Abbott continues to evolve as a healthcare organization, and its procurement organization is an important piece. By Eric Slack
Built from a legacy that stretches back to 1888, Abbott is an American-based healthcare company that has become a global leader with a presence in more than 150 countries. Bringing a wide array of groundbreaking products and technologies to market for more than 125 years, Abbott’s heritage in nutrition, diagnostics, medical devices and branded generic pharmaceuticals helps the company help people live strong and healthy lives.
“We are a diversified healthcare organization that has become known and trusted around the world,” Chief Procurement Officer Ric Schneider says.
Abbott has changed a great deal in the last few years. This is mainly due to the company’s continued global expansion.
Another factor was the decision to separate its research-based pharmaceutical business into an independent, publicly traded biopharmaceutical company, AbbVie. As those decisions have taken place, Abbott has been able to think differently about its strategic direction, including in the procurement arena.
“When you think about how procurement organizations work, the goal is to buy at the level where we have the most leverage,” Schneider says.
“We may buy at different tiers of our supply base to find commonality across our diverse businesses,” Schneider continues. “At Abbott, we approach that in a community fashion so we can gain value and capture it where needed.”
Although it has a centralized procurement process, Abbott has a decentralized supply chain organization, and the company is making sure that it has the expertise wherever it is buying. Centralization ensures responsibility in how the company buys and provides visibility, but it is not simply about control.
“As a truly global company with much of our manufacturing taking place in facilities around the world, we have a lot of expertise in many different countries,” says Elizabeth Riordan, divisional vice president, Global Dairy Operations in Abbott’s nutrition business.
“We are developing a community that is not about centralized command and control but is elevating technical and procurement skills all over the world with new tools, consistent processes and a broader expectation of how we want to integrate with suppliers,” she adds. “This purchasing community spans geographies, organizations and structures, and we are making it work without centralized command and control.”
Abbott’s approach to getting to where it is going from where it has been has required equal parts focus, discipline, sustainability and creativity. In terms of focus, the company is working to understand the capabilities of its supply base.
“As a procurement organization, we have to optimize that supply base and have it be prepared before we need them,” Schneider says. “As we shift our business model and grow into new geographies and launch new products, we want the supply base to be ahead of us. Relationships with suppliers have to be transparent and our connection point needs to be at a level where we are sharing our strategy with them in advance.”
Discipline is all about operating excellence, and to be as efficient as possible takes commonality and standardization across businesses and geographies. As the company brings on new people and works to ensure universal alignment, it is striving to make sure that everyone knows that excellence around standardization needs to be consistent and unwavering.
Sustainability means taking advantage of the great heritage that Abbott possesses. The company has a long history, and it is driven to help people live better, longer and healthier lives.
An integral part of this effort is working with suppliers to ensure quality, compliance and socially and environmentally responsible practices. As a procurement organization, that means supporting efforts to help suppliers understand and adhere to the company’s high expectations in areas including ethical behavior, business integrity, human rights and safeguarding the environment, among others.
“Our suppliers must reflect and share our commitment to responsible business,” Riordan says. “We stress sustainability inside and outside of the company, making sure everyone has the same focus and direction.”
Lastly, creativity touches on thinking differently and added value within the procurement organization. That is why the procurement team is made up of roughly 50 percent procurement professionals and 50 percent highly technical people.
“We want to have full depth of knowledge of everything we are procuring for the company,” Schneider says.
“That mix allows us to take a team approach and to work with suppliers from different perspectives,” he adds. “It goes beyond just working with their sales people. We have been able to tap into talent with diverse experiences, and that has provided us with learning opportunities.”
Critical to the ongoing transformation of Abbott’s procurement organization are its five points of purpose. First, the team is committed to protecting and elevating Abbott’s reputation. Second, the focus is on shared value. Third, the goal is to enhance margin and elevate financial performance. The fourth element is to expedite growth and drive innovation, while the fifth is to design a flexible supply network.
“Within all of the plans we build for our procurement categories, we embed those points within our strategies,” Schneider says. “They all have to be addressed.”
“Protecting and elevating the company’s reputation means having the right quality and suppliers,” Riordan says.
“Shared value means transparent relationships and a shared focus on improving lives,” she continues. “Enhancing margin and elevating financial performance means looking at ways we assess all of the elements that strategic sourcing needs to encompass. Expediting growth means growing relationships with suppliers to find mutual benefits with exciting plans and pipelines. Finally, we want dynamic supply networks that will help us meet consumer needs.”
As Abbott moves forward, the supply chain team will continue to play a critical role in the company’s ongoing evolution. The team is utilizing additional tools and capabilities to help identify what it should be paying for what it is buying, and it is looking at the best ways to craft its supply base of the future.
“We are looking at where we can get best value and making sure our suppliers can meet our growth needs in the markets where we are going,” Schneider says.
“To do this, we have to be at table with our suppliers and giving them opportunities to drive value to the company,” he explains. “It is about getting ahead of the business and working with our supply base to understand the options they provide so we can give value back to the company.”
Looking ahead, Abbott will continue to focus on the development and optimization of its supply base. The company is very conscious of the need to engage with diverse, disadvantaged and small businesses.
Not only does the company feel compelled to be inclusive with its products and how it touches consumers, it also believes an inclusive approach to sourcing is critical to future success.
“Wherever we can work with our suppliers to grow together, we can drive social benefits,” Schneider says. “That aligns with our focus on a decentralized community approach as well.”