We have an extensive network of suppliers around the world.
The Procurement and Supplier Management function is responsible for maintaining the standards by which third parties are identified, qualified and managed. Supplier selection and management follow a robust sourcing management process, in which Supplier Diversity principles are integrated throughout each stage.
Global Supplier Diversity
Our core values are driven by a desire to improve life, achieve scientific excellence, operate with the highest standards of integrity, expand access to our products and employ a diverse workforce that values collaboration. Economic Inclusion & Supplier Diversity (EI&SD) is an inclusive and integrated process that supports our corporate vision. We aspire to create strategic, sustainable relationships and achieve $1B of tier-one spend with diverse suppliers, inclusive of minority-owned, women-owned, veteran-owned, LGBT-owned and disability-owned business enterprises. We are also devoted to growing small businesses through subcontracting opportunities.
We have increased our spend with diverse suppliers by 18 percent, and with small businesses by 7 percent, compared to 2014.
Our company’s EI&SD process has transformed over the past couple of years to greater scale nationally and globally. Responsibility has expanded vertically and horizontally through all levels of the organization. Awareness and education has transitioned to the regular practice of inclusion processes with top level accountability and goals. Although EI&SD is managed under the Global Supplier Management Group (GSMG), senior and executive level corporate commitment has brought forth a heightened sense of importance and value. This commitment is reflected in our Global Diversity & Inclusion (GD&I) strategy.
The GD&I Business Consortium’s objective is to enhance our business performance through diversity and inclusion, creating a competitive business advantage and driving shareholder value. EI&SD participates on the Consortium and is one of four target areas focused on increasing business performance through diversity and inclusion. The GD&I Business Consortium is chaired by the VP, Customer Centricity and supported by the VP MMD HR and GD&I Center of Excellence (CoE). The Executive Sponsor of the team is our company’s Chief Financial Officer.
In 2014, the EI&SD CoE established the Supplier Diversity Strategy Council (SDSC) which comprises sourcing leaders globally from all categories of source-able spend. The SDSC convenes once a month to share information, identify opportunities, develop solutions and plan next steps. In 2015, the SDSC and respective sourcing teams took a more strategic approach to inclusive procurement and built category roadmaps accompanied by execution plans for 2016 implementation and beyond. This preparation and forecasting has resulted in the building of a foundational practice that we believe will deliver sustainable, innovative and transformative solutions that contribute to shareholder value.
Our goal is to achieve $1B of tier-one spend with diverse suppliers in 2016.
From a global perspective, we have named EI&SD representatives for each of our global markets: Canada, Europe, Middle East and Asia (EMEA); South Africa, Asia Pacific and Japan (APJ) and Latin America. Our global EI&SD representatives are involved in our strategic planning and are responsible for ensuring alignment in their respective markets with the company’s sourcing inclusion practices. In 2015, we established goals for Canada and EMEA and built strategies for South Africa, APJ and Latin America. In 2016, each global market will have measurable goals in its objectives.
We aspire to go beyond just providing opportunity by trying to prepare, counsel and contribute to capacity building within diverse-owned business enterprises with a goal of leveling the playing field for fair competition. Our Supplier Development & Performance Management (SD&PM) team performs supplier technical capabilities assessments and creates development plans to improve suppliers’ performance in quality and operations and also develops suppliers’ business as a whole. SD&PM has expanded their scope from predominantly direct manufacturing suppliers to include diverse suppliers in external manufacturing and are assiduously evaluating opportunities within indirect procurement including logistics.
In May, 2015, our company held our first Economic Impact Summit in Newark, New Jersey, USA. The Summit focused on “Building Supplier Capacity to Cultivate Opportunities for Success.” More than 100 people were in attendance, including representatives from more than 40 diverse-owned businesses as well as representatives from our company. Our chief procurement officer and senior vice president of global supplier management and global supply business development groups kicked off the Summit with a breakfast and our executive vice president and president of our manufacturing division was the keynote speaker.
We seek to do business with qualified small and diverse suppliers. In addition to hosting the Summit, we actively participate in over 30 external global events and conferences. We purposely identify different sourcing leads to attend conferences and matchmaker meetings based on the need and upcoming bid opportunities. This provides an opportunity for our sourcing leads to further develop through training, correspond with sourcing leaders from other companies and network with suppliers. It also offers potential suppliers the chance to connect with decision makers and influencers in their areas of expertise. Our outreach has led to more supplier relationships, knowledge transfer, increased inclusive practices and ultimately more business for diverse suppliers.
In 2014, we spent approximately $805M with diverse suppliers and $529M with small, small disadvantaged, small women-owned, small veteran and disabled veteran-owned, and historically underutilized business zoned (HUBZoned) companies.
In 2015, we spent:
- $953M with diverse suppliers, an annual increase of 18 percent
- $568M with small businesses, an annual increase of 7 percent
Our 2016 corporate goal is to achieve $1B of tier-one spend with diverse suppliers. To achieve this goal, we have raised our level of accountability to our Executive Committee.
While 2015 has proven to be a successful year, we remain committed to being a catalyst for change and understand that diversity of our workforce and within our supply chain is a distinguishing factor for innovation and competitiveness in a global market.
Supplier and Third-Party Risk Management
Third-party risk management is an enterprise-wide effort supported by Procurement, Supplier Management, the Office of the General Counsel, Compliance, and Environmental Health & Safety. Representatives from each function meet regularly to discuss, assess and manage issues that are risk drivers.
Our Business Partner Code of Conduct, along with our company’s Supplier Performance Expectations, are communicated to all existing and potential third-party suppliers and are included in requests for information, proposals and quotes, supplier contracts, and purchase order terms and conditions. In addition, we participate in the Pharmaceutical Supply Chain Initiative’s (PSCI) Pharmaceutical Industry Principles and are a signatory to the 10 Principles of the United Nations Global Compact. In 2015, we updated our Business Partner Code of Conduct and the contract language in our standard templates to address new and emerging potential risks, including additional expectations in the areas of employee disclosures, recruitment practices and housing standards.
Using a risk-based approach, supplier assessments and audits are conducted based on multiple factors (e.g., engagement type, geography). The assessments and audits evaluate a supplier’s ability to meet both industry and our own standards for ethical business practices.
Our supplier assessments include:
- Labor and human rights
- Privacy and data protection
- Environmental, health and safety issues
- Responsible sourcing of minerals
- Animal welfare
Where assessments and audits identify opportunities for improvement or deficiencies, we monitor suppliers to ensure that our concerns are addressed in a responsible and compliant manner. As part of our oversight and monitoring, we have established mechanisms to report, track and monitor adherence to plans to address non-conformances and help drive continued improvement.
Protecting the Privacy of Personal Information
Some of our suppliers and service providers, such as contract research organizations, market research agencies, information technology systems developers and other service providers, process personal information in connection with their performance of services for our company. We require these suppliers and service providers to provide appropriate privacy protection for personal information that they handle for, on behalf of or otherwise in connection with the performance of services for us, in accordance with our privacy policies and applicable privacy laws, regulations and guidelines.
Supplier Assessment for Labor Practices and Human Rights
In May 2015, we instituted a more formal program to evaluate the risks for labor and human rights in our supply chain. As of that date, prior to contracting all new direct suppliers (as well as selected indirect and research suppliers in certain geographies) were required to complete and return a Supplier Self-Assessment Questionnaire (SAQ) for Ethics & Compliance. Our SAQ presents suppliers with a series of labor and human rights questions covering a range of subject areas, including Freely Chosen Employment, Child Labor, Employment Practices, Employee Disclosures, Fair Treatment, Wages, Benefits and Working Hours.
Suppliers’ responses are used to judge whether or not they have programs and/or procedures in place to address potential risks for labor and human rights. In 2016, we plan to expand our evaluation to include a number of our existing direct suppliers.
In August 2015, we instituted a formal audit program to evaluate supplier compliance with our company’s standards for labor and human rights. Several third-party audit firms were engaged to perform independent audits at a limited number of direct suppliers’ facilities.
These facilities were located in countries identified as high risk for labor and human rights. Generally, audits were conducted over a two-day period and included interviews and a review of relevant documentation. In total, 27 supplier facilities were audited in 2015. Our supplier audit program for labor and human rights is still evolving. We intend to perform additional audits during the course of 2016.
Managing External Manufacturers of Our Products
The company maintains strict quality standards—no matter where our products are manufactured in the world. Once we have made a decision to engage an external manufacturer, that manufacturer is required to comply with our business requirements set forth in the contract, regardless of geography.
Prospective external manufacturers of active pharmaceutical ingredients (APIs) and finished products are screened for environmental, health and safety (EHS) compliance, in addition to quality, and supply and technical competence requirements. The EHS screening includes a survey covering such topics as regulatory compliance, fatalities and major incidents.
Based on the screening results and activities undertaken by the supplier, certain external manufacturers are subject to a more detailed on-site assessment conducted by a multidisciplinary team, which may include our company’s Quality, Safety, Environmental, Technical and Procurement representatives. External manufacturers we contract with are periodically reassessed using a risk-based approach; higher-risk external manufacturers are subject to more frequent on-site assessments. We expect that any observations made during the audit process will be remediated by our external manufacturers, and we monitor and track corrective actions to completion.
We continue to support the Pharmaceutical Industry Principles for Responsible Supply Chain Management (the Principles). The Principles outline industry expectations for external manufacturers and licensees with regard to labor, health, safety, environment, ethics and management systems. The external manufacturers with which we contract are expected to understand and align with these Principles.
|External Manufacturers EHS Assessment Summary|
|Prospective external manufacturers||44||42||55||48||50|
|Current external manufacturers||27||39||45||68||69|