Novartis Updates Progress in Procurement and Manufacturing Initiatives
Novartis outlined progress in its initiatives for improved operational efficiency, including cost savings in Procurement and manufacturing, in its first-quarter 2016 results. In January 2016, Novartis outlined several initiatives, which included centralizing manufacturing operations across divisions within a single Technical Operations unit, and integrating some drug development functions across divisions. These initiatives are incremental to the company’s existing productivity programs, including synergies delivered by Novartis Business Services (NBS), the company’s cross-divisional services organization, created in 2014 to drive efficiency, standardization and simplification across the company.
The company also took the first step in centralizing its manufacturing operations in the first quarter with the appointment of Andre Wyss as President, Novartis Operations. The new Technical Operations unit, which aims to optimize capacity planning and lower costs through simplification, standardization, and external spend optimization across divisions, is expected to be in place by July 1, 2016. The company’s manufacturing footprint initiative, which was first launched in 2010, will now be managed by the centralized Technical Operations unit.
The company also increased group-wide coordination of drug development with the appointment of Vas Narasimhan as the Global Head of Drug Development to help improve resource allocation, technology and standards across divisions. In the first quarter, the company also completed the integration of development for the Ophthalmic Pharmaceuticals franchise, which previously was managed by the Alcon Division. ,/p>
The company report that its Procurement group generated savings of approximately $300 million and continued progress on the initiatives under NBS. For example, one source of efficiencies delivered was the consolidation of facilities services from more than 100 to three key suppliers globally. In addition, NBS continued to scale up the offshoring of transactional services to its five Global Service Centers and prepare for the rollout of an in-country commercial and medical support platform (expected to start in the second quarter). The cost within the scope of NBS remained stable from the prior-year quarter.
In total, its productivity initiatives generated gross savings of approximately $500 million in the first quarter.