1. LFA PSM Expert workshop 28 – 30 January 2014 1 Collaborating our way to success

2. Where do we start 36.8% On time and in Full (OTIF)

3. How does that compare 97.4% On time and in Full (OTIF) – Africa (complexity) & Laggards are 80.5% Source PWC Pharmaceutical Supply Chain report

4. How does that compare ? Supply chain performance: The leading Pharmaceuticals and Life sciences companies achieve average EBIT margins (16.9%) with a high number of inventory turns (16.3) and excellent delivery performance (97.4%). The gap between the Leaders and Laggards is relatively low when it comes to EBIT margins and delivery performance but relatively high when it comes to inventory turns (16.3 turns versus 3.8 turns, respectively). Organizational set-up: Pharmaceuticals and Life Sciences companies typically manage their planning, operational procurement and delivery functions regionally, and their enabling, manufacturing and assembly and strategic procurement functions globally. They outsource about 6% of their planning and sourcing activities; a relatively high, 25% of their new product development activities; and 20%-40% of their delivery activities. Leading practices: The most important value drivers for Pharmaceuticals and Life sciences companies are minimised costs (100%), maximum delivery performance (94%), maximum volume flexibility and responsiveness (78%) and complexity management (78%). The Leaders focus on collaboration with key customers and suppliers and end-to-end supply chain planning. They also continue to place great weight on continuous improvements in manufacturing. How does the private sector achieve this ? Source PWC Pharmaceutical Supply Chain report

5. What can we take from that ? Profit motive drives performance ? Even the poor performers are doing better than we are Regional structures are key to performance Up to 40% of distribution is outsourced Cost / process improvement is the key activity followed closely by delivery performance Flexibility and complexity management are also important drivers Supply Chain is end-to-end and suppliers are partners

6. Thinking Versus Doing Market Dynamics Strategy Epidemiology Funding models Disbursement Human rights Thought Leadership Politics Parallel Systems Our Focus is so often on the Mechanism or process for delivery that we lose sight of both the objective and speed to deliver in a simple and yet effective manner Simplicity

7. Silos all over the place…… Even when working in partnership, partners nod at the table, and all too frequently go off and develop their own solution. Reducing speed Adding complexity Reducing leverage Adding fragmentation Pilots often stay pilots But the fact that many end up talking about a topic does prepare the road for those who are likely to act on it Talk is good !

8. Pulling away from the pack What started as a distraction Became a Benefit ! Every step forward was soon being replicated by multiple partners, especially thought leadership and strategy….but as soon as we realized that timelines were years rather than months we knew that we had a real chance of making a difference……………. HEY…That’s my Job !!

9. Insourcing versus Outsourcing Same old black suits Slow Can be dated in terms of drug lifecycles Difficult to refresh Academic focus And then everyone hires a consultant, very often from the same pool

10. Snapshot in time versus DNA Snapshot or Project based work often lacks the consideration of the evolution of product lifecycles, data, funding, potential for industrialization and scale up etc. Capability needs to be embedded, part of or organizational DNA

11. Introduction….why transform ? 11 VPP Grant PSA Country Vendors Sourcing Old State Health Products: Poor Penetration (Punitive / Voluntary) Lack of Control High Agency Costs Wrong Agency Incentive model Agency ‘local versus Global’ expertise Poor visibility of innovation Lack of ownership / supplier relationships Poor funds flow Time / difficult to plan Mediocre internal customer service Little competition in pricing Role of Global Fund largely executional No volume leverage/Many spot purchases What needed to improve : ‘It felt as though the roles were reversed and we had the agencies performing the sourcing, and the Global Fund was executing’

12. 12 GF Buyers GF Stakeholders From : Regionally Managed Procurement From : Regionally Managed Procurement To : Globally Leveraged Categories within a Matrix Spend Penetration Launching a cost optimization program across the organization Creating a category matrix, region versus category Creating category strategies & improvement plans Categorizing into Global categories and introducing category management Taking strategic ownership of spend categories outside of the current portfolio Building a simple front end user interface We are: Introduction….why transform ? – Indirect spend

13. Procurement 4 Impact: Our Objectives 13 The Global Fund will become the benchmark organisation in the sector for Sourcing and Procurement Minimising waste and eliminating non value adding activities Using simple, clear leading edge processes and tools designed by and for the organisation Ensuring effective governance and watertight compliance With measurable performance in value and lives saved Building collaborative relationships with partner agencies suppliers and donors Are directly aligned to the Global Fund’ s strategy

14. 14 Sourcing Achievements 2013 Organization New organization created by merging AMFm, Corporate & Voluntary Pooled Procurement New capabilities created, Business Planning and analysis, Active Pharmaceutical Ingredients and Formulation Process Sourcing in-sourced from the Procurement Agents Procurement Agents re-purposed as Logistics Agents and placed in-house. New contracts to KPI Logistics agents further downstream and increase accountability Market Dynamics All outstanding Market Dynamics performance issues resolved (WHO ARV guidelines & Paed. ARV’s) Coalitions / consortiums formed with other donors and funders to leverage spend, specification and demand Indirect spend control initiated with grant teams (vehicles, civil works, IT & Lab supplies) Performance 137 Million value / savings delivered in year to-date Lead-times reduced from 9 to 6 months LLIN global strategy successfully rolled out with tender savings of $ 70Mil/annum) Training produced and delivered to FPM’s and PSM’s Spend through pooled procurement increased from $300M to $1Bn. Supply Chain Supply Chain capabilities : Ability to forecast Track and trace system up and running Ability to measure delivery performance (OTIF) In country supply mapping for hi-impact countries under-way Rapid Supply Mechanism defined for all three diseases and in process

15. 15 Sourcing Objectives 2014 Organization Integrate Purchasing and Supply Managers(PSM’s) into Sourcing organization Re-structure to segregate operations from strategy Strengthen Indirect spend area Process Launch E-Procurement toolset (reverse auctions etc.) Launch country catalogue / application tool and implement in High-Impact countries Launch pooled disbursement Market Dynamics Complete market strategy for Tenofovir combination drugs Leverage Indirect spend into partner organizations Introduce new Chinese and Indian vendors to the Aid sector Create repeatable capability by partnering in depth with Market Dynamic focused organizations Performance Deliver 8% value / savings Achieve 60% OTIF Lead-times reduced from 6 to 5 months Roll out Global strategies on ACT’s, Diagnostics & ARV’s Implement Rapid Supply Mechanism Supply Chain Complete Supply Chain mapping for High-Impact Countries Establish common platforms for traceability at beneficiary level (Counterfeit /theft /diversion) Create base level training for in-country partners

16. 1.Develop and implement comprehensive reengineering of the Procurement Operating Model and Organization. 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 countries to exceed 75 % Just over $ 131M value added 5 more countries have asked to join pooled procurement Current OTIF disappointing at 36.8% Overall Progress to Plan - Procurement 4 Impact – Goals

17. 17 What does this mean………… 4.1 Insourcing of Sourcing 4.2 Pooled disbursement 4.3 Scale & Leverage 4.4 Organization and Tools Become a customer Of choice

18. 18 4.1 Insourcing of Sourcing Voluntary Pooled Procurement has evolved into a Sourcing Team with greater capability Spend under control is increasing We have created product, market and supply experts Relationships upstream and downstream are “owned” Reduced agency costs Changing the locus of control from manufacturer to buyer

19. 19 4.2 Pooled disbursement The award of framework agreements based upon multiple requirements from multiple countries Direct payment to vendors = improved funds flow The ability to leverage fragmented spends The ability to incentivize desirable behaviors or performance

20. 20 4.3 Scale & Leverage Partnering at various levels with donors and partner organizations Harmonized specification Harmonized demand Control – GF and partners dictate parameters Protecting Innovation Reduced Lead times 9mths-6mths-4mths

21. 21 4.4 Organization and Tools Comprehensive market intelligence Upstream Active Pharmaceutical Ingredient and Formulation Cost of goods sold transparency Downstream supply chain Track and trace i-Fund Reference App. Tender and E-Procurement capability Rapid response mechanism

22. Counterfeit / Theft / Diversion Slight change of direction………..Aligned to FDA language and past activities and output based Identify TOP 50 aid funded drugs into Africa and create a matrix List manufacturer counter measures Plot against incidence Look for improvements in prevention Direct Funding Supply chain online tracking Technology – Harmonization of prevention measures / new tech. i.e. random serialization List Top 10 Measures / systems with service or technology providers List solutions deployed in Top 20 (High Impact) countries, in a matrix: Cost effectiveness Scalability Platform Ease of Implementation Roadmap Other tests per country (minilab etc.) Interfaces with prevention Contract terms to encourage data collection at both country and manufacturer level Communication Plans for PR’s and Governments / better information of prevention and enforcement Promotion through local champions, AU / SADC Dashboard reporting of progress Working Group - Reg. bodies / Health Ministries - Global Fund / Partners Data Integrity underpinned by WHO PreventDetect Respond To include manufacturer data Dashboard reflecting trends Several levels 3 work streams Data Driven Prevent, Detect, Respond Prevent = Top 50 drugs, with listed measures vs cost vs effectiveness ………Identify improvement opportunities (direct funding, Supply Chain transparency, technology) Detect = Top x measures, solutions deployed in countries based on cost effectiveness, scalability, platform, ease of implementation………… …..leading to a roadmap Respond = contract terms around reporting, comm’s plans, PR involvement, AU & SADC

23. 23 To support our planning process we are leverage the way that we interact with our primary recipients. TodayThe Future Demands are triggered by PSM plans which are presented in an inconsistent format. Overall demand is calculated reactively by hand, this in effect means that we purchase on a spot basis in most instances, creating long lead times. Orders are placed on PSA for onward transmission to manufacturers Overall demand will be calculated from available funding for successful grant applicants This demand will be placed on manufacturers as an underwritten volume Detailed PR requirements will be presented in a consistent format We will use a planning tool to convert our forecast in to specific orders by type Supply Chain Improving our forecasting accuracy

24. i-Fund for The Global Fund 24 Equipment, Goods and Services team Health Products Team The Support Group SuppliersPartners GF PSM’sSuppliers Knowledge & Collaboration Country Ownership & Supply