Bayer Consumer Health heavily relies on contract development and manufacturing, maintaining a network of nearly 200 contract manufacturers that account for approximately half of their global sales.
This is set to change with the Project Martini initiative, which aims to significantly “shake up” and consolidate their network of contract manufacturers.
Ahead of his talk at CDMO Live, David Buhmann, Vice President of Procurement Finished Goods, exclusively reveals this new strategy and its critical importance to Bayer. Listen to the full episode below:
“Contract manufacturers are an integral part of our supply chain. We require top-tier partners to ensure that we fulfil our mission of helping over 1 billion people lead healthier lives with the most trusted selfcare solutions in the market. This includes every link in the supply chain, including the CMO network.”
Over the years, Bayer’s contract manufacturing network has grown organically, resulting in a situation where the company now collaborates with nearly 200 CMO sites, accounting for roughly half of the division’s revenue.
“Our priorities shifted rapidly during the COVID-19 pandemic,” says David. “Initially, our focus was on securing materials and supplies at any cost. However, more recently, we’ve shifted our attention to cost management and cash flow, right-sizing the inventories that accumulated during the pandemic.”
Project Martini
Against this backdrop, Project Martini was conceived. “Many of our initiatives within the product supply realm have James Bond-themed names,” explains David. “We chose ‘Martini’ based on the phrase ‘shaken, not stirred’ because we want to shake up our current network!”
The project has gained visibility within Bayer and is sponsored by the company’s divisional COO and CFO.
“The approach we’re taking here is to go to market with a substantial portion of our externally produced volumes in a large-scale tender that covers a wide range of technologies and essentially all regions.”
“The tender design encompasses roughly one-fifth of our overall sales. It’s a highly significant project, designed to rigorously assess the strategic fit, operational efficiency, and commercial viability of our partners.”
Long-Term Strategic Partnerships
Given the breadth of requirements, David confirms that they are seeking significant global players rather than a collection of smaller niche suppliers.
“One of the success factors for Project Martini will be to emerge with a leaner and more consolidated network. We’re looking for partners capable of serving a wide range of technologies and possessing the innovation capabilities to ensure
future-proof solutions. These partners will play a pivotal role in the tender.”
“In the CMO space, we always consider the mid to long term. Short-term deals are impractical due to the prohibitive cost of relocating production. Therefore, we seek partners with whom we can collaborate over extended periods.”
Willingness to collaborate and transparency are key. “It’s sometimes challenging to assess these factors upfront. Soft skills come into play. Ultimately, it’s still a people-centric business—otherwise, computers would make all the decisions. Having meaningful face-to-face conversations upfront is personally crucial.”
Internal alignment and technology
“Making the network leaner and more consolidated is a core priority for our divisional COO and CFO.” says David.
“We didn’t need much convincing to get the organisation on board. Having senior sponsors is tremendously helpful; it enables us to unlock resources and execute the project effectively.”
To help deliver the project, Bayer are introducing a new sourcing platform, Coupa’s CSO, to streamline and enhance the management of the procurement process.
Previously, they conducted offline tenders in the CMO space, David explains. However, the existing Request for Quotation (RFQ) capabilities and underlying technology fell short of meeting their evolving needs. Coupa aims to address these limitations and provide a more robust solution allowing for scenario analysis, expressive bidding and alternative bids.
The hope is that the tender process facilitated by Coupa will yield solid data, enabling informed internal discussions and objective decision-making.
Dual Sourcing for Resilience
At a time of consolidation, maintaining a balance between supplier reliance and efficiency gains is crucial. To achieve this equilibrium, Bayer is implementing dual sourcing strategies:
1. Parent-Child manufacturing
For certain critical products or formulations, Bayer seeks to establish two sources. They operate on a parent-child model where the Parent Site produces a significant portion of the volume and the Child Site produces the remaining portion.
This setup provides flexibility, allowing Bayer to switch between the parent and child sites as needed. Both sites can be either internal or external, depending on the circumstances. This approach mitigates over-reliance on a single supplier.
2. Raw Material dual-sourcing
The pandemic underscored the importance of raw material availability, says David. Bayer collaborates closely with its CMOs to initiate dual sourcing for key raw materials. Having alternative sources for critical inputs enhances resilience and minimises supply chain disruptions.
For more insights on this project, don’t miss David Buhmann and Malik Akhtar’s exclusive talk at CDMO Live June 13th – Project Martini: How Bayer are Optimising their Contract Manufacturing Network in 2024 – and join a roundtable discussion about network optimisation. Register for your free ticket here
