Signature Ceremony Chair GSK Biologicals Strategic Sourcing and Procurement November 24th 2011

Signature Ceremony Chair GSK Biologicals Strategic Sourcing and Procurement November 24th 2011

Prof. Bruno Delvaux Rector

M. Christophe Weber President Designate GSK Biologicals From talent acquisition to academic partnership in a growing biopharmaceutical company

Prof. Per Agrell President of the Louvain School of Management Research Institute The Chair GSK Biologicals in Sourcing and procurement: the first of its kind in Belgium

The three university missions Teaching Undergraduate Graduate Continuing Research Fundamental Applied Critical Service Academic service (national, international) Societal (expertise, policy, analysis) Enterprises (spin-offs, executive ed, applied res.)

Background Sourcing and procurement are vital functions in virtually all enterprises The importance of sourcing and procurement increase with internationalization and outsourcing of value-added processes The economic impact of the function is very important In Belgium, there was no university training for procurement professionals In Belgium, there was no research group working specifically at these questions

Our principles Teaching excellence is built on research excellence LSM is a research-based school of management Synergy between active research and teaching staff Research excellence is created on-site by people Research projects are founded in scientific discourse Doctoral training is vital to research groups Integration in an existing team is primordial to lasting value Build research groups on domain experts

The Chair approach Teaching Specialized training Master s theses Case studies Research Methods Models Processes Service Training expertise Analytics for policy and Improvement processes Network creation

Our Mission Becoming one of the leading think tanks for Strategic Sourcing & Procurement in Europe Covering the full knowledge chain Academic & Applied Research, Education and Networking. Addressing always the latest & future agenda setting topics in Strategic Sourcing & Procurement.

Our knowledge circle Innovate - Analyze new topics - Develop solutions - Rigorous research - Research collaboration Implement - Apply solutions in firms - Analyze implementations - Improve solutions Educate - State of the art education methods - Latest research contents - High return on education

Americas Scientific Research Currently ongoing collaborations Ram Narasimhan Michigan State University Tobias Schoenherr Michigan State University Sriram Narayanan Michigan State University Santosh Manapatra Clarkson Antony Paulraj University of Northern Florida Arash Azadegan New Mexiko State University Vaidy Jayaraman University of Miami Europe & Asia Per Agrell UCL Philippe Chevalier UCL Margarita Protopappa-Sieke EBS Business School Michael Henke EBS Business School Richard Pibernik EBS Business School Christoph Bode ETH Zurich Bart MacCarthy Nottinham Business School Marc Sachon IESE Lieven Quintens University of Maastricht Andreas Norrman Lund University Martin Lockstroem CEIBS Kurt Jörnsten Norges Handelshøyskole Guillaume Roels UCLA Per Semal UCL Mathieu Van Vyve UCL Aadhaar Chaturvedi U of Namur

Interconnectedness of the three domains Research Education Network Practice Applied Research Executive Education Practice Networks Theory Scientific Research Teaching Research Networks

Strategic Research Topics Value Creation Global Supply Networks Sourcing Strategies Performance & Risk Management - Sourcing of Innovations - Integration in NPD - Early Supplier Involvement - Glocal Sourcing - Offshoring & Emerging Markets - Global Supplier Coordination - IPOs - Outsourcing - Supplier Portfolios - Cost Management - SRM and Supplier Selection Enabling Research Topics - Supply Chain Risk Management - New Methods in Performance Measurement - Incentivisation & Alignment Corporate Social Responsibility Technologies & Techniques HRM Strategy & Governance - Product Stewardship in SCM - Environmental Proactiveness - Code of Conducts & Supplier Compliance - Contracting - E-Auctions - E-Procurement - Capability Development - Retention - Training - Category Management - Demand Management - Procurement Organisation

Analytical Research Chair Positioning No dedicated procurement center! Harvard, MIT, Stanford, UCLA UCL CORE UCL MSU, Wuerzburg, PSU ETH Dedicated procurement centers! Business Schools EU Mainly teaching, no procurement research RSM, Bath, ASU Empirical Research

Universities in US: Universities in Europe: Active Academic Network Scientific Conferences: The chair is each year involved in hosting and chairing sessions, presenting as well as reviewing papers at the following conferences: Universities in Asia:

Prof. Constantin Blome Chairholder Sourcing and Procurement as succes factors in globalization: its future role in research and practice

The Myth of the Flat Earth vs The World is Flat Is the world flat? Supply chains cannot tolerate even 24 hours of disruption. So if you lose your place in the supply chain because of wild behavior you could lose a lot. It would be like pouring cement down one of your oil wells.! Thomas Friedman! 17

Megatrends drive criticality of strategic sourcing & procurement Shortages of raw materials / energy Demographic developments Pressure on cost of capital Globalization Environmental protection / risks

Need for Global Sourcing Increases Need for Global Sourcing! Global sourcing as instrument for reducing costs Other Prod. costs Material W-Europe Low wage countries! Companies in all industries are pushing forward activities for global sourcing Savings Savings of up to 30% can be achieved with wage cost differences! Competitive pressure necessitates global sourcing 19

The Megatrends: Globalization increases with a stronger focus on regionalization 20 Source: WTO Secretariat

21 Currency changing the attractivity of regions

Dependence on raw materials will increase Global supply and demand for raw materials Supply Australia Russia Brasil India USA China Japan = Population ca. 200 million Western Europe Demand Source: BHP Biliton

The energy battle World population is growing Energy consumption is rising dramatically Per capita consumption is rising World population (in 000 million) Global energy consumption (in 000 million t coal equivalent) Per capita energy consumption (in 000 t coal equivalent) Source: IEA-Outlook and BP

Development of carbon emission Development of fossil carbon emissions 24 Source: GNU FDL

TOPLINE PROCUREMENT BOTTOMLINE

Cost and innovation in CPO focus Recent CPO statements of a best practice firm: Over the last two decades the approach toward suppliers by major corporations has shifted from an overwhelmingly price and cost focused, supplier by supplier basis to one of interconnected supply chains and ultimately supply networks. Yet, at the same time, traditional cost metrics drive most Supply Management organizations, not innovation measures and in some situations, rightfully so. But cost alone will not create a winning business proposition in a world where competition quickly duplicates leading products and customer expectations continually change. Focus means balance. We can t say as procurement that we just want to be innovative and forget the rest; neither can we do the rest and forget innovation. 26

Supplier Innovation is key! Integration in New Product Development Value Analysis/ Target Costing Low Cost Country Sourcing Switch of supplier Price negotiations Supplier consolidation E-Auctions Fully disagree Disagree Neutral Agree Fully agree 27 27 Source: Fraunhofer

Pharma Outsourcing in India PHARMA Source: Zinnov

29 How it really happens!..

It's not about money. It's about the people you have, how you're led, an how much you get it. Steve Jobs 30 CONFIDENTIAL!

Levels of Risk Management Elimination of root causes Crisis management fight fires after risks turn into full-blown problems Fix on failure early detection and quick reaction when risks materialize Risk mitigation have contingency plans, but do nothing to eliminate them in the first place Risk prevention identify risks and prevent them from becoming problems remove factors that make risks possible 31

Sustainability throughout the supply chain - Supplier - Sourcing / - Procurement - Supply Management Org. - Inbound logistics - Internal - Client - Internal - Value Chain - Outbound Logistics - Customer Environmental friendly Product Design Environmental Sourcing Supplier Management Green Transportation Life Cycle Assessment Green Packaging Green Warehousing Green Energy Green IT Green Meeting Reverse logistics Reuse & Recycle Waste elimination Procurement Programmes Procurementin cooperation with internal client Procurement Initiative corporate-wide contribution 32

Strategic Research Topics Value Creation Global Supply Networks Sourcing Strategies Performance & Risk Management - Sourcing of Innovations - Integration in NPD - Early Supplier Involvement - Glocal Sourcing - Offshoring & Emerging Markets - Global Supplier Coordination - IPOs - Outsourcing - Supplier Portfolios - Cost Management - SRM and Supplier Selection Enabling Research Topics - Supply Chain Risk Management - New Methods in Performance Measurement - Incentivisation & Alignment Corporate Social Responsibility Technologies & Techniques HRM Strategy & Governance - Product Stewardship in SCM - Environmental Proactiveness - Code of Conducts & Supplier Compliance - Contracting - E-Auctions - E-Procurement - Capability Development - Retention - Training - Category Management - Demand Management - Procurement Organisation

Americas Scientific Research Currently ongoing collaborations Ram Narasimhan Michigan State University Tobias Schoenherr Michigan State University Sriram Narayanan Michigan State University Santosh Manapatra Clarkson Antony Paulraj University of Northern Florida Arash Azadegan New Mexiko State University Vaidy Jayaraman University of Miami Europe & Asia Per Agrell UCL Philippe Chevalier UCL Margarita Protopappa-Sieke EBS Business School Michael Henke EBS Business School Richard Pibernik EBS Business School Christoph Bode ETH Zurich Bart MacCarthy Nottinham Business School Marc Sachon IESE Lieven Quintens University of Maastricht Andreas Norrman Lund University Martin Lockstroem CEIBS Kurt Jörnsten Norges Handelshøyskole Guillaume Roels UCLA Per Semal UCL Mathieu Van Vyve UCL Aadhaar Chaturvedi U of Namur

3 why sourcing & procurement 3 ~50% of value creation is outsourced, in leading firms upto 100%. Cultivate and harvest innovation 3 " Sourcing handles the biggest budget in a firm Manage biggest budget The importance of Sourcing & Procurement in 4 pictures? Avoid disruptions Manage high complexity 37

Most international job in a firm 3 Still not convinced? 3 In sourcing & procurement you will! Unique capabilities learned at UCL Why you might like a career in Sourcing & Procurement Job market Impact from day 1 on Fast track career due to better skills 38

M. Marcel Laubacher Vice-President Global Sourcing and Procurement GSK Biologicals Key role of procurement in global organisations

PROCUREMENT FUNCTION DEVELOPMENT ACCELERATED DEVELOPMENT IN THE LAST 25 YEARS DIFFERENCES OF MATURITY BETWEEN SECTORS GROWING RESPONSIBILITIES IN A MORE UNCERTAIN & COMPETITIVE LANDSCAPE SHORTAGE OF PROFESSIONALS & TALENTS

VALUE CREATION AT THE HEART THE FUNDAMENTALS : Availability, quality, service and cost STRATEGIC SOURCING & CATEGORY MANAGEMENT RISK MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT

THE NEXT LEVEL NEW VALUE CREATION OPPORTUNITIES BUSINESS PROCESS OUTSOURCING (BPO) SUSTAINABLE PROCUREMENT TALENT MANAGEMENT & CARRER PATH

Signature Ceremony & Reception