Business Intelligence
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Johnson & Johnson: A Quick Insight into Spend Management from over 80 Operations
Situation
In 2004, Johnson & Johnson, a major global health care company, started an NPR sourcing program in Europe and began to implement a spend management solution. The company started sourcing initiatives for categories Marketing, Logistics, Contingency Labor & Professional Services, Construction & Facilities and Travel & Fleet. A Financial Shared Service Center in Prague was established to centralize all purchase-to-pay processes (P2P). SAP and Ariba Buyer & Category Management were selected to support P2P processes and sourcing initiatives which, in time, will be integrated to include more than 80 affiliates and operations throughout Europe. In the meantime, Johnson & Johnson looked for a flexible solution that could bridge the information gap quickly.
Requirements
In order to organize its processes of cost reductions, Johnson & Johnson (J&J) had to collect and consolidate the spend across all operating groups and franchises in Europe to be able to identify and prioritize savings opportunities. Also, the company had to set up a procurement organization consisting of European category teams, local purchasing managers and country cluster managers who could keep costs under control and ensure company-wide collaboration on all purchasing levels. To facilitate their work, J&J had to find a solution that would give all purchasing staff and financial management insight into consolidated spending.
The Solution
After Johnson & Johnson teamed up with COPE Purchasing Solutions (CPS) and strategy consulting firm Vintura, they decided to implement SPiDRE™: a solution to enable collection, standardization, classification and analysis of spend data. Within two months after implementation, saving opportunities mounted up to about 50 million Euros. To enhance compliance, data management was outsourced to COPE Purchasing Solutions by the end of 2006.
Purchasing staff at local affiliates import data files from SAP into SPiDRE™ and standardize their spend data. CPS manages compliance (on extraction and standardization) and consolidation of these data across all affiliates and operations. Subsequently, CPS builds the resulting spend cube for J&J Europe. Company staff have access to the spend cube through The Diver Solution™, a web-based Business Intelligence Suite for reporting and data analysis. The functionality provided by SPiDRE™ allows J&J to: 1. import spend data from all datasources, 2. standardize vendor names across affiliates, 3. classify the spend using J&J’s global category tree, 4. enrich data with organizational dimensions (e.g. operating group, country cluster, country, affiliate), 5. classify vendors (external, inter-company or employees) and 6. link vendors to a common parent company.
With SPiDRE™, J&J Europe is able to create one version of truth on their consolidated spend. The company was able to identify saving opportunities fast. Because the data is refreshed periodically, insight is sustained. It allows J&J to align strategies and to streamline its purchase organization. In addition, J&J Europe can share its knowledge and practices with other corporate regions, like North America or Japan. Currently, J&J Asia Pacific and Latin America are in the process of linking up to SPiDRE™. The company has the ability to adapt to organizational changes instantly without losing its insight into spend. The strongest advantage is the support which the solution provides for decisions on category strategies and cost reductions.
Results
SPiDRE™ has delivered essential spend insights at the start of Johnson & Johnson’s NPR sourcing program in Europe. It helped the company to prioritize strategic decisions with respect to organization, categories, countries and suppliers. Major stakeholders were identified and a comprehensive sourcing agenda was build and aligned, delivering growing savings year after year, up to 50 million Euros on NPR spend in 2007. In a few years, the ERP platforms which Johnson & Johnson uses are expected to deliver insight in the consolidated spend data. In the meantime, SPiDRE™ has proven to be a very effective solution. “We are currently using SPiDRE to consolidate and analyze the spend from all J&J affiliates in Europe, as these data are currently managed on several independent ERC systems”, says Philippe Campagne, VP Finance & Administration Janssen-Cilag.
“SPiDRE is an eye-opener and driver for cross-affiliate collaboration and category management”, says Ben Scharrenberg, Vintura consultant and project lead spend visibility, Johnson & Johnson. “It allows procurement staff to coordinate and manage key suppliers in different spend categories at country and regional level.”
About Johnson & Johnson
Johnson & Johnson is a global manufacturer of health care products and a provider of related services for the consumer, pharmaceutical, and medical devices and diagnostics markets. The more than 250 Johnson & Johnson operating companies employ approximately 120,500 men and women in 57 countries. The company was founded in New Brunswick, New Jersey, USA in 1886, and its headquarters have remained there ever since. In 2006, worldwide sales amounted to USD53.3 billion; net earnings were USD11.1 billion.
Johnson & Johnson was named nr. 6 on Fortune’s 2006 Most Admired Companies list. An annual reputation poll conducted in 2005 by Harris Interactive cited Johnson & Johnson for having the best corporate reputation in America for the 7th straight year, since the inception of the survey.
The company is probably best known for its products JOHNSON’S® Baby Powder, introduced in 1893, and BAND-AID®, introduced in 1920. However, Johnson & Johnson’s medical device companies develop, market and sell more medical devices than any other company in the world, while Johnson & Johnson Vision Care, Inc., is the world leader in contact lenses.
