"One on One: An Interview with Farryn Melton" By Jill Schildhouse, Fall 2006, Vol. 42, No. 4, p. 2
Journal of Supply Chain Management Copyright © November 2006, by the Institute for Supply Management, Inc.
Interview by Jill Schildhouse, writer for Inside Supply Management®
Farryn Melton, C.P.M., is the vice president and chief procurement officer for Thousand Oaks, California-based Amgen, the world's largest biotechnology company. She is responsible for leading the organization in leveraging the company's external spend to improve productivity, optimize cost efficiency and align with the overall business strategy to optimize value. With company revenues approaching $14 billion, her team is responsible for managing direct and indirect external spend, currently estimated at around $4 billion. Melton is a 20-year procurement professional whose career includes management positions with Fortune 100 companies across multiple industries. She has a degree in business administration, and is a lifetime C.P.M. Melton received the National Association of Purchasing Managers (NAPM) New Jersey Crystal Award for the 2004 Purchasing Executive of the Year as well as the Healthcare Businesswomen's Association (HBA) 2004 Rising Star award. Upon joining Amgen in late 2005, Melton conducted an opportunity analysis to connect her team's efforts to the company's strategic goals.
The Journal of Supply Chain Management: Why is it important for a supply management department to link its efforts to its company's drivers?
Farryn Melton: Successful sourcing organizations strive to be strategic partners to the business and to add value to the company at the highest levels. They contribute in a more meaningful way than cost savings and supplier rationalization. While these are important components, there is incremental value you can bring by connecting to the overall strategy and linking activities to form a common goal.
The Journal: What is the most effective way to link your organization's activities to the company's overall strategy?
Melton: A key way is to conduct a holistic opportunity analysis (OA) of your external spend that is tied to the company's strategic imperatives and business drivers. It is critical to begin with a deep understanding of your company's strategy, business drivers, strategic imperatives and key objectives. This is the core of your OA and becomes the key input for all your activities and projects. As you develop your list of opportunities, it becomes the "touchstone" used to prioritize and focus your efforts. Successful sourcing organizations are able to translate their company's strategic imperatives and objectives into meaningful activities within their organization that add maximum value. Connecting your OA to the company's strategy and objectives is a key way to accomplish that goal.
The Journal: What other benefits does an opportunity analysis offer?
Melton: The OA reveals key (internal and external) drivers, including how well the category is penetrated; who the key stakeholders are; geographic relevance (if it is managed locally, regionally or globally versus the marketplace); and the complexity of the category (internal versus marketplace) and savings opportunities.
The Journal: Why did you conduct an opportunity analysis upon joining Amgen?
Melton: To understand the state of the business and prioritize our efforts. I worked with my senior leadership team to create a vision around strategic business partnership and category management. We began to develop the necessary skills training and coaching on how to be a strategic business partner and manage spend at the category level. This does not happen overnight, but takes passion, focus and perseverance to attain.
The Journal: Did you also need to gain buy-in from senior leaders?
Melton: Yes. As part of my introduction to Amgen's senior management, I explained my assessment process for the organization including people, systems, processes and priorities to assure alignment with the company's goals. I outlined that our vision was to be strategic business partners and that a key enabling tool was a process called "category management." I listened to their input and, after the process, I asked for feedback and support.
The Journal: What was the next step?
Melton: The most time-consuming but crucial component of the process: data collection. We developed a questionnaire and conducted a series of interviews across 100-plus categories. It is important to include key stakeholders, such as R&D, manufacturing and marketing, in the process. The objective is to understand the state of each category from multiple perspectives and each area's key business drivers to essentially marry them to drive focus and priorities.
The Journal: What did the opportunity analysis reveal?
Melton: Amgen's business is growing, and our imperatives are scaling for growth, by building additional manufacturing plants, increasing clinical trials to support the robust pipeline, preparing to launch new products and managing any associated risks. So, we added these elements aligning and scaling for growth, risk management and being more proactive versus reactive to our OA.
The Journal: How do the results of an opportunity analysis vary by company and industry?
Melton: Each company and industry will be different. Our business drivers included scaling for growth, risk management and pipeline delivery. Other companies or industries, depending on market forces and business cycles, may have a broader need for efficiencies internally (processes) and externally (supplier savings), while others that are focused on entering into new markets may require aligning new capabilities.
The Journal: After you identified your business imperatives, and got buy-in from senior management, what was the final step of the process?
Melton: To put the results into action. The OA's output is a key component of your long-term business plan, how you prioritize efforts and resource your teams always tied back to the business imperatives. These imperatives change over the years, so you need to stay abreast to shift your team's focus and stay relevant to the business at the highest possible level.
The Journal: Did you face any challenges trying to obtain accurate spend data?
Melton: It is always a key challenge. Systems rarely provide all the data needed, so teams need to be creative. We mined the best data available by accessing a variety of sources. Don't worry about information perfection; it's only meant to be directional. The data can be obtained a number of ways, including financial systems, invoices, budgets, purchase orders, even suppliers. All the information must then be assimilated by the sourcing professionals and key stakeholders closest to the categories.
The Journal: What other challenges did you encounter?
Melton: Appropriately prioritizing the results of the analysis and "force-ranking" the opportunities. Each category will have many opportunities that need to be prioritized across the business relative to each other and the overall company. You will need to appropriately rank these, which is why understanding the business imperatives and drivers are critical, because everything is balanced against them.
The Journal: Do you have any words of wisdom for supply managers preparing to conduct an opportunity analysis?
Melton: Take time to develop a true understanding of your company's strategy, imperatives, objectives and drivers, and be able to translate those into supporting sourcing activities. Incorporate these into your analysis to ensure that your organization's activities, priorities and focus are aligned to support the business at the highest level. If conducting an OA seems daunting from a manpower standpoint, look to outside consultants for help. Consultants familiar with OAs and category management can provide critical manpower and have the ability to look at your organization objectively. Make certain the consultant has a deep knowledge of the categories important to your company and make sure your team remains heavily involved to ensure continuity and that the capability is built into your organization.