic opportunities existed that were not yet being met, the organization is now able to move people to these areas that need the additional focus. One of these has been earlier supplier involvement in the innovation, development, and commercialization process.
Weinstein-Millson expects the realignment to deliver 20% to 30% enhanced value in cost reduction, quality, risk management, and growth/innovation. Cost reduction value will be calculated by using actual historical savings and comparing them to new team cost reductions. Quality value will be measured in supplier quality issues. Risk-management value will be calculated using actual "revenue at risk" managed with current projects and risk management, against a baseline. Growth/innovation value will be determined by industry benchmarks (20% of revenue driven by new products every three years, and 30% of new ideas from suppliers).
In all, Weinstein-Millson's organization is poised to move quickly and responsively in support of Boston Scientific's corporate strategies, because it is aligned to respond better to company needs.
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