18 September 2013 Christopher Game Chief Procurement Officer 1 Geneva 9 Sept Why getting the First Mile right, drives the........ Last Mile Challenge.

18 September 2013

Christopher Game

Chief Procurement Officer

1Geneva 9 Sept

Why getting the First Mile right, drives the........

Last Mile Challenge

What is The Global Fund ?

• 4.2 Million • 4.2 Million People currently receiving ARV therapy

• 9.7 Million • 9.7 Million New smear-positive TB cases detected and treated

• 310 Million • 310 Million Insecticide-treated nets distributed

Since its inception in 2002, the Global Fund to Fight AIDS, Tuberculosis and Malaria has become the main multilateral funder in global health . It channels 82 percent of the international financing for TB, 50 percent for malaria, and 21 percent of the international financing against AIDS. It also funds health systems strengthening, as inadequate health systems are one of the main obstacles to scaling up interventions to secure better health outcomes for HIV, TB and malaria.

$3Bn

600 Employees

What started as a Procurement Transformation……..

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The Global Fund will become the benchmark organisation in the sector for Sourcing and Procurement

Minimising waste andeliminating non value adding

activities

Using simple, clear leading edge processes and tools

designed by and for the organisation

Ensuring effective governanceand watertight compliance

With measurable performance

in value and lives saved

Building collaborative relationships with partner agenciessuppliers and donors

Are directly aligned to the Global Fund’ s strategy

Industry must love us as a sector ?

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Or perhaps they don’t ?

• We are silo’d• We are fragmented• We are impeded by process / bureaucracy• We have poor funds flow• Inadequate planning & forecasting• Much of what we do is outsourced

• All of these carry a $ premium• Risk increases with fragmentation• Long lead times reduce system stress at manufacturers

How can we become a

customer of choice ?

What started as a Procurement Transformation……..

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Turned into a process for industrializing thought leadership

• I soon realised that we are not a customer of choice• Many inputs, few outputs• Data often out of date and not easily refreshable• Slow and operating in silos'• That too many are thinking and too few are doing• Substantial amount of people feeding at the table• Numerous barriers to improvement (agent structures and cash flow)• Drugs often mid-late lifecycle• Partial aversion or fear of the private sector……in the same sector• Our behaviors may erode the incentive to innovate

• That upstream leverage irons out some downstream supply issues

Working Upstream to improve the Downstream

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I am going to illustrate how upstream transformation can drive downstream performance

What we soon realised :-

• Lack of Accountability• High Agency Costs• Multiple Agencies Incentive model• Agency ‘local versus Global’ expertise• Poor visibility of lost innovation• Lack of ownership / supplier relationships• Poor funds flow driving wrong behavior• Fragmentation = difficult to plan• Little competition in pricing• Role of many funders largely executional• No volume leverage/Many spot purchases

How we responded :-

• Subscription, (spend under control) driven by transparency and ease of application

• Leverage with other large funders / donors to become a customer of choice

• Agency accountability (track & trace)

• Vendors incentivized to innovate

• Creation of product market & supply chain experts

• Ownership of relationships, up and downstream

• Greatly improved funds flow ? Cash flow

• Simple user designed processes

• Comprehensive market intelligence

• Frequent price competition

• Scalable and can be leveraged

• COGS versus Market based costing

Fixing the Plumbing first ? Creating the Ecosystem

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Upstream partnering facilitating downstream partnering creating the Ecosystem

Funders

Manufacturers / Logistics

Countries

Phase 1 : Creating Partnerships

A Single Ecosystem

Fixing the Plumbing first ? Creating the Ecosystem

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Upstream partnering facilitating downstream partnering creating the Ecosystem

Funders

Manufacturers / Logistics

Countries

Phase 2 : Creating Capacity and Capability

Underscored by common systems and transparency

Common Accountability for OTIF

The Principles of Our Approach

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Fundamentally changing the way we work across the supply chain to increase access to products

Earlier involvementand closer

collaborationwith

manufacturers

Improving our purchasing

capability and changing our contracting

models

Optimising the international

supply chain to reduce cost

Better planning and

scheduling to support

continuity of supply

Delivering more products at the right time and place to more

people

How we are measuring this ?

P4i

1. Develop and implement comprehensive reengineering of the Procurement Operating Model and Organisation.

2. Develop Procurement as a strong partner to create and facilitate Best in Class solutions and delivery for the global fund.

3. Create additional Value of 8% per annum

4. Increase spend penetration by 20% per annum

5. On Time and In Full (OTIF) service to recipient countries to exceed 90 %

The Commercial Relationship

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To ensure we maintain a competitive price in a longer term contractual framework we will need to change our commercial model.

i-Fund for The Global Fund

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Equipment , Goods and Services

team

Health Products

Team

The Support Group

SuppliersPartners

GF PSM’s Suppliers

Knowledge & Collaboration

Country Ownership & Supply

Track &

Trace

To Reflect – How does fixing the first mile influence the last mile ?

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How upstream transformation can drive downstream performance

Phase 1 (Upstream) :-

• Make the Public Sector a customer of choice for the private sector

• Leverage funders / buyers• Harmonize specifications• Improve forecasting• View longer term replenishment

cycles• Improve planning• Standardize track & trace• Open leverage to smaller buyers

+cost of doing business• Pay on time• Create transparency

Phase 2 (Downstream) :-

• Use savings generated to build country level capacity

• Take an academic approach to buffering supply chains

• Harmonize regulatory landscape

• Create regional centers of excellence building on upstream partner leverage

• Make logistics partners accountable and KPI to that accountability

Thank You

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Questions / Discussion