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From single lane to value creation superhighway: Johnson & Johnson’s Procurement transformation journey

At Digital Procurement World 2021, Len DeCandia and I explored Johnson & Johnson’s Procurement transformation journey, as well as the future of the function itself.

Leading transformation is rarely easy. But when your function’s fundamental role is shifting, the world is transforming around you, and you’re up against ways of thinking that have become embedded over many decades, it’s hard to overstate that challenge.

These are the challenges that Len DeCandia has been navigating through in recent years in his role as CPO and President of Services at Johnson & Johnson. 

Len and I spoke live at Digital Procurement World 2021, and we explored how Johnson & Johnson’s Procurement team successfully navigated the pandemic, and how people, process, and technological evolution have come together to transform Procurement from a single-lane road, into a superhighway of value creation. 

If you couldn’t join us on the day, here’s a recap of the discussion.

Transforming Procurement at a 130-year-old organisation

Opening the session, Len gave us an insight into Johnson & Johnson’s own Procurement transformation journey, walking through the challenges they’ve faced and overcome along the way. 

“For about 130 years, up until 2016, the company had really grown and thrived on the concept of decentralisation,” said Len. “The complexity [in our transformation journey] came from the fact that we’re based on three different business segments – consumer goods, pharmaceuticals, and medical devices.”

When the team started to transform Procurement in 2016, that structure created a major challenge – taking 13 decades of decentralised operations and bringing them together into a centralised approach and function, with one definition of Procurement success and excellence.

“With Procurement being decentralised, the focus of activities was very different across sectors and regions,” he continued. “There were multiple ERP systems in use, and no common data sources. But for me, the number one challenge was that there were a lot of different definitions of ‘good’ across business and local market contexts.”

Crucially, Len and his team didn’t back away from that challenge. They recognised that the complexity created by diverse operations, processes, and standards across the industry wasn’t just a problem for them – it was a major barrier to innovation and process optimisation.

“That complexity creates an incredible amount of friction, which really impacts your ability to drive best practices throughout the organisation,” explained Len. “It would make it very difficult for Johnson & Johnson to execute innovation, when suppliers are such a great source of that innovation.”

To overcome those challenges, Len’s team first looked inwards, building up a clear view of what ‘good’ really looks like across contexts to establish what the rest of the business really needed from Procurement. With that defined, the team was then able to look outwards, considering how strategically selected suppliers can best help it deliver on those goals.

Driving innovation through supplier selection and collaboration

“When you’re one of the world’s largest healthcare companies and you’re trying to deliver next-generation solutions, you have to be extremely collaborative,” said Len. “You have to look outside of your four walls for that innovation, across all of your areas of spend.”

Len also raised the point that in many cases, people think about Procurement as simply supply chain. “In reality, Procurement is a research organisation. As much as 75% of our spend is non-supply-chain,” he said. “What we really wanted to go after first [in our transformation] was that 75% – research, development, keeping up with constantly-changing customer needs, and investing in the relationships that can help keep us ahead of those shifting demands.”

That helped Johnson & Johnson shape its global supplier base, building a huge portfolio of preferred suppliers, all well positioned to help the organisation achieve its strategic goals – whether that’s product innovation, reaching new markets, or improving margins.

That vision – from a clear definition of what ‘good’ looks like, to an idea of how Procurement can best help the organisation achieve its strategic goals through supplier collaboration and research – fuelled the creation of one of the world’s largest cloud-based Procurement e-marketplaces. 

Launching in 2019, for Johnson & Johnson, it came at the perfect time.

Leading change in a time of immense disruption

Even with the right systems, processes and structure in place, changing definitions of ‘good’ that have been established over decades across a large enterprise is tough. And while the pandemic has been immensely challenging for us all, one small silver lining for Johnson & Johnson was that it helped accelerate its Procurement transformation journey.

“The pandemic really drove greater adoption – in two dimensions,” explained Len. “The first was that we saw huge uptake for our e-marketplace for approved suppliers. With everyone working from home, the marketplace proved hugely valuable for helping teams keep the business up and running as we all switched to remote working.” 

That surge in uptake also helped the team make continuous investments and improvements to the experience of using that marketplace. “In the beginning, we had Net Promoter Scores in the thirties,” said Len. “Now, we’re seeing scores in the low 80s, which is unheard of, because people recognise and appreciate the ease and value of using a system like this to reach approved suppliers.”

The other dimension of change was most felt by Procurement professionals themselves. With Procurement processes and systems modernised – and in a lot of cases, being automated and running on their own – the way they spent their time changed. 

“We operate in 65 markets around the world, every one changing every day and seeing different impacts from the pandemic,” continued Len. “Adopting the technologies and processes we’d put in place gave Procurement professionals the time to understand those shifting dynamics, and make strong decisions amidst the change.”

Today, that surge in adoption can be seen in a 20-30% increase in buying, contracting, and sourcing activity at Johnson & Johnson. Cycle times have dropped by between a third and a half, compared to what they were before the pandemic. All with next to nobody in the office.

Riding the Procurement value superhighway

While the financial and operational results speak for themselves, perhaps the most powerful takeaway from the entire session was how transforming Procurement prior to and during the pandemic showcased Procurement’s full potential to deliver value across the organisation.

For Johnson & Johnson, automation and clear digital processes meant more time for Procurement experts to get ahead of market trends. That in turn helped them secure strong supplies of PPE at the beginning of the pandemic, which through its global operations, helped protect and save the lives of frontline workers around the globe.

But this is also a great example of how broad Procurement’s ability to create value is. Omer and Len discussed how Procurement’s remit has expanded far beyond cost saving, and how far it could theoretically extend.

“Now, our message is ‘partnering for growth and good’,” said Len. “We’re living in a world where we’ve also accelerated ESG. We’re using supplier decisions and investments to work with diverse suppliers that deliver immense local insight and value. That’s helping us solve more local challenges, and apply what we’ve learned globally, to bring that benefit to even more people and groups.”

“Procurement isn’t a single-lane road anymore” said Len. “Today, it’s a multi-lane superhighway. You’re not just delivering cost savings. You’ve got sustainability, community impact, innovation, and social impact too. Those can all be improved through stronger and better supplier relationships.”

“Procurement is the steward of that highway,” he continued. “We have two things – resources and budgets. It’s up to us to enable our organisations to use them in the best ways to drive innovation, empower people, strengthen communities, and be a positive force in our markets.”

To find out more about Johnson & Johnson’s Procurement transformation journey, you can watch Omer and Len’s session from DPW 2021 in full on-demand here.

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  • Omer Abdullah

    Omer is a co-founder of The Smart Cube and leads the firm’s business across The Americas. He works with Procurement and Strategy leaders at global organisations, transforming their teams to become value-driven and insight-led. Omer has more than 30 years of management consulting, global corporate and industry experience across North America, Europe and Asia. His prior roles include A.T. Kearney (North America), Warner Lambert (USA) and The Perrier Group (Asia-Pacific). Omer has an MBA from the University of Michigan at Ann Arbor, USA, and a BBA from the University of East Asia.

  • Omer Abdullah

    Omer is a co-founder of The Smart Cube and leads the firm’s business across The Americas. He works with Procurement and Strategy leaders at global organisations, transforming their teams to become value-driven and insight-led. Omer has more than 30 years of management consulting, global corporate and industry experience across North America, Europe and Asia. His prior roles include A.T. Kearney (North America), Warner Lambert (USA) and The Perrier Group (Asia-Pacific). Omer has an MBA from the University of Michigan at Ann Arbor, USA, and a BBA from the University of East Asia.