2 years ago
May 16, 2017
Are You a Strategic Supplier? How a Chief Procurement Officer Sees Translation
Have you ever received a call from a buyer at the deal close asking for another 10% price reduction? Your ability to defend your pricing and win the deal can depend on many variables but the more strategic your solution is to the client, the better your chances of success.
The headwinds are strong. Increasing global competition, outsourcing and the application of technology reduce pricing power, squeeze margins and make it harder to maintain your brand differentiation. Product life cycles show that as categories mature, the more they are susceptible to commoditization; and the speed to maturity is accelerating.
Understanding the buyer and the variables they consider in procurement is essential to securing and retaining strategic accounts. At the inaugural SlatorCon London on May 9, 2017, over 60 senior industry executives were treated to a snapshot of how the procurement brain works by one of the language industry’s largest buyers.
With USD 7.8bn in revenue and 50,000 professionals serving clients in over 100 markets, QuintilesIMS is by far the world’s largest clinical research organization. It purchases millions of dollars in translation for itself and its clients. The company is said to be one of TransPerfect’s major global accounts.
At SlatorCon, Steve Kirk, Chief Global Procurement Officer at QuintilesIMS, discussed their strategic sourcing process, what category management looks like, centralized vs. decentralized procurement models, and where they place translation in their procurement mix.
He walked participants through the many variables they consider when evaluating a supplier relationship with a Language Service Provider (LSP) and challenged the audience to know how many of these variables are important to both you and the buyer.
Kirk works with his teams in North America, Europe, EMEA and Asia Pacific to manage global and local purchasing and he detailed the process they take to identify, segment and manage Strategic Sourcing. For QuintilesIMS, the five steps are Initiation, Insight, Innovation, Implementation and Improvement.
“Everyone has a slightly different version of the five, six or seven steps that you go through but the flow is pretty much the same,” said Kirk. “Go off, get your data, work out what your category looks like, and try to get together some kind of a business case of what you’re trying to achieve from the category.”
Focusing in on the translation category, Kirk highlighted the challenges they face in building a team. “You’re looking at trying to get together people that are maybe in dispersed geographies, different parts of the business,” said Kirk. “They might be doing marketing translation, they might be doing clinical translation, they might be looking at something that is part of our market research division in the IMS case. [We are] trying to work out how you can get all those different guys together into one room and say right, how do we build a spec here?”
Adding to the complexity for translation is QuintilesIMS’ “fragmented spend across the business.” Kirk said, “You’ve got a fragmented industry, with a fragmented supply base, with a fragmented nature of spend in translation. How do you get your hands around that and work out what you’re really buying?”
“You’re looking at trying to get together people that are maybe in dispersed geographies, different parts of the business” — Steve Kirk, Chief Global Procurement Officer, QuintilesIMS
A large portion of QuintilesIMS’ translation spend is passed through to their clients, i.e. the world’s largest pharma companies, which expect them to be custodians of that spend on their behalf. As such, QuintilesIMS is constantly measuring and analyzing data as it seeks to improve supplier management, achieve economies of scale and leverage buying power.
Sourcing cycles are accelerating from the current 2-3 years, placing even more pressure on vendors. “What we’re driving towards now is a more frequent sourcing process. A more regular challenge to our supply base,” said Kirk. “And we’re going to try to increase our sourcing velocity,” indicating a potential target cycle as short as 12 to 18 months.
Within the supplier management process, QuintilesIMS are using globalization and centralization to build a global supply base and leverage their buying power.
“You typically start with 50, 60, or 100 suppliers doing translations,” said Kirk. “New procurement comes in, category management comes in, a new CPO comes in. Let’s try to use economies of scale, let’s try and bundle together our spend, let’s try to get to one single contract with one single supplier.”
For now, there is still a lot of local translation activity ongoing at QuintilesIMS, but once there is one supplier with one dashboard with one set of metrics, Kirk believes they can more easily create their specification and use it to challenge the market for better value for the spend.
Total Cost of Ownership
Currently, Category Managers at Quintiles are divided up by areas of spend and so it is important that vendors are engaged with the right parts of the organization.
These managers are looking for levers to derive savings from vendors through:
- Supply management: Pricing and supplier consolidation. Think last minute pricing squeezes and fewer suppliers.
- Demand management: Volume reduction and specification changes. Think reducing travel or changing from business to economy class as examples.
- Value management: Increasing revenue generation and cash flow improvements.
- Process improvement: Automation and lean management to deliver higher quality more quickly and at a lower cost.
It is in the last two areas where Kirk feels that translation firms can help QuintilesIMS deliver for its clients.
“The turnaround times, the quality of the data, the criticality of the data that we’re providing to our clients is all based on your abilities as a translation company to provide that service,” said Kirk. “How can we do this more quickly? How can we do this in a way which is exceeding the client’s expectations but at a cost that is continually reducing?”
QuintilesIMS is looking to increase control of the pass-through costs and drive innovation back into the supply chain. They are also looking to improve their processes through automation and remove duplication in quality control with translators (i.e. additional in-country reviews) to achieve further savings.
“The turnaround times, the quality of the data, the criticality of the data that we’re providing to our clients is all based on your abilities as a translation company to provide that service”
Quintiles considers all these factors in assessing the Total Cost of Ownership and they consider cost-per-word only a part of this cost, albeit a large one. Quality Review and costs associated with re-checking and non-text formatting, procedures to pay and other vendor management and legal factors are also assessed within the TCO.
Savings definitions, therefore, are not as black and white as vendors might think and Kirk challenged the audience to know their client’s requirements across the full breadth and depth of negotiating variables.
Strategic Partner or Pens and Paper
The process ultimately places vendors into four broad categories and QuintilesIMS has a strategy for vendors in each category:
- Non-Critical: Tactical sourcing and standardized products. Think pens and paper with many suppliers which are easy to switch on price.
- Bottleneck: Long-term agreements of secure supply. Move the dimension by aggregating spend.
- Leverage: High value of spend. Shop around for the best deal. Short term commitments.
- Strategic: High value of spend and difficulty switching suppliers. Use open costing and seek improvements.
Fortunately, translation is still viewed as strategic at Quintiles. Nevertheless, Kirk’s teams are constantly analyzing each procurement to see where it really fits and if they can move LSPs from the high spend Strategic category to the Leverage category.
“How quickly can we shift a category that is a high difficulty today to a low difficulty? Then suddenly we can start doing short term deals. We can do more regular bidding. We can do harder negotiations”
Questioning the client-provider short-term relationship, Doris Albisser, Vice-Chairman and Leading Partner at EurAsia Competence asked “How can we reduce costs yet retain the know how? Because if you’re going to redo a RFP every 12-18 months, what’s the use for a provider to build up all that knowledge and then you switch again?”
Kirk replied “If you’re not on the left hand side (in the Leverage box), you’re actually a Strategic Supplier. Then are we getting open book costing? Are we getting continuous improvement and are we getting innovation. If you’re doing all these things and we can evidence that from the solutions you’re providing and we can see the value that’s bringing to us, then yes, you’re shifting the perception to the right hand (Strategic) side and you’re winning the argument in terms of all these things are happening. Then, of course, we’ll do that (longer term contracts).”
“We’re kind of open right now to those kinds of conversations on how that CMS might come into play”
Reflecting on the Total Cost of Ownership, Hans Fenstermacher, Managing Director of Corporate Development at ULG, asked “To what degree at Quintiles have you considered the full scope of the content that you’re localizing? So in other words, a lot of the result in the translation side is dependent on the content development in the first place. The TCO should really include all of that.”
Kirk agreed that “the front end of the process that we see today is very manual. I think I mentioned email workflows and documents flying around. I think there’s an element of automation. We’re missing that. And also an element of policy or governance. How do we get [a content management solution] to be a standard process? That means we don’t have to translate over and over again.”
Kirk suggested a glimmer of hope to vendors capable of building an effective CMS solution for Quintiles and its clients. “We’re kind of open right now to those kinds of conversations on how that CMS might come into play and how that would really work in practice.”
The look into the Procurement brain offered by Kirk should be very valuable to Business Developers and Account Directors as they engage in discussions with Category Managers in a large organization.
For a copy of the full presentation, register free of charge for a Slator membership and download a copy here.