Catalent Pharma's procurement team makes it on its own
By William Atkinson -- Purchasing, 11/19/2009 2:00:00 AM
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Being a procurement department in a division of a larger corporation has advantages such as being able to leverage spend with the other divisions, sharing technology and infrastructure as well as best practices. However, if and when a division is spun off on its own, things can become challenging for the new standalone procurement department.
This was the challenge faced by the procurement team at Catalent Pharma Solutions of St. Petersburg, Fla. When Catalent was divested from its former parent Cardinal Health in 2007, "We had to become a standalone company," reports Meri Stockwell, global director of strategic procurement at Catalent, which develops, manufactures and packages services for pharmaceutical, biotechnology, and consumer healthcare companies.
"One of the things we needed to do relatively quickly was to transition 170 contracts from Cardinal to our own new company," she continues. These included contracts for direct and indirect materials. Cardinal provided a great deal of sourcing support in the indirect area. However, the company used a matrix-based organization to take care of its direct materials throughout the world.
According to Stockwell, the Blackstone Group, a private equity firm which became Catalent's new owner, is very involved in the success of the companies they purchase. To help Catalent's procurement department make the transition in 2007, Blackstone suggested that it look into a group purchasing organization called Coretrust Purchasing Group.
"We went with Coretrust for several contracts that they had in place for indirect materials, such as office supplies, computers and leased cars," says Stockwell. Coretrust negotiates contracts for its members, but it doesn't do any of the buying or issue POs. "They manage the suppliers at a high level, and they have dedicated account managers for each company," she explains. This arrangement took care of about 60 contracts for Catalent and reduced its costs by an average of 28%.
Having worked with Coretrust for a couple of years now, Catalent is in a position to provide some input to Coretrust in terms of some of the things Catalent would like to see Coretrust source next. "For example, we would like them to start looking at mobile phones on a global basis," states Stockwell. "We would also like them to take a look at global programs for safety supplies and janitorial."
Catalent also uses Coretrust to negotiate contracts for some of its direct materials, such as corrugate. For some companies, corrugate is an indirect buy. However, for Catalent, given that it is involved in packaging for its customers, corrugate is considered a direct buy. "Also on the direct side, we have created some synergistic opportunities with some of the other companies that are part of Coretrust, and we have been able to go to market as a kind of consortium as a result," she adds.
And now, even though Catalent Pharma Solutions is a stand-alone company, it is once again working with other organizations, and it still benefits from procurement strategies that were available to it only when it was part of a larger corporation.
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