Keynote: 21st Century procurement the GlaxoSmithKline way
Keynote: 21st Century procurement the GlaxoSmithKline way Willie Deese, SVP Global Procurement, GlaxoSmithKline
By on May 17, 2001Keynote: 21st Century procurement the GlaxoSmithKline way
Willie Deese, SVP Global Procurement, GlaxoSmithKline
DR LEANDRO: Good morning, delighted to be here, and it's almost being home with this delay, a bit of European Continental delay is always fine before anything, I'sm very happy to be here. The evolution of the Bio Pharmaceutical executive, has taken him or her to heavy use of technology. This road hasn'st always been straight, it's been quite bumpy. Just and not a long time ago, put yourselves back in March 2000, we had this amazing figures around, this amazing definition of the economy at that stage. Well a bit later, not that much, we have something that looks like that, and is quite different, and today or a little bit more one year later, we have, I don'st know what we have in NASDAQ, but in the last few hours it's been announced as you know, that G is back to be bigger that micro soft. Whatever that means being bigger or smaller, it means that it's a reverse in the economy, microsoft being or has been the prototype of the biggest company, etc, is to be continued. If the world where we think like desperate to put some labels to what is happening, labels that have to do with the knowledge economy, with the information society, etc, and we are trying as I say desperate to probably put some more, trying to understand what's going on, some people understand better that others, and it's a world that is certainly dominated by the E, E anything, E-business, E-trade, E-economics, E-commerce etc, some people may think that maybe even E-thiopia, and certainly I'sm absolutely determined to change the name of my business card, to use my ability to have a E in my name, I'sm going to be E-Herrero, which I'sm told that by doing that, I'sm going to make more money. Is anything new around here, and I think it's worth spending a couple of minutes, no more, on that, and it's a very good question, because I suspect that the problem with all users, like this one, is that we all or almost all, we are already converted to something. It's like pitching to the converted, I suspect that in many management teams of company's that you belong to, it is no such conversion yet, and some people are saying, what is that is really knew there, is it really an E-economy, are we talking about use of enabling technology, which is totally new, hasn'st swarmed the whole thing, are really talking about new business models. You have people in all the extremes, and in a spectrum, in one side you have the ones who think that we are in a revolution, that is a revolution, that is bigger than anything that we have seen before, certainly bigger than the telegraph, by the way was called the Victorian internet, and that the internet is a really disrupting technology, by that meaning it's changing absolutely everything that we are doing. But, in the other side of the .. you still have skeptics that think that IT stands for Insignificant Toys, if anything, and that they are waiting for some sort of Amazon boom at some point, and the economist in a survey, in September 2000, said then burn all the books, after all B2C may mean Back 2 College, is really nothing new, or the answers where already there. Despite the whole thing, there is no doubt that we have an era, we are privileged to be in times where we have this amazing type of data, that we can handle. I always use some of these as lights to remind ourselves where we are. We are in a situated which we'sve never seen before, again for people in the IT area, this is nothing new, but is worth saying that, certainly something that when I talk to very young people, they say what is faster, well the fast is that it doesn'st look anything like 5 years or 10 years ago, there's a lot of . Our company's, our organizations, are some way in a spectrum of trying to do all business, or carry on doing all business, or using the enabling technologies, and the possibilities that we have in a way that you could call poor or rich, and we are some where. There are all business models that are still using all aspects of technology, sort of desert islands, there are still people doing a very old fashioned model, but trying to use this, people are trying to get to grips with the new technologies, particularly the IT area, some people who are really trying to do things different, but they don'st know how to do it, and they are still using technologies and IT's that are probably not appropriate in some cases. Then we have the sexy area, where everybody wants it to be their new business models, the new use of IT, the sole commerce etc, and using that area where there is still a bit of confusion of what we are talking about. I still find the board is between this E-commerce, IT business, or use of technology sometimes, that it gets very boring discussions. It may not be obvious for people who are in the area, who are vendors of a particular solution etc. When Professor Einstein's secretary wanted assistant, want to prepare the paper for that years exams, he asked the Professor, and he was handing out all the paper with some questions, and he was a bit astonished to see that the paper was last year paper, it was exactly the same as the previous years paper, so she thought there was something wrong, maybe Professor Einstein was already in the cline, was getting very old and he couldn'st believe that, so she went very politely to him, saying Professor you realize you'sve given me the papers for last year, all the students know that in the campus, the answers have already been circulated etc, it's exactly the same questions, and he said, oh I know that, the questions are the same, but the answers are different, and that was mathematics and physics, and combinations. So it gives you an idea that today probably we still think we have, and I'sm very keen to stress that again, the same set of questions, questions that have to do with the organization, with the people, with the use of technology, and at the end of the day the purpose of what is it that we are trying to do. A set of questions that I think is worth baring in mind for the rest of today, because they should be the frame work for our discussions. What is Bio Pharmaceutical in the whole thing? Well we have a panel that is a very good combination of people, who are going to talk in a generic way, and in a specific way, from a vendors perspective, from users perspective, and we have in the morning a fantastic panel of 3 people. First of all, before the break, Willie Deese from GSK, is going to talk about procurement, 21st Century procurement, then E-governance by Anne Friedman, completely different thing, and then after the break, A big pharma research platform from Wolf from Bayer, then we are going to have a panel discussion of all these things, and put them all together. If after the presentations, there are very quick questions in terms of facts or comments, I will appreciate them, the speakers will appreciate them, otherwise we will leave the main discussion for the panel, at the end of the day, but again feel free to ask any questions at the end of presentation. So I'sm very pleased to introduce Willie Deese now, from GlaxoSmithKline, who is going to tell us about the 21st Century procurement the GSK way.
9:05 - Keynote: 21st Century procurement the GlaxoSmithKline way.
Willie Deese, SVP Global Procurement, GlaxoSmithKline
WILLIE: Good morning, before I start the presentation, I need to ask a few questions. I was told once that if you'sre making a presentation, it's good to know something about the audience. So I'sve got a brief series of questions, that I'sd like to ask you and will probably take less than a minute, and it will mean for me, and hopefully more for you, if you answer honestly. How many of you have worked in a procurement organization, in some form or fashion during your career? Okay. How many of you have sold to procurement organizations, during some facet of your career? How many of you intend to work in procurement organizations, during some facet of your career? Okay. Now, when you'sre asked to be a keynote speaker, it would presume that you know something about the topic. I'sve been engaged in procurement and related activity for close to 24 years, so I don'st know whether that qualifies me as a guru or not, but since we do have people in the audience who's knowledgeable about this, I'sm going to go to the second presentation that I planned for today, and I won'st give you the first one, which may have been full of things that would have been a little confounding, and maybe not all true. Lets talk about procurement in the 21st Century at GlaxoSmithKline, it's an interesting topic. When I was asked to talk about this, because things are moving so fast in the E world, and certainly in procurement over the last 5 years, that to presume that you could talk about procurement for the 21st Century would be very presumptuous indeed. I think what we are going to talk about this morning is procurement in GlaxoSmithKline for the next 3 to 5 years, and that may even be ambitious, when you consider the rate of change within procurement and within our industry. What I will say is that we are on a quest to be the best, that's all I'sm going to say about that for now, and I promise you I will tie it in at the end as to why it's important. Let me give you a profile of GlaxoSmithKline. We have sales of 18.1 billion pounds or roughly 27, 28 billion dollars, for products of sales is greater than 1 billion, and a total of 16 products with sale in excess of billion dollars, on an annual basis. There's over a hundred thousand employees world wide, 108 manufacturing sites in 41 countries that supply products to a 140 global markets, and produce over 1100 brands. Our R&D budget that's 2.4 billion pounds or roughly 4 billion dollars, and it's about 4 months old. Pretty spectacular growth for a 4 month old company. But as I'sm sure most of you know, GlaxoSmithKline grew out of the merger between GlaxoWelcome and SmithKline Beechum. Who is procurement at GlaxoSmithKline? There's 1200 procurement professionals on a global basis, we have a global re net and we'sre responsible for procuring 8.1 billion pounds of materials and services globally, or that translates into roughly 13 to 14 billion dollars, depending on the exchange rates on any given day. We do have direct reporting relationships for all of the people within procurement on a global basis, and I'sll explain why that is important, as we go through. All spend within that 8.1 billion pounds or 14 billion dollars is within scope, and we take a collaborative approach, in that we engage our internal customers within the organization, they participate on the cross functional procurement teams, and they indeed have a voice in what we buy and how we buy it. It's supported by business mandate, if you go into a effectively managed procurement on a global basis, it can'st be something that's done simply locally, regionally or by country, it has to be managed what we call central strategy development de-centralized execution. Procurements raise on that why do we exist to procure grids and services. but it's a little more complicated than that, if fact it's a lot more. If you looked at procurement organizations 15 to 24 years ago, most of them were engaged in administrative and tactical kinds of activity, and for the most part what we used to call place and chase, they placed an order and then they chased it's delivery, and they were considered good at what they did, if indeed the materials arrived on time and the prices stayed stable, it didn'st hurt if the quality was okay as well, to ensure that all business requirements are met or exceeded. Lets talk about some of those business requirements. Within GlaxoSmithKline it's starts with the assurance of supply, doesn'st matter what it costs if you can'st get it, and in the business that we'sre in quality and regulatory requirements are key. The one things is 99 % quality does not work in the pharmaceutical industry, 0.5% failures could result in someone being injured or worse a fatal incident, so 99 % quality does not work, so it's key to what we do. Extremely high service levels, and that forms the AQS, and within SmithKline Beecham if you'sre going to be a supplier to us, you have to meet AQS, those are the tickets to the ball part, and every supplier has to meet those. If you'sre going to be a preferred supplier and differentiate yourself from your competitors, then cost and innovation become the differentiating factors and those are the ones that drive whether or not you become a key supplier to SmithKline, not to SmithKline Beecham but to GlaxoSmithKline. Too ensure that we achieve best total cost for purchased goods and services, now cost is important, it's important because we compete in a global environment, and we compete in a global economy, so our ability to manage cost and manage it effectively is very important. We believe that if we have the best price and the best cost, and they'sre not always synonymous, the best year on your productivity and processing improvement, the best specification management, and the best technology, that we will significantly reduce our cost over the next 3 years. We promise to Wall street and the City in London that we will do exactly that, and that's part of our mission, to work collaboratively across the business, sharing success, reward and recognition. We manage the procurement of goods and services on a collaborative basis, we form sourcing teams that are made up across functional membership, and they indeed set the parameters under which we purchase, to be recognized as a valued strategic partner to the business. If procurement is being done well in the enterprise today, then it moves certainly beyond the clerical and administrative and is recognized as a valued strategic partner. How we organize to do this work on a global basis, I get to lead the merry band of 1200, we have a global head of production procurement, a global head of capital procurement, as well as construction, a North American head of commercial and general, and we commercial and general any procurement that is not directly related with production, that person heads up North America. We have someone who is the counterpart for North American head of commercial and general for Europe. We have global head of R&D procurement, someone who heads up international, and international in our business is considered all areas outside of North America and Europe, rest of world. Information technology and that is global as well, and then global systems and processes and that's headed up, that in effect defines the systems that we use, the processes and the methodologies that we use on a global basis to manage the procurement of 8.1 billion pounds of spend. Then global operations and that manages the transactional aspects of the procurement function globally. We also have dedicated functional support from human resources, information technology, finance, legal, quality assurance and communications. We have taken a business approach to managing 8.1 billion pounds of spend, and if you think about that in ratio to our annual revenues, we spend on an annual basis 50% of what we turn in revenue. So it's very important to our bottom line to manage it effectively, therefore we manage it like a business, and in various simplistic terms if our prices go up, if our costs go up, we consider that a loss. If our costs go down we consider that generating profit on behalf of the enterprise. So what is it that we buy, what makes up that 8.1 billion pounds or 14 billion dollars? We spend roughly 2.1 billion on production materials and services, on R&D 1.1 billion, capital 1 billion, international, all areas outside of the US, North and Europe 867 million, IT 338 million, commercial and general 2.6 billion. What must we do as we manage this over the next 3 years, we have promised our organization that we would reduce our cost on that 8.1 billion of spend by 10% or more over the next 3 years. We have to coordinate the supply chain impacts for the largest network rationalization in the Pharma sector. We have to ensure that all business requirements, the assurance of supply, quality, regulatory, service at all are met or exceeded as we do number one and number two. It's important to understand the procurement cycle, it starts with identifying the business requirements and selecting the suppliers, then we have requisitions, people want to buy things, we have approvals from the buyer to the financial organization to special approvals within our organizations, order creation and resolution, order validation by the supplier and delivery of the good of service, and invoice and payment. Now that is the procurement cycle, keep that in mind I'sll come back to it as we go through. The key elements of the way that we do our work, we have a keen focus on process, methodology and ways of working. The foundation of GSK procurement is anchored in a strategic source in process that works collaboratively across the business, sharing the successes with the rewards and the recognition. What does it look like? Starts with these steps, process initiation, situation analysis, strategy creation and approval, strategy implementation, specification management, supply management and supplier management. Let me be very specific about what those are. we start with understanding where we are going to buy something globally, where is it going to be used, where is it manufactured or produced, where is it going to be consumed and then we start to analyze all of those factors and then we start to study who are the suppliers who are capable of supplying us, whether it be local, regional or global, what are the cost structure of those products and of those industries and the suppliers that supply us, and then we start to create scenarios of how we want to buy that better service in the market place, and they are very analytical and structured and then we start to develop strategy and then we develop the implementation of that strategy, and then we start to look at the specifications and determine are they the best, can we improve them, and then we look at how we'sre going to manage the supplier and manage the flow of goods and service into our network globally. It's a very structured and analytical approach that delivers results. We have an operating model, we'sre the sourcing group management process at the core, but it's not that alone, it's starts with people that are most important asset and we invest heavily in them. Planning and measurement it does not do any good to have a game plan, to have a strategy without planning and without measurement, so we measure ourselves as well as the supply base relative to our performance. We expect leadership within our organization that is shared, it cuts across the entire function 1200 people, we expect them to lead the sourcing group management process, work collaboratively with their peers. We instill process and policy, strategy and structure and we deploy technology and systems to make it all happen. We have very definitive ways of working that connect us with our business partners globally, both internally and externally, and we make sure we'sre tied into the cooperative objectives of making sure we manage the enterprise globally, making sure that we defend against pattern intrusion, and protect against pattern risk, operational excellence on a global basis that we enrich the pipe line of products that is the key driver for all pharmaceutical company's, and that we turn molecules into block busters. Then finally it's driven as I said earlier through people with passion, with a key objective and that is delivery top notch performance on a global basis. People, we place a keen focus on them, we train, we make sure that we train not only for what we'sre doing today, but for what we know is coming in the future, we put a keen focus on competency, development, we invest in our people significantly and we want to attract an retain the very best procurement people in the world. Why is that important? Because we know if we do our work very well, we impact the bottom line of GlaxoSmithKline. We will invest and we have invested over the last 2 years some 3 to 4 million pounds, so it's actually closer to 5 million dollars on development and education of our people all over the globe. We have a world class global learning program in a place that is transforming our organization to a recognized leader. Now it would be easier for me to stand here and say that so it begs the question, how do we know? We know because we'sve received external recognition, most recently we were highlighted in the purchasing machine by someone who is known as a guru in the purchasing ranks, and we were recognized as one of the top ten procurement organizations regardless of industry in the world. Our people are targeted by major global cooperation and while it's flattering to have them targeted, it also creates a real problem for me and our objective is not to lose very many. So if you'sre here and you hear me talking about this you do need to know, we'sll defend keeping those people very vigilantly. Our systems, we have a keen focus on Web enabled decision support systems to facilitate the sourcing group management process. Our user involvement, we ensure we have our users involved in the development, the design and the continuance improvement of those systems. We try to make sure that we have the best cost for developing those systems, the best speed to implement those systems and we make sure that we truly engage the user community. One comment about the best cost and the best speed, most technology that I'sve been associated with over the last 24 years, it's rarely on time, it's rarely at budget, and most of the time it does not live up to it's expectations. Unhappy to say that over the last 4 years, we'sve been very successful in developing our systems, they'sve been on time, they'sve actually met budget, and in most cases they exceeded our expectations. My hat off to the IT community and our internal people who develop. Our system philosophy is to engage the customer in what we call customer idealized design, a process that allows the user involvement and the design and development phases, through an edited process, that ensures system introduction on time and add budget. Our ideal is to transform data into wisdom, it starts with data, leads to information, leads to knowledge and understanding and ultimately wisdom. It's really the application of that wisdom that makes the difference in the execution of what we do in the market place. Our process is also focused on personal accountability, if you are a sourcing group manager within GlaxoSmithKline, you have truly personal accountability. In other words if we are going to reduce our cost by 10% or more, and then we like to think of it or more, every person that has responsibility for manage in the category of spend for good of service within GlaxoSmithKline, has the responsibility personally to deliver validated savings that are measured and reviewed quarterly. They have to own the work that they are responsible for, so if they'sre leading across functional team, they are viewed as the leader of that team, the facilitator of that team, and they are held accountable for delivery results. Excellence and executions, something that we gleaned about 4 years ago. We were very good at planning back in the SmithKline Beecham days, we were not necessarily good at execution from a procurement stand point, so we would often have very eloquent, elegant plans and very poor execution. So roughly 4 years ago, we decided that we wanted to have excellence in execution. Usually what separates those who plan from those who succeed is excellence and execution. So we plan, we do , we check and then we act. We apply lean process and six sigma process as well to ensure that we constantly improve methodology and improve the results that we generate. If you'sre going to manage procurement on a global basis, there are some key information elements that you need, you need to know how much you'sre spending, you need to know what you have contracted, you need to know what your levels of compliance are to the contracts that you have let, you need to understand what you'sre saving, or whether or not your costs are going up, you need to be able to take that information and analyze suppliers, to analyze markets and to know the business requirements. If you'sre going to manage procurement on a global basis, there a four fundamental questions that you must be able to answer. How much are you spending globally? Who are you spending it with? What in line item detail are you spending it on? And where is it being spent around the globe? Now those are very mundane questions, and you'sll probably say, gosh every organization can answer that, well let me give you some facts. I would take that and all those folks who raised their hands saying that you worked in procurement organizations, I'sll take this bet that probably no more than 15% of global corporations and ones that are national and even smaller can answer those questions with 90% accuracy. Any one here to challenge me on that bet? I didn'st think I'sd get very many challenges, so while the question is mundane, the answer is very difficult to come by. We developed a systems portfolio that gets it starting to answer those questions, and this is what we are today, it's not what we'sre going to be tomorrow. First you spend track of tracks, suppliers spend, lets us know where we'sre purchasing those goods or services, what we'sve bought and what did we pay and now we can say to suppliers on a global basis, if you'sre charging us more in India than you are in North America, or South America, or Sub Saharan Africa, or any where else that we do business in the 140 countries that we do business in, we have a problem. Save track, it allows us to measure our performance and to tell whether or not we generating loses or profit. Contract, it allows us to create contracts online and manage compliance with outstanding report capabilities. Then we also use reverse auctions across all types of GSK spend. Now if you talked to procurement guru's and experts from around the globe, they are divided on whether or not the use of electronic auctions are a good thing. Well let me say this, if you'sre not demanding suppliers to be competitive globally, to meet those AQS CR requirements globally, then you'sre being taken advantage of. One other thing about the use of the electronic auctions, and we'sve used them now for the last 2 years and we'sve generated typically anywhere from 12 to 20% savings when we use them. If you have more than 2 suppliers who want to compete for your business, and you have clear specifications, electronic auctions are very apropos. Second, people are concerned if you use them do you destroy supplier relationships, absolutely not, every supplier relationship is not strategic. How do you determine whether or not it's strategic? It's whether or not it's a good service that is broadly available and can be leveraged, if it can it probably ought to be used on reverse auctions, 70 to 80% of what we buy, and I would suggest 70 or 80% of what you buy could be managed through electronic auctions. I'sd like for you to see what some of this technology does and we'sll roll the tape now. They start with data, which gets transformed into information, which leads to knowledge, which generates understanding, and ultimately results in wisdom. (Tape Playing) GSK's procurement home page provides one stop shopping for information about the procurement organization, it's people and processes. Users can link to a full range of powerful and flexible information systems. Save track is a system for GSK procurement and other business partners to record savings generated for the organization. Pulling data from more than 100 financial and production systems world wide. Spend track shows in one place GSK's spend with suppliers. It features a searchable data base and custom reports. Contract is an internet Web based system that allows people to create and store contracts in the data base. Template provided that can be added to fit a particular need. Users can learn who we'sre buying from, as well as pricing and other contract terms. The buying guide is a site that directs users to GSK preferred supplier and provides instructions for on how to buy from them. GSK is one of the select few leading edge company's to adopt free markets online as an integral part of our overall purchasing process. Watch the reverse auction bidding as we make a market(Tape ended) Everyone of those clips represents the price going down. But we don'st consider ourselves truly E enabled yet, and we'sre moving in that direction fairly quickly, because we believe it will drive further data transparency to drive both price and cost reductions. Reduction of not essential spending within the enterprise, enables uniform procurement policy across GSK, drives compliance to preferred suppliers to an even greater degree, rapid standardization and rationalization gains, significant efficiency gains throughout the procurement cycle, rapid data analysis to further external and internal leverage, better overall asset management inventory control and demand management, transactional resource activities should shift from placing and chasing, orders to helping enable the sourcing group management process, which is a core of what we do. You hear all of the entertainment conglomerates talk about content as king, well within procurement we believe content is king as well, and content is best developed in categories characterized by repetitive spend, purchase goods and plenty purposes. Examples include office supplies, lab supplies and MRO. Because of the nature of these categories, a little price reduction is available, and they'sre pretty mundane categories, they'sre leveraged already, the available spend data and buying patterns already established, and we work the meon year anyway. However the gains can be made through increased compliance across the enterprise, but it's hard to put an E-procurement implementation proposal forward and have it approved, putting pens and pencils through the system. So that's not what we'sre going to win by, and that's not the content that we'sre talking about being king. Therefore the challenge is to drive content into categories for the content, it's not existed before, service areas, non repetitive spend, and areas for procurement has had less impact. Examples would be contract of human resources, marketing and print, just to name a few, but our approach is everything that we spend. So if we think about procurement and it's E enabled raise on . It's electronic to check through an approved compliant process, it's to exceed the business requirements, assurance of supply, quality regulatory, service by electronic fulfillment through enhanced visibility and availability of real time data. To electronically enable the strategic sourcing process, which should accelerate the rate of savings and all of the other AQSCI requirements. Should it support accelerated new product development and stream line supply chains while working collaboratively across the enterprise. Then to leverage opportunities from the E enabled supply chains straight through to the E enable cell side of the business, bringing enhanced value as well. So as most of you know, we emerged about a year ago, and that postponed our foray into implementing E-procurement, turns out that we were pretty lucky, but we are moving forward using a suite of Web enabled decision systems of our Web site of preferred suppliers, reversed auctioning, a core competency, partial implementation of SyQuest's which is used in the R&D community, E-procurement software decision eminent, so we'sre going to move next into implementing this strategic platform for E-procurement, and that was early 2002 implementation. Our wait strategy has been a good decision, well actually we'sve been fortunate, because we like everyone else a year ago would have been caught up in the .com craze, and as most of you recall about 16 to 18 months ago, everyone was rushing to form IPO's for trade exchanges etc. I would ask how many trade exchanges are really making a different shot, the reality is not very many, will they, I think they will, will it change to way we manage buyer and seller relationships, I think it will, the question is how quickly will it be adopted, and I would suggest that it's going to take longer than we all envisioned. It was really interesting when the Andro talked about the .com craze, I really believe if someone had imploded and IPO that said, I sell junk.com a year ago they would'sve made money. I think we'sre al smarter now and we'sre taking a much more enlightened approach to the utilization of technology, but it's clearly going to transform buyer and seller relationships. Our approach as we move this forward is that we would like a plug and player approach that takes advantage of the technology advancements, which occur in 3 to 6 month increments, and as we envision the future it is one of plug and play and interoperability, so as we select our E-procurement platform and has to be able to play with electronic auction capability, it has to be able to play with various supplier capabilities out there, it has to be able to play at the appropriate time of horizontal and vertical market places, and certainly electronic fulfillment enhancement. We see it pretty much this way, because if you can'st plug and play, you going to get locked into technology and locked into processes that may not be right for you 3 to 4 years out. So what's our implementation plan, we will implement the software on a regional basis, starting in the US, UK and then moving to the rest of the word, R&D Pharma corporate and consumer part of our business, specific point solutions and punch out applications, will be added to make good business sense, and horizontal exchanges and vertical market places will be added as applicable. We will not just rush to be a part of a horizontal exchange or a vertical market place because it's the in thing to do. Now assuming that we do all of the things that we'sve talked about and do them well, what's the impact at GlaxoSmithKlein over the next 3 years. Well we believe our implementation costs are going to be neutral, and I'sll show you why, because we believe when we reduce our costs by 10% integrator, and when we implement these systems going forward we'sre going to drive up our profitability, we'sre going to increase the return on investment, that is whatever we spend in terms of implementing the systems as well as the cost of running procurement itself, the net present value of every investment we make will go up, the earnings per share of the enterprise will increase, so will the valuation, and we believe procurement organizations that are really doing the job and doing it well in the 21st Century, all of those kinds of things are happening from a financial perspective. From a qualitative effect, it would be seamless ease of use for the internal customers as well as the external supplies, it integrates purchasing policy into the electronic process, data transparency allows buyers to make the right choices the first time, stream lines direct to check process and freeze up human capital, significant efficiency and productivity gains across the enterprise, E enabled procurement cycle, it will then generate more time for those sourcing group managers to do the real value added work. So going back to that procurement cycle .(end of side). if that's happening, the waste that's occurring in your organizations is significant. We have that situation and we think we'sre pretty well managed, that situation will not exist 3 years from now. So as we look forward, the future really does take the procurement cycle and it E enables it with the E procurement platform with strategic sourcing that's also electronizied, electronic auctions, fulfillment processes that are online, straight through to demand management and it should lead to cost reductions, stream line focused on the value add, compliance, automotive processes straight through to demand management. That brings us back to the mission we'sre on, why we'sre on the quest, why we'sre in the quest to be the best? Well we believe that is you'sre going to be a leading organization you have to have the best people, you have to retain them and the last thought that I would leave you with, it's a lot more fun being number one than being number two, number three or number four, and that's why we'sre in it to be the best, regardless of industry. Thank you very much for your attention, and I'sll entertain any questions you might have.
SPEAKER: Are there any questions. Yes, could you tell us who you are and your organization.
Q: (Not Clear)
WILLIE: We built most of these internally, and on a few occasions we used third parties to help us with the development, but we did most of it internally.
Q: (Not Clear)
WILLIE: Very little. I came from the SmithKline Beecham side of the organization and we did not use SAP. So we developed these pretty much independently of SAP, however we are integrating it now with SAP.
Q: (Not Clear)
WILLIE: The challenge. It's not easy because as you heard, it was drawing down from over a hundred different financial systems worldwide, but what we did is, what's behind all of that is an awful data base, so that's a plug for the awful people. It allows us to manipulate the data, and I'sm not a techy, but a couple of gentleman sitting behind you could get into more technical detail.
Q: (Not Clear)
WILLIE: We'sve been smarted and I think that we stack up pretty well, but I think a better bench mark is not so much what you cost, but what's the return on your investment, and what's the return on what it costs to manage the function versus what it delivers. There I think we stack up pretty well, both inside the industry and against all industries.
Q: (Not Clear)
WILLIE: Both. It's more in the fully functioning and particularly as I said, we'sve used it for the last 2 years within the SmithKline Beecham legacy organization, and now as we migrate and corporate our Glaxo welcome colleagues, we need to use both. I would say over time, over time we'sll being moving more towards direct source.
Q: (Not Clear)
WILLIE: The forecasting of demand comes through to us from manufacturer, and as you know within this industry and certainly within most industries, I'sve worked in 3, forecasting of demand tends to be more than art and very much not a science, and most organizations are lucky that they are more than 60% accurate. So it's good if you can forecast it and you have high degrees of accuracy, in most instances we don''s, but we do take what we get, and we use historical trends as well to derive what we are going to buy in the market place.
Q: (Not Clear)
WILLIE: Certainly I think there are going to be moves to improve the level of inventory turns that we have today, and that's really the key driver. But I don'st know when you look at the cycle time to manufacture a Pharma product, whether we'sre ready to go the straight route replenishment by consumption technique. Because the worst thing that you can have happen in the Pharma industry, is not have the product when you need it. So can we improve on the management of those assets and reduce our working capital? I think we can. Can we go straight to replenishment by consumption? I'sm not sure we'sre quite ready for that yet.
SPEAKER: Last questions and we leave the rest for the panel.
Q: (Not Clear)
WILLIE: Because we knew what we needed and we didn'st want someone selling us something that we didn't want or didn'st need, or that they didn'st understand. We thought that we understood it very well and I go back to those 4 questions. Only about 15% of the company's worldwide can answer those, and I might be being generous when I say that. So we wanted to be sure that we could do it, do it quickly, do it within budget and it worked for us. That's not to say that we couldn'st have gone outside, but we saw very little opportunity outside to develop it, particularly when you looked at the fact that we had disparate systems all over the world, and we didn'st have a platform that was consistent worldwide.
SPEAKER: Thanks very much. Willie thanks so much for this lovely presentation. Please keep in mind of all the questions for the panel. There's going to be a panel discussion at the end, I certainly have all the questions, it will be an opportunity to even profane some of these things further. I'sm pleased now to introduce Anne Friedman from Novartis, who is the Vice President of E-business, she's going to talk about E-governance a marketers perspective. Thanks very much.