Novartis Reports $500 Million in 3Q Procurement Savings
As part of its third-quarter earnings release, Novartis reported gross savings of approximately $600 million in productivity initiatives in the third quarter, which included $500 million in savings from procurement, achieved through leveraging scale.
Other contributions to savings were from Novartis Business Services (NBS), the company’s shared service organization, continued to execute on its priorities of driving efficiency, standardization, and simplification across Novartis. NBS cost under management remained stable versus the prior year as it continued the selective offshoring of services to five Global Service Centers. NBS is also driving efficiencies through the consolidation of information technology suppliers and contracts in addition to consolidating facilities services from more than 100 to three suppliers globally.
In the company’s centralized Technical Operations organization, which has been operational since July 1, 2016, transformation planning is progressing for each manufacturing technology platform. Organizing by technology platform is expected to enhance the company’s ability to optimize capacity planning and lower costs through simplification, standardization, and external spend optimization across the network. Technical Operations represents approximately 28,000 employees and 67 manufacturing sites.
In addition, the company’s Global Drug Development (GDD) organization, which has been operational since July 1, 2016, completed a review of the company’s entire portfolio of medicines, which has enabled allocation of drug-development resources based on the promise of each asset for the entire Novartis Group versus a single business unit. Additionally, GDD has completed the integration of the vast majority of its global functions, which is expected to help strengthen capabilities, enable more efficient utilization of functional resources, and optimize external spend. The organization is on track to complete integration of the remaining global functions by the end of 2016. GDD represents approximately 10,000 employees worldwide.