Collaboration with internal customers builds confidence

Paul E. Teague -- Purchasing, 4/6/2006

It's not unusual for suppliers, co-workers or even editors to get emails or phone calls from Janice Stephenson at 7am—or earlier. It's no wonder: As the lone purchasing person at Lexington, MA-based Cubist Pharmaceuticals, Inc., Stephenson may as well not wear a watch to work. There's too much to do for her to keep track of the time.

Indeed, her scope of responsibilities is increasing as Stephenson, with the encouragement of Corporate Controller Mary Stack, extends purchasing's reach into non-traditional services areas. Her strategy: build confidence of internal customers by closely collaborating with them and, often, producing unexpected savings.

Cubist, incorporated in 1992, is a fast-growing biopharmaceutical company with one flagship product, Cubacin , the only once-daily bactericidal antibiotic approved in the U.S. for treatment for skin problems caused by certain microorganisms. The European Union also recently approved the product for certain skin and soft-tissue infections. The $120.6- million company has several other products in various stages of research and development. While developed by Cubist, Cubacin is manufactured, warehoused and delivered by third-party vendors.

Stephenson is responsible for Cubist's $100 million indirect spend, a critical number to control in this company that—like many young companies in the biotech industry—is still on the road to profitability. Indirect spend at Cubist formerly included only supplies for the offices and labs. Even with the extension into non-traditional areas such as services, her goal remains the same: get fair and competitive prices from the most qualified suppliers.

While that may sound like every purchasing manager's goal, it holds special significance at Cubist. Prior to Stephenson's arrival three years ago, the purchasing department, which had two people at that time, had more of an order-processing focus than a strategic sourcing focus. There was no formal purchase-order approval process, and formal RFPs (request for proposals) didn't exist. "Now, purchasing's role is considered critical for the organization," says Controller Stack.

So, putting rules in place to streamline the purchasing process was one of Stephenson's first priorities. Among the results of that effort: an increased use of the electronic requistion process; a revised requisition/approval form and procedure for service procurements, to make the process more efficient; and blanket purchase orders. Additionally, Stephenson instituted annual meetings with top suppliers to establish goals, discuss core competencies and review performance; worked to negotiate savings with suppliers based on anticipated increased spending; and researched opportunities for discounts for online ordering.

But perhaps the biggest challenge was in moving into those non-traditional areas to control spend. In some of those areas there was push back from managers who were unfamiliar with formal purchasing processes and used to dealing with a few favored suppliers. "Getting buy-in was a hard sell," Stephenson says. What's helped is the success she has had with suppliers in terms of cost reductions, increased quality and reliable supply. Also, new hires from other companies who understand the value purchasing brings have smoothed the way in some of those departments.

One non-traditional area where purchasing has made an impact is public relations. In many companies, marketing and PR managers use their own contacts and instincts to find, interview and hire outside agencies to handle media relations and publicity. But at Cubist, Senior Director of Corporate Relations Eileen McIntyre turned to Stephenson for help.

"We used to have three separate PR agencies, one for marketing, one for investor relations and one for special projects," says McIntyre . Working together, she and Stephenson were able to reduce that number to one agency. "Jan's approach and her questions helped us to clarify our own thinking and led to a really good RFP," says McIntyre . The PR-agency search started with seven firms. After an initial email questionaire, Stephenson and McIntyre sent the RFP to five of those seven agencies, and after reviewing proposals narrowed the search process to three. Using an evaluation matrix that Stephenson developed, they interviewed the three finalists and selected the one agency they would work with.

"By using Jan's evaluation matrix, I found that my gut feelings on the agency choice were wrong," says McIntyre . "She was a real partner and improved the outcome of the process."

Following that experience, they collaborated on the search for someone to revise and maintain the company's website. "We got all the stakeholders in the room, including IT (Information Technology) to discuss our needs and wants, then based on those discussions did an RFP," Stephenson says.

There were some departments within the company that were initially skeptical of the value purchasing could bring. But after several experiences the departments warmed up. Now, Stephenson wins them one at a time.

Aside from her own ability to persuade, Stephenson knew she could rely on one other factor to help her overcome any reluctance on the part of purchasing stakeholders at Cubist: the support of top management. Not only the CEO, but also the audit committee of the board of directors supported her efforts to bring discipline to the purchasing effort, and they broadcasted their support to all the troops. Stephenson developed a training session on the importance of purchasing and how purchasing could help, and the CEO and board required all employees to attend.

"That initial rollout was critical," says Controller Stack, "and what made it work initially was that Jan explained so well what disciplined purchasing could do for the departments and how she would work with them."

And in that experience lies the lesson for other purchasing professionals. "Work as hard with your internal customers as you do with outside suppliers to establish long-term relationships," Stephenson suggests. "That's how to win."