Spend Matters is pleased to present a post from regular contributor Gregg Brandyberry.

I read Bob Ferrari's July 22, 2011 blog on Supply Chain Matters titled Pharmaceutical and Drug Supply Chains are Failing – Why?? with great interest. For quite some time, I've felt that the complexities of the Pharmaceutical global supply chains were greater than the capabilities of those companies to control. Many factors contribute to this hypothesis, including offshored sources of supply from low-cost countries, mega mergers and acquisitions, major reductions in support staff (300,000 pharma workers laid off in the past decade) driving overall morale to new lows, margin reductions from declining NA market and a host of others.

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Among the big pharma companies, GlaxoSmithKline (GSK) is one of the most forward-thinking providers when it comes to procurement innovation and execution (more on this in a minute). Here at Spend Matters, we're lucky to count two former GSK procurement executives, Gregg Brandyberry and Jason Magidson, as contributors. Gregg formerly served as GSK's CPO and Jason was charged with driving innovation into procurement processes, technology investment and usage. The legacy of Gregg's and Jason's contributions -- along with that of countless others -- lives on in GSK's ability to deliver earnings results even an environment lacking new blockbusters.

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I've recently been involved with a new company aptly named Cellepathic, founded and led by Greg Muffler. Greg is one of a group of pioneers leading the way designing and developing mobile technology platforms that are going to play a huge role in redefining how our "new economy" works. In the case of healthcare, the Cellepathic mobile platform is changing the way the various groups in medical industry can interact. Applications are even being developed to improve the testing of new drugs in clinical trials.

The Cellepathic solution leverages client information (in this example patient, pharmacy, physician et al), geography (where the patient is located and where they are 'buying' ... the pharmacy or outlet such as CVS, Rite Aid, Walgreens or Wal-Mart) and past buying patterns. This all occurs dynamically in a real-time mobile environment using standard SMS cell phone technology. This mode of communication is much more effective and less costly than traditional print marketing and all other forms of media have ever been.

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This is a true story! How do I know this? I was involved. I know the readers of Spend Matters will love this example of almost getting ... well almost paying too much.

I own a "New York style loft" (whatever that means) in a building in Philadelphia. 30 large condo's were created in an abandoned factory and sold in 2005. Big spaces, lot's of windows, soaring ceilings, great location and a fun place to live. Like most rehabs of this type, the developer had a tight budget and in some cases did the minimal amount work to update the building.

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The more I have the opportunity to see how companies are (or aren't) strategically sourcing indirect goods and services, the more I recognize that there are still huge benefits to be captured even in those categories of spend where companies have traditionally developed expert capabilities, whether they be internal or external.

Take energy, for example. Most companies have a dedicated expert who works to ensure that the appropriate hedging strategy is in place. Most of those folks were in for a rough ride the past few years and I know of a few casualties and early retirements that resulted.

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Back in October 2009, I wrote a Spend Matters post about bringing off-shored call center and transactional jobs back to the U.S. ("OURSHORE"). Having held various supply chain management roles for over 30 years, I understand the importance and competitive value of the global supply chain, but I strongly disagree that this type of global strategy should include call-center and transactional jobs, which can be executed as efficiently here as anywhere else. Research shows that up to 1 million such jobs have been off-shored to countries with low-cost labor pools, with the majority relocated to India. If the average annual wage for these jobs is $20,000, the cumulative loss to the American economy is now approximately $20 billion per year! If the average effective federal tax rate for these salaries is 15 percent, then $3 billion was lost from federal taxes, and another $1.5 billion from state and local taxes.

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I had an experience last week that has caused me to believe that National Healthcare has definitely begun even before any final legislation has been passed. To be clear, my information is anecdotal and based upon my own personal experience in the City of Philadelphia PA where like most folks -- especially those who have children or who travel extensively -- I've been preoccupied about getting the H1N1 vaccine as soon as it was available. I typically get the seasonal flu vaccine in mid to late September and this year was no exception. I found it very easy to go to my local CVS Pharmacy, present my insurance card, roll up my sleeve; "in and out" in 15 minutes.

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Having led a successful offshore project of GlaxoSmithKline's transactional procurement activity a few years back, I know a fair bit about what's involved from a technology, process/knowledge transfer, employee training and necessary new management structure needed to ensure a smooth transition. This offshore project was of course to an India-based BPO as was the fad at the time. I've been out of this space for a while but my eruditions were:

1. It takes a huge amount of detailed tactical planning to be successful. I was fortunate to a have Denise Bamford as part of my Global Systems and Operations organization leading the project. She was not only an expert in the transactional procurement space but a really strong project leader as well.

2. It's more costly than one might think. Straight one-to-one labor arbitrage looks attractive. But it doesn't work that way. The BPO's add layers of management to ensure their service offering works and this creates additional cost. There are savings, at least initially, but how long that remains the case is debatable.

3.You have to deal with very high employee turnover rates and accelerated salary inflation. Employee turnover rates of 30-40% were the expectation a couple of years back and this of course helped to accelerate salary inflation as BPO's attempted to stabilize their workforces. These high turnover rates drove higher costs and lower quality of services provided. Think of the upheaval caused in your own businesses if you were dealing with annual employee turnover of 40%.

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In May of 2007 I purchased a commercial building in the Midwest in a metropolitan area located on the Illinois/Iowa border where the Mississippi river runs east to west. This was the beginning of my plan to establish a "cost neutral" retirement headquarters where I could pursue life without all the stresses associated with the big city and the big corporation.

After a couple of false starts, I became very active in moving this project forward after my "retirement" this year. The City whose downtown property I planned to rehabilitate was very active in letting me know the various financial incentives they would provide. This of course, was very attractive, especially for a former "Procurement guy" and the incentives offered were about 20% of the total project cost ... who wouldn't get excited about that! The incentives included monies for energy efficient windows and HVAC, no sales tax for all goods purchased, façade improvement credits and up to $20,000 for newly created residential units.

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