BVS is a vaccine company that relies on chemical ingredients supplied by distributors for its products. It is facing delays and supply issues for a critical ingredient called Mystic Acid needed for an important new vaccine. The head of purchasing, Markus, works with R&D manager Natasha to find a new supplier, Wildgrass, a small startup company. Markus' student intern, Sarah, helps develop the relationship with Wildgrass and qualifies them as a supplier, despite initial skepticism from R&D. The lead auditor is impressed with Wildgrass' competence and potential to supply additional needed ingredients.

1. Biological Vaccine Science:
Capturing the Value of Supplier
Relations
:Evil geniuses:

2. Bvs(Biological Vaccine Science) profile:
 BVS (Biological Vaccine Science) independent division (5% of revenue of the parent
company) of a large pharmaceutical firm. Based in Austria, while its parent, a German
company, is running its operations from Hamburg.
 BVS for the last 30 years
 He is now working on securing his place in history before his retirement.
 The division’s profitability has been between 10 and 20% consistently, which has insured
its relative independence from its corporate parent.
 Final users range from large non‐profit organizations working in disaster areas to doctors
in private practices prescribing routine vaccinations.
 BVS had grown quickly over the last 20 years, multiplying its sales 9 times and its
personnel 15 times to 4000 employees worldwide.

3. Sales history:
 Two new vaccines that addressed the new markets of cancer treatments were
in the last phases of qualification. They had the potential to triple the revenues
of BVS by 2020.
 An analyst report by “Banque de Genève” had made forecasts of a total
market of more than 2 billion USD for the VxC1
 The VxC1 was based on very sophisticated “V‐Augmentor®” technologies
that BVS mastered significantly better than its competitors.

4. Sales Forecast vs. today by product line
• Unfortunately, last year’s results were poor. Profitability had decreased as sales
growth dropped to the single digits, while expenses had continued to grow at a
double digit rate.
• Some acquisitions of startups have been delivering disappointing results as the
culture of those startups did not mesh with BVS's, which led to the departure
of the best scientists at those acquired companies.
• The latest financial results pushed the corporate parent to apply pressure on
BVS to improve its operations.
• No more acquisitions will be authorized in the foreseeable future.

5. Competition
 Today BVS is a strong number 2 in its field. The market was dominated by a handful of companies, each
with strengths and weaknesses
 BVS had placed high hopes on two new vaccines.
 One of its competitors, Marble Pharm Vaccines had a product addressing the same need but with a
narrower spectrum and the need for more complex treatment protocols.
 The CEO had just named his most trusted employee, Patrick Schneider, to lead the project, called the
VxC1 Ship, to bring the VxC1 to market in the committed timeframe.
 the pilot plant that was developing the new techniques to manufacture the vaccine and the new
“V‐Augmentor®” preparation,
 Patrick detached all the experts he needed to speed up the process from their original functions. (R&D,
clinical, production (pilot plant, validation, and engineering), and marketing).

6. R&D and the “V-Augmentor®”
• The Research Department was housed in its own building, an architectural wonder.
• The “V‐Augmentor®” production was especially challenging; it involved mixing very
small amounts of rare, highly purified ingredients.
• “V‐Augmentor®” consists of a handful of recipes blending rare ingredients.
• BVS never invested in manufacturing those ingredients because they could usually be
sourced from the catalogs of chemical distributors.
• BVS were, and still are, better allocated to developing and manufacturing vaccines.
• On the other hand, the “V‐Augmentor®” blend recipes were highly proprietary
developments from vaccine and biotech scientists.
• Natasha Fletcher was the VP in charge of the development of the “V‐Augmentor®”
technologies.
• She was worried, as she had received reports showing delays caused by the difficulties
of supplying key rare ingredients used in the “V‐Augmentor®” technology, such as
the Mystic Acid.

7. The Chemical Distributors
 Fletcher’s team had a good relationship with the two main distributors of rare
chemicals, BCC and LCSD, but that did not help.
 Everyone was under pressure to accelerate the introduction of the new vaccines,
 The relations with the suppliers were suddenly taking too much time from her staff.
 Junior scientists lacked the maturity to manage the increasingly detailed contracts that
BCC and LCSD were using.
 Natasha knew those two chemical distributors almost too well. Their strength lay in
the size of their catalog and the quality of their sales force.

8. Cont..
 LCSD is a USD 4 billion revenue group, with global reach, and a global network of
suppliers. BCC is European, a bit smaller at about EUR 2 Billion.
 On the other hand, such does not come without cost. Pharmaceutical R&D culture rarely
argues about price unlike what she knew before joining BVS.
 LCSD and their main competitor, BCC never compete against each other on price. They
avoid dealing with hard‐nosed purchasing departments as far as possible.
 Fortunately, LCSD and BCC have the same approach to dealing with buyers: wine and dine
them, have their R&D client control them, and ignore them when they become pushy.
 The sales manager of LCSD, Mr. Kurt Egger, was acutely aware of the supply issues with
different products ordered by Natasha project teams. BVS was a very profitable client

9. Supplier Management at BVS
• Purchasing at BVS was headed by Markus Fournel, a new recruit. Purchasing was a department reporting to the CFO
• He had originally thought of promoting someone from his finance department, but needed that resource for other tasks and
realized that a bit more experience in more aggressive environments would be a plus. He finally hired Markus Fournel.
• Responsibilities were scattered. A few buyers were aggressive negotiators looking for cost savings, but most of the others
were simply assisting other functions, to find rare products,
• Only one manager, one of the oldest, had followed a dedicated Purchasing training program. The new head of Purchasing,
Fournel, had a very simple mandate: professionalize the function and reduce costs by 9% of all the non labor spend within
three years.
Assessment of the Purchasing Department
 Markus began to empower his staff to be
o More creative
o To open to new ideas.

10. The Issues with Single Source Materials
• Natasha Fletcher had heard Markus give a presentation to the top 50
management meeting.
• He appeared dynamic, entrepreneurial, and ambitious.
• He could contribute to solving the most urgent issue, the Mystic Acid supply.
Before the call from Natasha, Markus had never heard of Mystic Acid, but felt it
was pressing, so he went to R&D to meet with Natasha.
• Prior to the meeting, he tried to gather some information about this material.

11. Developing a New Relation
 Wildgrass was a young company. Joe San Benovar, had worked for many years for a
large chemical company before investing his live savings in Wildgrass 5years ago.
 He had developed tools that allowed him to change volume and formulation very
quickly while respecting stringent specifications.
 His startup company was considered too small, or lacking the right skills, especially
in risk management and change control. It had been successfully audited by the US
regulators
 What he needed was to find a patient customer, ready to help him develop his
capabilities beyond the synthesis technologies, like in record management, risk
management, etc.
 He did not see himself returning to corporate life, even as President of the division he
had created.
 Markus and Natasha realized that the current approach was not appropriate to the
increasingly fast paced and cost conscious evolution of the company.

12. Cont…
• Sarah, the student who was doing her internship was finishing her project. She had the right background to
become the relay that could manage sourcing, supplier development, and qualification for the R&D community.
• She had met Natasha who appreciated her energy, her creativeness to “think outside the box” and consider new
approaches to solve old problems.
• Her experience managing all the aspects of a supplier relationship allowed her to sort out a situation that had
appeared overly complex to non-Purchasing experts.
• She had also used her analytical skills to identify the issues at the heart of the new development better:
o 7 key materials ranging from €60 per kg to €12 million per kg
o Spend growing from less than €2 million in 2006 to €300 million in 2015 (This made Sarah the Purchasing Manager
with the smallest spend under her responsibility but one of the most critical)
o Objectives: validate first source and establish contracts that preserved BVS’ long term interest

13. Cont..
 Developing a relation with WildGrass was difficult. Sarah had the support of Marina and, to
a certain extent, Natasha Fletcher, but the rest of the R&D team involved in the development
of those new solutions were, to say the least, skeptical.
 The first meeting did not go that well. People in R&D were openly wondering “why
someone from finance was attending their meeting.”
 The requirements outlined were as difficult as anything he had seen before. Moreover, BVS’
forecast was very unstable.
o How could he invest in equipment and training in such a situation?
o Was this BVS a potential partner or just another of those arrogant R&D driven pharmaceutical firms?
 The BVS had a very different attitude. Sarah talked to Markus about it. She had to prepare
the first audit of Wildgrass and team up with one of the scientists, Otto Fils,

14. Cont..
 The lead auditor Otto was quite impressed by Wildgrass: they were competent,
even if their equipment lacked the finish of what was typically found at large
suppliers.
• They were learning very quickly, integrating his comments immediately. Moreover,
he understood that they had the potential to solve more than the Synthemar
problem. Through discussions with Joe and his team, he saw the opportunity for
Wildgrass to manufacture at least two other critical molecules for BVS.