What Buyer-Supplier Collaboration Looks Like in Real Life….
I had the privilege of facilitating and witnessing first hand a great example of what a true strategic partnership looks like recently, when a large pharmaceutical brand met with a large global Contract Drug Manufacturing Organization (CDMO) at their site.
Like many companies, the CDMO had been through various acquisitions and mergers, and had just taken over a site producing two big generic drugs for the pharmaceutial brand. Last year had been a rocky one in the relationship, with several quality issues, facility equipment breakdowns, and other issues that had led to significant cost overruns, production shortages, and some consumer impacts. Senior executives at both companies had meet last week, and the it was a tense meeting. The buyer (pharma) was focused on getting performance back up to speed, and the seller (CDMO) knew that the brand had been very unprofitable for them, and needed to address the price of the product. Discussions were going nowhere.
The parties decided to host a collaborative workshop. I had the privilege of helping to facilitate this discussion, and we began by having four of our Industrial Engineering graduate students from NC State support the event. The team met on-site, and began collecting data from the different production lines, and started to create the value stream map for the end to end supply chain. By end to end, in this case, we included the demand forecasting process, the order management process, manufacturing planning and scheduling, capacity planning, materials management, in-bound material handling, supplier releases for all raw materials, and quality inspection. This was a huge task, and the team quickly realized that much of the data was in different locations. It also became apparent that there was a large amount of inventory in the system, and that there were major disconnects in information flow between the parties in the chain.
Opening day of the two-day workshop. I came up to the front of the room, filled with planners, managers, executives, and Operational Excellence experts. The mood is tense. I put up an opening set of ground rules for the session:
- No commercial discussions allowed
- The focus is on improving performance approaches to address total cost, but no price or contractual issues should take place.
- All ideas are welcome
- Teams will engage in brainstorming and data-driven process analysis to identify opportunities to take out cost.
- No idea is a bad idea, and all suggestions will be captured and considered.
- No finger pointing!
- The goal is not to assign blame, but to identify team-based approaches to achieve mutually beneficial outcomes. Rely on data, not opinions.
- Not a forum for open book cost sharing
- Teams will identify metrics associated with cost drivers, (e.g. labor hours, inventory DOS, expediting, waste, etc.) that drive performance. The $ will follow.
Next, I presented much of the data from the value stream maps. Once the data started to appear, the questions began. I was amazed by how the presence of actual data began the discussion, and when the teams went into breakout sessions, the ideas began to flow.
People broke out into their work streams, with members of both companies sitting in on team rooms, using postits, white boards, and open discussion (see picture). The three work streams for the project included 1) Planning and forecasting, 2) Quality and process improvements, 3) Total cost of ownership improvements. All three workstream teams began to develop “as is” process streams, began to generate ideas and data to validate their hypotheses, and then began to highlight the opportunities. By the end of day 2, all the teams had identified 3 or 4 key actions that would produce immediate results, and had assigned deliverables for all teams, and had documented them in A3’s.
This is what true collaboration looks like. When all the right people sit down and start to look at data, not myths or rumors, the issues begin to be addressed. And the lawyers never got involved once!