When Alan Rankin joined STADA Arzneimittel almost two years ago as chief procurement officer, he had a clear goal in mind: to draw on his extensive experience at life science giants such as Novartis and BASF to create a best-in-class procurement function at the German generics and consumer healthcare specialist.”
What does it mean to have a best in class procurement function? There is no single definition that can be applied to every procurement function in every business in every industry in every part of the world. Procurement maturity and what it means to be best in class is constantly shifting and evolving over time so much that by the time a journey towards maturity starts, the very parameters that a business is working towards will have already begun to change. This is in reality, a reflection of the fluidity of procurement. It cannot stand still as the world around it moves which brings us full circle again.
The quest for procurement maturity is one defined by the need to be able to react to business needs and in most cases, be one step ahead of them. In order to do that, procurement needs to be better aligned with all areas of the business, it requires a strong team and it requires a greater understanding of the responsibility and the role of procurement itself.
“Category management is the engine of procurement, however, the business doesn’t think in categories,” explains Rankin. “But this is how procurement puts things together, and it’s how they drive things. The best explanation I’ve heard of category management is that you have business that creates demand, a market that creates supply and your category strategy puts those two things into balance to create value, which I think is a remarkably simple explanation of what it is you really need to do in procurement.”
As a leading manufacturer of high-quality pharmaceuticals and a long-standing heritage rooted in pharmacies, STADA has established itself as a ‘‘reliable and trustworthy partner for 125 years.’ In fact this goes to the heart of the company purpose, ‘Caring for people’s health as a trusted partner’. A key part of establishing and ultimately maintaining that purpose has been the company’s relationships with key suppliers and customers. STADA’s procurement transformation program aims to strengthen and build on those relationships, driving value and innovation.
“What makes the difference is actually understanding your own business, and understanding how the demand is generated. It amazes me how very few procurement people understand that. If you master your own business and understand how your demand is generated, and you have that level of curiosity to lean in, then you will be much more successful than the person who focuses on suppliers and markets”
In 2017, STADA was bought out by two private equity groups Bain and Cinven. It’s rare that we hear of the difference in how procurement is viewed and how it views the wider business in the private equity space and Rankin admits that his own understanding as to what the ‘private equity lens’ was prior to working with STADA has been turned on its head. For him, procurement in private equity means one thing; speed to value. Like any journey, Rankin had clear goals and money-driven results that he needed to deliver along this roadmap, but developing a best-in-class procurement function that has the capacity to deliver on speed to value was and still remains a vital goal. “We had to look very carefully at where we needed to invest across the business in order to generate the maximum return as quickly as possible, and it was pretty clear it was speed to value,” he says. When you’re in that dynamic, it’s all about partnership, and working together finding the best way to work with partners to generate the maximum amount of value in the shortest time frame.”
With the goal of speed to value in mind, STADA required a key partner that could help not only take the first steps of this journey, but work closely with STADA every step of the way towards procurement maturity. Here he speaks of a partnership with Genioo that, from the outset and to this very day, allows STADA to leverage experience and knowledge while continuing to deliver key successes. “Working with Genioo was a different experience because they spent time working on the vision of the future, and acting as a sparring partner before we went into working on projects together,” he says. “When we then executed a project, it was much easier to see how the new processes put in place would fit with the overall procurement vision.”
Through this relationship, procurement has been able to generate value much quicker from consumables purchases, while simultaneously managing demand more efficiently.
“It’s all about speed. To actually go out and recruit that ability into the organisation. To be able to get new procurement strategies in place very quickly and to search for opportunities effectively across a very fragmented landscape in the business all the while working with multiple business models, it would take a huge amount of time. Speed to value is so important for STADA and, like I said before, finding the right partner for the job. The right partner for us was and continues to be, Genioo in every regard.” adds Rankin.
“I think that has been the key learning for me in STADA working with this private equity lens. It’s all about, understanding how you can partner with the right people and make the right decisions to bring the best companies in to take you from low maturity to best in class fast.”
Zooming out and looking at the broader journey that Rankin had embarked upon, STADA was looking to move away from an operational and transactional approach to procurement while also breaking the traditional and somewhat fragmented nature of procurement throughout the business. Not unlike many other procurement transformation projects, Rankin is here to connect the dots across disparate parts of a fragmented business to bring them together as One STADA. At the heart of this is One STADA Procurement.
Rankin was looking at evolving the low maturity level of procurement to new best in class heights, and to even begin to consider doing this he had to create a new operating model, creating business-facing strategic roles in procurement. What this meant was that all middle office activities, such as contract management, e-sourcing processes, data analytics were consolidated and brought together with a partner, Genpact.
For the more operational and transactional activities such as PR and POs, STADA adopted Ariba to digitise them and utilised Genpact to manage them. Whenever the word ‘digitise’ is thrown into the conversation, eyes may start to roll as the procurement journey is swallowed up by buzz phrases and technology jargon. Rankin is all too aware of this and nips that in the bud. “Sure, we are bringing STADA more into the 21st century by being able to digitalise cataloging and channeling or being able to do good source-to-contractor activities and great RFPs,’ he says.
“It’s a massive transformation in the sense that you’re building the plane, but you’re also flying the plane. So it’s a question of transform and perform. It’s not transformation for the sake of transformation, it’s transformation to deliver value, and speed to value, as quickly as possible, so we have to transform while delivering the numbers every year”
In using the expression ‘speed to value’ it creates a number of images in our minds as to what that actually means. For Rankin, it’s simple; harmonising processes across the business by implementing an operating model that’s right for the business with a digital platform that has the capability to truly enable that operating model to deliver. In his own words; “We needed to start firing the engine that is category management in the business to make it mean something in reality.”
This is key for Rankin, taking promises and innovative solutions and turning them into reality for a business. He speaks of how he is privileged to be in a business that has given him the support and confidence he needs in order to deliver. Operational buy is, as we know, often a common struggle amongst other businesses as there can be a lack of understanding, trust and even credibility in what the CPO plans to change. This is certainly not the case for Rankin.
“The value agenda we have created is fully supported by the STADA executive team and it is a real pleasure to work in this environment. As long as we bring the right business cases to the table,” he says The air cover that we have here is incredible, and it’s very exciting actually to be able to build a full procurement system in STADA.,”
He continues; “Why I think this job is so good, and so interesting is that we can do in two or three years what would take a normal organisation five or six because the stars are aligned to operate that way.”
With the evolution of procurement taking centre stage it had created a somewhat crowded marketplace of so-called experts and consultants. While they do have their place, Rankin acknowledges that there can be one too many and that some days for him consisted of a steady stream of consultants coming in through the door and telling him that he and STADA should follow their particular method and head in a direction that they felt was best for the business. His first step was to draw a line under and put an end to this.
“The very first thing that we really had to do was just take ownership of the whole thing and get the organisation firing with people that were employed by STADA, make them realize that they owned it, were accountable for it, and that they needed to go out and deliver it,” says Rankin.
“It needed to be something that’s much more owned by our own people and our own business. Only then could we really figure out what the real things that we need to drive with various partners to, in the end, work with the business and generate the value.”
As with any journey, there is a roadmap and a timeline. For Rankin and STADA, the initial timeline is a three-year plan but as he is keen to stress, once the third year is complete it’s not the time to down tools and pat themselves on the back to say a job well done. Procurement is an ever evolving ecosystem, so while Rankin is 18 months into this journey he is already thinking of the next three years.
Over the last 18 months, Rankin can already point to some key achievements and milestones as part of this journey. Examples that prove that the direction that procurement and STADA are going in is the right one.
“For me, and this is not just a procurement success, we’ve had a big part to play in inorganic growth through acquisitions. Through inorganic growth with new business development and licensing opportunities, STADA is able to continuously outgrow the market” he says. “We have made a number of large acquisitions in recent years that represent what the STADA ethos is about.”
“We are the partner of choice for people to approach with their opportunities and with their innovation. That’s the mindset that’s running through the organisation. If we’ve got partners that are helping us drive the top line, and drive our business with great new products and innovation, or opportunities to acquire product portfolios, we want those companies to be coming back to us time and time again with the next opportunity”
That repeat business and being seen as a partner of choice comes from the business strategy and the relationships that the company has built. By investing in its procurement function, STADA looks to continue to build those relationships and others just like them and see suppliers as partners. In order to build these relationships, STADA needs people who are able to listen and to understand how these relationships work and more importantly, how they can mutually grow.
This was a big focus for Rankin, equipping STADA with the right team made up of people with the right skills to deliver on STADA’s promise. “We needed a new procurement team. We’ve been able to create a mixture of external hires from people who’ve seen it, done it, got the T-shirt, and have come in and been able to act as teachers in the organisation,” explains Rankin. “And they’ve been brought together with people who’ve come from other areas of the business that we’ve recruited into procurement as internal moves, bringing great knowledge of STADA and the way that STADA works into procurement, mixed with internal promotions. This diverse mix of experience makes for a much stronger and more agile team.”
STADA has been able to leverage all three of those levers to upscale the procurement leadership team while also enabling an internally driven education program across procurement that was inspired by one of STADA’s key subsidiaries.
“There was a team of people who’d come up with a syllabus based on professional standards, and they wanted to roll it out in Serbia and do some training. It was a very good curriculum that they came up with and I said, why don’t we roll this out to the entire global procurement organisation?”he says.
“It was all driven internally, it was taught and lectured by internal people. We were able to implement really good professional standards across the organisation and the feedback on it was sensational from the procurement community. They’d never had this before, they’d never interacted to that level with the other parts of procurement in the organisation. They were putting the ideas and learnings into practice immediately, there were no barriers between direct and indirect, it was all the same principles; so I was really happy with the initiative. It showed what we can achieve as a procurement group when we have the right focus.”
This approach to the people that power the procurement function reflects directly in the relationships STADA has with its partners. Being a partner of choice comes from having strong relationships with key players. Rankin highlights relationships in particular that demonstrate this; Aenova (partners for contract manufacturing services), Midas Pharma and AET, where one-time ingredients suppliers now help to manage entire supply chains on behalf of STADA. He cites a top-to-top relationship, coupled with a seamless integration, that means a partner employee and a STADA employee is practically indistinguishable from one another.
“The key to these relationships is the level of integration within the business,” he says. “We have to have a level of integration that means top-to-top CEO to CEO. It means that priorities are aligned, strategic objectives are aligned, and goals and ambitions are aligned, as well as providing us with capabilities, that it would take STADA more time to create by itself.”
“It’s very important that those capabilities are a good strategic fit with what we’re trying to do. For me, it’s that level of integration and our businesses growing together that really makes the difference.”
2020, beset by the COVID19 pandemic, has proven to be a crucial test for procurement organisations the world over, and STADA has not been immune to this disruption. With lockdown measures in place, staff working from home and closures to key supplier facilities, Rankin speaks of how the partnerships the company has with its suppliers and the strength of his team as being the key to getting through these trying times as smoothly as possible.
“We are talking with them every day to make sure that they can keep operating, and they can keep the business continuity machine moving,” he says.
“Throughout the pandemic, this has been all about relationships and the fact that we and our partners had the right plans in place to be able to work through it. There were many issues; employees were working at home, transport and logistics issues with borders closing. We had to work very hard to unblock these issues, and that was all about working with partners.”
While the last 12 months have been difficult, Rankin has already delivered key successes for STADA and the next 12 months will start to see further fruits of his and his team’s efforts. He points to the future as one of value delivery, with all the pieces coming together and working effectively for STADA to embrace the 21st century of procurement. What has been, and what will remain, key to succeeding for Rankin is a simple truth; the team around him and curiosity.
“Always get the best team and make sure that the team is as strong as it can be. I always look for two things in people, know your numbers inside and out, and endless curiosity,” he says.