Success in Leveraging
Supplier Diversity
HPCLC
October 12, 2010
Tom Cummins
Director - Commercial Services Procurement
Forward-Looking Statement
This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the
United States Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to,
statements about the benefits of the merger between Merck and Schering-Plough, including future financial and
operating results, the combined company’s plans, objectives, expectations and intentions and other statements that
are not historical facts. Such statements are based upon the current beliefs and expectations of Merck’s
management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in
the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking
statements: the possibility that the expected synergies from the merger of Merck and Schering-Plough will not be
realized, or will not be realized within the expected time period, the impact of pharmaceutical industry regulation and
healthcare legislation; the risk that the businesses will not be integrated successfully; disruption from the merger
making it more difficult to maintain business and operational relationships; Merck’s ability to accurately predict future
market conditions; dependence on the effectiveness of Merck’s patents and other protections for innovative products;
the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to
litigation and/or regulatory actions.
Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise. Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in Merck’s 2009 Annual Report on Form 10-K and the
company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site
(www.sec.gov).
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Today’s Merck
Merck is a global healthcare leader working to help the world be well
• We provide innovative medicines, vaccines, biologic therapies and consumer
and animal health products to help improve health and well-being
• We work with customers in approximately 140 countries to deliver broad-based
healthcare solutions
• We demonstrate our commitment to increasing access to healthcare through
far-reaching policies, programs and partnerships to help people around the
world lead healthier lives
• The Company is known as Merck in the United States and Canada.
Everywhere else, we are known as MSD
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Business Case for Supplier Diversity
• Reduce costs / Increase revenue / Leverage innovation
• Demographic shift – customers and suppliers
• Support wealth creation in the communities in which we do
business
• Build brand loyalty & brand visibility
• Enables us to better understand and anticipate the needs of the
people we serve
• Supports Merck’s Corporate Social Responsibility goals and
policies including Merck’s Diversity and Inclusion initiatives
• Support Commercial and Government contracts (U.S.)
• It’s the right thing to do
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Perspective on Supplier Diversity
• Competitive advantage vs. social program
• Global businesses depend on strong national economies
• Inclusion of all communities of suppliers creates stronger
economy and an innovative supply chain
• Global strategies do not necessarily equate to one global
supplier – diverse suppliers can partner for the optimum
solution
• 2nd tier drives supplier diversity throughout the supply chain
AND enables diverse supplier opportunity and
development
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Supplier Diversity – Case Study
CASE # 1. Diverse Supplier Provides Managed Service
for Temporary Labor Requirements
Merck is collaborating with a certified diverse supplier who performs a managed
service for sourcing temporary labor requirements through their web-enabled
vendor management system. Merck utilizes the expertise of the diverse supplier
to drive delivery of quality resources and market pricing while achieving best in
class Tier 2 diversity performance.
The supplier has demonstrated an eagerness to grow with Merck and has invested
in program enhancements to deliver more value. The annual spend volume with
this supplier has doubled in three years. Merck manages the relationship with this
supplier through its Supplier Value Management program and has identified other
potential areas to collaborate for “total work force solutions” with this diverse
supplier.
Example demonstrates opportunities to collaborate and grow
business with existing diverse suppliers.
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Supplier Diversity – Case Study
CASE # 2. Merck teams with Large Corporation on driving
significant diverse supplier opportunities across Integrated
Facilities Management portfolio
Merck’s sourcing effort for IFM services in North America required the prime
suppliers commit to achieving significant share of their spend with diverse
suppliers. This requirement was a key decision maker in the selection process.
From the outset and still today, Merck collaborates with the IFM supplier in the
sourcing across its scope of services specifically targeting diverse supplier
solutions - including landscaping, janitorial, mail room services, and other site
maintenance activities. This strategy has resulted in the building of strong
relationships, cost reduction delivery, and the enhancement of the IFM supplier’s
corporate supplier diversity program.
Example shows that building aggressive diverse supplier
expectations into major sourcing opportunities can prove to be
very successful and ultimately provide competitive advantage for
all involved.
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Supplier Diversity – Case Study
CASE # 3. Merck partners with a lead Transportation Management
Services provider, driving diverse supplier opportunities in the
trucking category.
To be distinguished as Merck’s lead supplier of domestic trucking services, this
supplier was required to adopt Merck’s supplier diversity program and carry out
the policy as a commitment under the Master Services Agreement.
This supplier is enrolled in Merck’s Supplier Value Management program as a
top tier supplier, due in large part to its proactive stewardship of a program to
qualify, subcontract and cultivate diverse carriers in its TMS. This carrier’s
diversity program is rigorously tracked via monthly governance meetings.
This supplier is required to use commercially reasonable efforts to spend a
minimum % annually of the total of that year’s spend for US based (including
Puerto Rico) diverse subcontractors.
Example shows how aggressive targeting can drive results in a
category (logistics) traditionally challenged to contribute to
company diversity goals.
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Opportunities and Challenges in Logistics
• Supplier diversity opportunities in the Logistics category
are typically limited to carriers under the North American
domestic trucking area.
• Large logistics suppliers with expansive carrier network are
well served to invest in a supplier diversity program as a
means of landing and growing business with companies
such as Merck.
• Long term Services Agreements must include strong
supplier diversity language:
– Language adopting companies diversity definitions
– Requirements to develop and maintain rigorous program
– Required and realistic diversity commitments are ideal
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Weighing Options
• Joint ventures
• Strategic alliances or partnerships
• Carve-out
• 2nd Tier
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