Welcome to What the Duck?! A podcast with real experts talking about direct spend challenges and experiences. And now, here’s your host, SourceDay’s very own manufacturing Maven, Sarah Scudder. Thank you for joining me for What the Duck?! Another Supply Chain Podcast, brought to you by SourceDay. I am your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of the supply chain. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct materials supply chain content. Today, I’m going to be joined by Denise Sena, and we’re going to discuss the importance of having a master service agreement in place with your key suppliers. If you work for a manufacturer struggling to get allocation for critical direct materials for your suppliers, then this episode is for you.

Denise has leadership experience in biotech, pharmaceutical, and cell and gene therapy industries. She has extensive experience across all phases of the supply chain, including sourcing, planning, distribution, delivery, and managing the entire product life cycle from launch to sunset. I’ve known Denise personally for the past few months. She’s a part of a supply chain meetup group that I host twice a month, and she has some really, really unique life sciences experience that I think is useful and relevant for our audience. So, welcome to the show, Denise. Thank you so much, Sarah. It’s a pleasure to be here, and thank you for inviting me.

So, we are going to go back in time, make you put your thinking cap on to when you were first figuring out what you wanted to do in your career. So, why supply chain, and how did you get your start in the industry? Yeah, thank you so much, Sarah. And to go back in time, I’d have to say that it wasn’t always supply chain. When I graduated college, I wanted to open up my own health club. And so, it was in the health club arena where I had a client that said, “Denise, you should go into pharmaceutical sales.” And after back and forth and a lot of deliberation, I finally submitted my resume, and that’s how I ended up in Pharmaceuticals. Now, the sales part didn’t work out because I had Johnson and Johnson say, “Denise, we don’t have a sales role for you, but we have a leadership development program in supply chain. What do you think?” So, I accepted the role and honestly thought in the back of my mind, “Well, I’ll take this role, and maybe I will get into their Fit for Life organization.” But then, a funny thing happened. I had some wonderful experience and really enjoyed what I was doing. I started in customer service, learning about the customers, the product, the processes. I moved into vendor-managed inventory where I learned all about forecasting and planning and statistical analysis. I’m back to school for my MBA in Supply Chain Management. I went to the Distribution Center, being the last person who actually touched the package before it went into the operating room. And I became a chief of staff, learning more about the business acumen and financial acumen, what drives the supply chain organization. And that really was a pivotal moment for me as I moved from just being interested in supply chain to really being incredibly passionate about it.

So, you stayed at Johnson and Johnson for what I would consider to be a long time. One, it’s a very, very large company. Fortune, it may be a Fortune 100 or Fortune 50, but a large company. And it was your very first job out of college. What would you say are the most important takeaways that you learned from working at such a large organization that has a pretty established supply chain team? Yeah, that’s a great question. I’ve been in situations like JNJ where they’re going from good to great to best in class, and other companies that you have to stabilize the organization before you can take a step forward and optimize. So, at that journey, you know, in my career, I would say, Sarah, that three things really come to mind. You know, the first is the importance of collaboration. You find that supply chain management is the hub, or they work very closely with various stakeholders, whether they’re internal or external.

Internally, we’re working with manufacturing, with quality, with regulatory, with the commercial team, logistics team. And externally, we’re working with our suppliers, our vendors, our CDMOs. So, it’s extremely important to have effective communication so we can align on goals, we can resolve issues together, and we can come to consensus. I think the second, for me, is that you find in supply chain the ability to be agile and nimble and flexible, right? And so, supply chain folks, they pivot under duress all the time, and there are always unplanned events. And so, you have to be able to feel comfortable mitigating the contingency plan. And the third, which is my favorite, is data-driven decisions, right? And so, supply chain creates a vast amount of data, and so the ability to leverage that data, analytics, and technology is crucial in order to enable data-driven decisions, informed decisions, which actually becomes a competitive advantage for some of the companies. Yeah, I was interviewing Steph Schrader earlier today, who’s also part of our meetup group and a very close friend, and she was talking about ERP data challenges and how it’s kind of every company she’s been at has had crappy bad data, which is pretty common, and what she’s and her team are doing to try to one, clean up the data, and then keep it clean ongoing, because it’s very, very challenging to make decisions when you don’t know if you have accurate data or not. You’re spot on in such a relevant topic.

I love that. I’ll have to talk with her too after this session. So, you left J&J and went to work at Merck, and one of the things that stands out to me with your time at Merck is that you moved up very, very quickly and you served in many different roles. So, how were you able to advance your career so quickly there? Yeah, I would say a couple things. First, I’m passionate about what I do, so I feel I’m good at what I do, but also more importantly, is I just didn’t stay in supply chain. I was involved in other things that increased my visibility and improved my leadership. So, at Merck, for example, I led the Merck Women’s Leadership Initiative, which was 3,000 members, and I was able to get a lot of visibility and sponsorship in my career. I took stretch assignments of creating a centralized distribution center in Panama, so I traveled every month to Panama, for example, and I got a lot of exposure to the leaders not only in the United States, but also in Latin America. I worked in Animal Health as an orchestration role too, and so again, I met so many people and stakeholders through the orchestration role, which led me to get opportunities that I typically wouldn’t have discovered if I didn’t have that exposure.

So, your last position at Merck is a title that I’ve never heard of before, so I’m actually going to read your exact title: Associate Director, U.S. Marketing Customer Centricity and Solution. So, I’d like to have you explain what that role actually was. Yeah, absolutely. When I was at Merck, I was a value stream leader responsible for a five billion cardiovascular portfolio, which I got involved in launches, I was involved in mature products and building out the growth, and also preparing the supply chain network for a loss of exclusivity or sunset and being able to compete with generics. And with that role, I had exposure to mostly manufacturing and also the commercial organization. And after about two and a half, three years of being an end-to-end value stream manager, I was asked by the commercial team to join a newly created role called customer centricity. Now, at the time, Merck was actually moving away from a very product-centric way of thinking, which is product sunsets, another one is born, and we wanted to move more into a customer-centric way of thinking, which means working with our largest customers or partners in creating win-win initiatives or being thought leaders together to try to understand how we can improve healthcare disparities or how we could provide better market access in countries that do not have as much access.

So, companies like Walgreens or Premier GPO are now working together to solve our biggest problems in healthcare. And then, the marketing piece, where does that come into play? It’s a great question because nowadays, there’s a lot of cross-pollination between marketing and supply chain, where you have marketing going to supply chain, supply chain folks going to marketing. And I’m a big proponent of that because there’s a level of education that happens where you have an understanding of what the marketing team is doing. For example, when they’re sitting at the table putting strategies together for, for example, Merck, how to shingle vaccine, and we tried to couple it with the flu vaccine during the flu season. So, there was a time where there was a problem with one of the flu vaccinations, which directly impacted the shingles vaccine, right? And so, our marketing team was busy trying to mitigate and trying to figure out how we could get sales. But me, being the operations person sitting at the table, said, “Hey, I think someone needs to call manufacturing to slow down lines,” right? And so, I’m able to bring that value. But it was also in the reverse. I learned a lot about the marketing strategies, portfolio strategies. I learned a lot about what our customers and what our patients valued and able to translate that back into operations.

So, that’s really where the marketing piece comes in, where we collaborated and we educated each other, and together we made much more effective decisions and improved the efficiency of the business. I would also argue that doing the same with sales is vital. Often times, sales is coming in with projections and targets that may not be data-based, and it’s very important to include data and accurate forecasting on the supply chain side, so you’re not purchasing too much inventory or too little. Absolutely. So, after your time at Merck, you went to Bristol-Myers Squibb, and you ran forecasting for them. And forecasting is a really, really important function for manufacturers as well, which is the audience of our podcast. So, what would you say was the most important part of your job there? Yeah, I would say in the beginning, if I worked at Celgene before we were acquired by Bristol-Myers Squibb, at Celgene, we were going through an evolution. We had a product, nine billion dollars in sales, it was a small molecule, and it was relatively easy to make and relatively inexpensive, and it sold itself. One of the issues that we were going to experience is that we were moving into biologics, which, as many people know, it’s complex to make, expensive to make, and has a longer lead time.

So, there was a level of working with our commercial organization to help educate or understand the value of accurate forecasting, right? So, I was brought on to really bridge that relationship between the commercial organization and manufacturing, to talk about the value of better forecasting or accurate forecasting, and really helping them to understand the interpretation of the marketing platform and how we use it to coordinate what we need to make in manufacturing in order to support the sales going forward. That would probably be the most important thing, that was my level of responsibility on the team. Given all of your experience with forecasting, what can you recommend for our listeners that are working in manufacturing to do to improve their forecasting? Our secret sauce at Celgene, I firmly believe, is that we have to make decisions with the customer, the patient, in mind. And at that time, our demand planners, who use the statistical and historical information to create a forecast, were a bit far removed from our commercial team that is very forward-thinking and understands the market landscape and the competitive landscape. And what I firmly believe is the two need to come together. So, our demand planners and our commercial team need to sit together to talk about the market research, primary and secondary. They need to understand if the product is price-sensitive, for example. They need to understand together the sensitivity analysis because the two organizations work very closely together to understand the financial implications or the sales implications. But also, it’s our responsibility as supply chain experts to work with our marketing team to say, “And this is what we do on the manufacturing side and how we can support you with a safety stock strategy, with an inventory strategy, with a scenario planning strategy.” So, to get a better forecast, I truly believe it’s the collaboration of those two organizations. It’s having a mature sales and operations planning process so you can understand the trade-offs from scenario planning that you do, whether it’s a launch or a sunset, doesn’t matter. And agreeing, having a handshake agreement on what they plan to sell and what we plan to make.

So, your next gig was at Gilead Sciences, which I actually have been to one of their offices before here in the Bay Area. I actually hosted a women in procurement event, which was kind of a fun panel to be involved with. And when you were there, you oversaw new hematology and oncology product launches. Walk me through your product launch strategy, and the reason I’m asking this is we have people working for manufacturers listening to our show, and there are some cases where they’re launching or considering launching a new product, and I know that there’s a very important process in science to follow when you are doing a new launch. Well, I love the question. Gilead really firmly believed in their number one objective at the time was developing a very mature and best-in-class sales and operations planning process or integrated business process. They really wanted to be known as the company that’s building the supply chain of tomorrow. I led the sales and operations or IBP process during our life cycle management reflection points. And one of the big things that we were implementing at Gilead that really helped, I think, goes back to what I mentioned before about data-driven decisions. And so, we introduced these scenario planning, which was very similar to what I introduced at Bristol-Myers Squibb, which is mostly working with the marketing team to understand a low base-high scenario and the probability that each one of those scenarios will occur. And I believe that in doing that and really getting some due diligence and some rigor around it, which can take months, it can take years depending on the therapeutic area, bringing the collaboration of the different stakeholders together to walk through the different trade-offs of each different scenario. And then the hard part actually comes where you have to agree on which scenario do we want to plan to.

So, when launching a product, it’s extremely important to do that sensitivity analysis, that low base-high, and to understand what’s happening in the marketplace, that low is going to happen versus the high, right? And we had many conversations around it. We’re competing against the gold standard, but our price is too high, and if the price doesn’t work out, the low scenario will happen. We also had a combination of different scenarios. And so, creating a very strong sales and operations platform or a forum where different constituents can have that data-driven conversation was extremely important at Gilead. And so, that was really our competitive analysis, that was how we were able to take a step back and bring in the scenario planning, bring in the collaboration, bringing the consensus, doing the handshake agreement, and then dividing and conquering manufacturing to that plan. But having the SNOP process, we would always go back and say, “Are we tracking? Are we working together well? What’s not working well? What is working well?” And we were able to continue to pivot if we needed to change that strategy. I like the scenario planning. I think that’s good for our listeners to think about. Again, a lot of our listeners aren’t working for such large manufacturers, much smaller. But there’s still somebody in sales and marketing that I think you can collaborate with and talk to and figure out kind of worst and best case, and then plan around that. Yeah, then we can even, don’t need a lot of sophistication. You can actually say, and this is what we did at Celgene, what is the range? That’s it. What is, and we can fall somewhere within the range. So, depending on the sophistication or the maturity of where you are in your company, you still can reap the same benefits with just a very basic conversation. So, you mentioned Celularity, which was your last gig, and you ran their integrated supply chain. So, I’d like to start with having you explain what is integrated supply chain mean? Yeah, it’s a fancy word for saying everything in the supply chain functional area is running seamlessly or in coordination or in harmony. So, your procurement, your planning, your logistics, your manufacturing, all run in harmony together. So, your people, your process, and your technology is all in sync. And we call that an integrated supply chain management.

When you were there, what would you say was the most important direct materials project that you and your team worked on? Yeah, so at Cellularity, we were building out supply chain capabilities, and there was a time where we did not have a supply chain subject matter expert in procurement. And as a result, we had the employees would order the materials that they needed. So when I arrived, we had many, many suppliers, 300-400 suppliers. We also had about 65 percent of the inventory was overstated, and 35 percent of it was understated. And so when we were probably 99 in reactive mode, so when we would realize that we needed plastic or rubber during the pandemic or coming off the pandemic, we realized from a best-in-class procurement that we needed to put some things in place prior to going into stabilization. So, I would say that one of the hardest things that we had to learn was that we’re driving the car as we’re paving the driveway, trying to get our direct materials, realizing that we still did not have a lot of things in place for procurement in order to run effectively and to get the products to our manufacturing team. So, the theme and kind of topic for our conversation today is going to relate to my next question: biggest direct materials challenge you had to overcome during your time at Cellularity.

Well, let me put it this way, we had many, but I would say the silver lining is that at Cellularity, we were really keen on building up the supply chain capabilities, in particular in procurement. And we were the pure definition of peeling back the onion. What I mean is that we said, “Well, we have too many suppliers, let’s find out who our key suppliers are.” And in order to do that, we had to say, “Well, what are our key critical direct materials?” Well, in order to do that, we had to do a variety of different activities, and probably I would put it into three categories. The first was we took a look at the bill of material, and we realized that maybe the bill of material needs to get updated. The second was we looked at the unit of measure, and going back to what we said prior, some of the units of measure were inconsistent. And then the last was working with our commercial team to try to do due diligence on a level of forecast that we could use to talk with our suppliers about volume discounts. When all that occurred, we had realized that when we were trying to get some of our products, I’m going to use plastic bags and rubber stoppers as an example that directly related to our products, we realized that these products were on national backorder. So, we couldn’t just pick up the phone and say, “Please, we need them within two weeks,” because we did not have a master service agreement with some of these suppliers. So, they did not know what our volume was for the next couple of years, which in turn, we didn’t have a cost structure involved or terms and agreement. And so, when we were talking about a product that’s on national backorder, you know it’s hard for us to make the allocation, less it’s hard for us to be prioritized. And so, we kicked into gear very quickly. We identified our top suppliers, identified our direct materials. It took a while, but we did it. We were able then to create a master service agreement that talked about the longevity of our forecast, create different cost structures, create the terms and liabilities, our intellectual properties, our quality, our service agreements with them. And as a result, we were able then to at least get on the allocation, receive partial shipments to get us by so production didn’t stop. And that was one of our biggest and most urgent needs that we had in procurement. It worked out well. We saved the company multi-million dollars in doing that. So, that was very crucial. And I think going back to what you had said before, Sarah, you’re working for a larger company like Johnson & Johnson, and you come in, that stuff is already done. But you know what good looks like. And so, again, the secret sauce of working for a smaller organization is if you know what good looks like, you can build the ladder to get there and to prioritize. And that’s exactly what we did at Cellularity.

So, just to kind of recap, you did not have master service agreements or MSAs in place with some or many of your key suppliers, and this didn’t come to light until there were challenges getting parts and materials, and you realized you were not a customer of choice. So, this triggered the team to do an assessment and then go out and figure out a strategy to put these MSAs in place. Absolutely.

So, for those that are listening right now that are working on small supply chain teams, let’s say maybe five or ten people, and they don’t have an attorney or legal resources, let’s say on staff, what would you recommend for those that want to start putting MSAs or contracts in place but don’t have a lot of bandwidth and don’t know where to even start? I think it’s really important to build a high-performing procurement team. Folks in procurement have worked with contracts before, they know right from wrong, they know how to read a contract. And really, that’s what was happening here at Cellularity too, bringing in a subject matter expert. We had a template. My procurement had worked in procurement for over 20 years, right.

So, I think the number one most important thing is to find a high-performing procurement subject matter expert, right? That understands the foundation of an MSA and the importance of an MSA. Again, we, and even an RFP process, and Cellularity too, were able to centralize procurement. So, at a smaller organization, you’ll have multiple people around the organization picking up the phone and calling their supplier at choice, and they might have different reasons why they want to use that supplier. But when you have a high-performing procurement team, they are going to be talking to the supplier about the quality and the service and the expectations of not only today but the expectations of building the relationship for tomorrow. So, we’re providing them volumes that we expect over three years. So, I would start very small, like we did at Cellularity, and prioritize what needs to get done first, what is critical, that if you don’t have this product, you don’t have this process, things are going to come to a dead halt. You have to work on those first, and you have to mitigate that quickly, and starting an MSA process and building the supplier relationship, in my experience, has always been the first thing that we looked at.

Yeah, a couple of other things I’ll add is, don’t make your MSAs novels. If you make something look really legal and scary, it’s not going to be as friendly for the supplier. So, make it short and simple. Of course, you need to protect yourself, but let’s tone it down a bit. And the other thing is templatizing can work very well. So, put a template in place, and then use that with all of your suppliers. You can do an appendix or addendum that has specifics, but if you are going to start from scratch with every single supplier, reviewing all of their contracts or documents, that can really become burdensome.

Those are all great additions, thanks Sarah. So, from a KPI and data perspective, is there anything that stands out that you think is really important to include in MSAs when we’re talking about direct material suppliers? Or something that you had missed and you learned from that and by not including it?

We always worked with industry benchmarks as the standard to say, “This is what we would like.” And so, we always started with that and then either worked backwards or forwards. So, a lead time was very important to us, a quality level was important to us as well. So, I would just say, know what good looks like for your organization. For us, we did some benchmarking outside of what the industry would look like, and then we went with that and started our conversation there with our suppliers.

Well, thank you for discussing the importance of having a master service agreement in place with your key suppliers with me, Denise. Where would you like to send people to find you?

Thanks, Sarah. You can find me on LinkedIn @DeniseSena. I’m happy to have conversations or connect with you. Follow me, and I’ll follow you. If you missed anything, you can check out the show notes. You can find us by typing in “What the Duck?! Another Supply Chain Podcast” directly in Google to have the optimal search results. Make sure to add “Another Supply Chain Podcast” at the end of your search to ensure you don’t miss a single episode. Make sure to follow this podcast and subscribe to us on YouTube. I’m @SarahScudder on LinkedIn and @SScudder on Twitter. This brings us to the end of another episode of What the Duck?! Another Supply Chain Podcast. I am your host, Sarah Scudder, and we’ll be back next week. Thank you.