Re-designing procurement: A global healthcare manufacturer's post-acquisition journey

Our client, a leading global medical device manufacturer, was recently sold by a global healthcare conglomerate to a global PE entity. However, the existing procurement team, systems, processes, and supply base were to remain with its owner, adding further challenges to the already-complex process of carve-outs.  

Efficio was initially engaged to act as the client’s global procurement department, while also providing transition assistance for procurement and supply chain readiness and policy creation. Post-cutover in August 2021, Efficio was tasked with structuring the client’s go-forward procurement department and driving cost reduction in key spend areas to help the business to find its feet as a newly separated entity. 

Results 

Together, the client and Efficio: 

• Delivered 17% savings on third- and fourth-party logistics (3PL and 4PL) provider spend through a combination of aggressive benchmark-based negotiations and shipping and resource optimisation.
• Achieved 12% savings on spend across a variety of categories, including laptops, permanent recruitment, executive recruitment, translations, lab consumables, and software negotiations.
• Designed a global, strategy-focused team of 14 procurement professionals, including the client’s go-forward CPO, and upskilled existing team members.
• Reassigned, novated, or recreated 62 contracts and onboarded up to 1,000 suppliers to meet transition timelines. 

Approach and challenges 

From a procurement perspective, a major challenge was the fact that very few of the existing systems, processes, team, and supply base were carried over in the carve-out, with our client receiving minimal resources from its owner during the transition.

However, Efficio was able to leverage its experience with carve-outs and healthcare procurement, as well as its long-standing relationship with the new PE owner, to help our client navigate these challenges. With Efficio’s guidance, our client structured the changeover process across four key workstreams:

1. Policy, process, and tools and systems creation 
2. Organization design
3. Key supply chain support projects
4. Contract and supplier readiness 

Managing each project’s deadlines and targets was a crucial aspect of readying procurement for our client’s move to becoming a fully independent organization. Firstly, the client-Efficio team set up an independent customer supply chain as an immediate priority to ensure margin stabilisation. Policies and processes followed, with an interim source-to-pay process rapidly created on a new ERP system. This bought time to design the more comprehensive go-forward process that would be implemented in time for the final Transition Service Agreement (TSA) exit. 

Another obstacle was the limited data available to the client from its previous parent company. Nonetheless, the combined client-Efficio team was able to collate information from different vendor data sources, due diligence findings, and automated invoice scraping to build a complete spend picture that filled in the gaps – the foundation upon which our client drove its significant cost reductions. 

In delivering these cost reductions, there was a particular focus on the client’s U.S. 3PL and 4PL. Global distribution hubs needed to be in locations that could reasonably address all customers within committed SLAs, balancing the client’s vast customer base with the limited staffing it would have as an independent company. 3PL and 4PL drove 17% in savings, and further savings of 12% were achieved across categories, including laptops, permanent recruitment, executive recruitment, translations, lab consumables, and software negotiations. 

Collaboration among the combined team was crucial to delivering results – but organization design was another important aspect of setting our client’s procurement team up for success. Efficio assisted in designing a global, strategy-focused team of 14 procurement professionals, with a headcount optimization of two, and assisted with the screening, hiring, and onboarding of our client’s new CPO to deliver sustained value to the business. 

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If you would like to explore the value generation and cost reduction opportunities of your procurement function, including how we can support you with post-merger integration or any other M&A-related activities, please contact us by filling out the form on our M&A hub.