1 Objective

The purpose of this Global Procurement Policy is to ensure that organization

manages its procurement activities to a minimum set of consistent standards .
Expenditure on goods, services and capital investments is significant and it is
required to ensure the organization makes transparent spending and to mitigate
internal and external supply chain risks. This Policy describes the principles,
requirements and minimum standards that expects to be applied to all
procurement activities.

This policy recognizes that government laws and regulations relating to

procurement vary around the world . The local units are therefore required to
accommodate such requirements within their local SOPs and seek advice
from their legal and compliance teams, when determining how to accommodate
such rules.

All procurement must be made in accordance with this Global Procurement

Policy. This is to protect the integrity and consistency of the principles of this
policy.

The Policy shall be implemented with immediate effect.

2 Definition of Terms & Abbreviati ons

2.1 Abbreviations

Abbrevi Definition Abbre Definition

ation Aktiengesells viatio Material Master Data
AG API n
chaft Active ng Material Requirements
BU re MMD
Pharmaceutic Planning Market Unit
CAPEX di MRP
al Business en Purchase Order
MU
ts
Confidentiality Disclosure
Unit
CDA PR
PO Purchase Requisition
Agreement
Capital
Coe Code of
Expenditure PU Production Unit
Conduct
COGS Costs of Goods Sold Production Unit
PUSC
Strategic Components
cu Compounding Unit R&D Research &
DFO Divison Finance Officer Development

eCatalog Electronic Catalog RFO

RfP Regional Finance
Request for Proposal
Officer
EDI Eletcornic DataInterchange RfQ Request for Quotation
eProcure Electronic Procurement SCoC Supplier Code of
ment
System Conduct
System Selling, General &
ERP Enterprise Resource Planning SGA
Administrative
Expenses

GPMD Global Procurement Medical SM Sourcing Manager Devices

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 GS Global Sourcing SoD Segregation of Duties
global Standard Operating
gSOP TCO Total Cost of Ownership
Procedure
I&D Innovation & Development Center VAT Value-Added Tax

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Abb D Abbreviation Definition
revi ef VMD Vendor Master Data
atio in
n iti
LB o
n
L
e
a
d
B
u
y
er
MD Master Data

2.2 Terms
Term Definition
Approved
Supplier Frame Contract

Authorized
Procurer

Category

Contract

Business

Owner

Direct

Spend

Four-
eyes-
principle

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 A types of employees involved in the procurement activities at xxx. The
supplie Authorized Procurer is any xxx employee who performs a
r that procurement role within the procurement process. The Authorized
has Procurer is authorized by local management and responsible for defined
succes activities related to finding, selecting and maintaining suppliers or buying
sfully goods and services for xxx. The Authorized Procurer may be authorized
underg for the whole source- 2-pay process or be
one a authorized for some activities of this process only. Likewise, the
qualific Authorized Procurer can be authorized to conduct activities of this process
ation for the whole spend of its organization, or only for some defined goods or
proced services. Authorized Procurers may belong to a
ure is Procurement/Sourcing/Purchasing/Buying Department but can also belong
conside to other departments.
red an Examples for an Authorized Procurer may be Lead Buyer, local buyer,
"Appro assistants, team leader, project engineer, line manager, marketing
ved manager, sales manager, etc..
Supplie
r ". A group of goods or services structured according to common
Qualific characteristics as: Supply markets
ation Intended use and nature of material (e.g. glass, vials, ampoules) Material
proced group definitions as per purchasing hierarchy
ures
are A contract is understood as a legally binding agreement between xxx
needed and a supplier on a specific subject. The contract shall contain the
for fundamental terms of the agreement, shall be documented in a form
defined agreed by the parties and shall be authorized by representatives of both
goods parties . Examples of contracts are frame contracts , which apply to
and more than one procurement transaction , whitepaper agreements
service (signed by both parties ) or purchase orders in combination w ith a
s. matching quotation or order confirmation.
The A xxx employee responsible for the appropriate and effective
concep realization of a part of xxx's business.
t of the Direct spend refers to purchase of goods and services that are directly
Authori incorporated into a product being manufactured by and for xxx
zed
The four-eyes-principle is a requirement that two individuals review or
Procur
approve a transaction before itisexecuted.
er is
establis An agreement between xxx and a supplier (group ) in which
hed to fundamental terms and conditions, which may include pricing, have
highlig been stipulated that shall apply to all purchase orders.
ht the
numero
us

Hotelkeeper The Hotelkeeper is the representative of a legal entity who ensures

coordination of xxxi's interests across all relevant stakeholders (MU,
PU,I&D, functions) in a legal entity and who is accountable for all legal
& fiscal matters of that legal entity. The Hotelkeeper of each legal entity
has been appointed and published in the Hotelkeeper List (see chapter 9
References).
Indirect Spend Indirect spend refers to the purchase of goods and services that are not
directly incorporated into a product being manufactured by and for xxx.
Key Supplier Management of suppliers, that are strategically valuable and for which
Management sourcing activities are performed to create benefits in costs, quality or /
and logistics for Fxxx.
Buyer named by the respective global sourcing/procurement department,
Lead Buyer (LB) responsible for the company-wide coordination and execution of
sourcing

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Term Definition
activities of a specified Lead Buying category.
Lead Buying Local All sourcing activities for categories with the involvement of a Lead Buyer.
buying Purchase All purchasing activities with the involvement of a local buyer.
Order A purchase order (PO) is a commercial document, officially issued by a
purchaser
(buyer) and expresses the company's intention to buy a certain good or
service under defined conditions. PO's should be created out of the
ERP system if available.
Purchase Requisition
A purchase requisition (PR ) is a document generated by an
internal xxx organization to inform the responsible Authorized Procurer of
required goods and services. PR's should be created out of the ERP
Purchase-2-Pay system if available.
Requisitioner
Part of the generic procurement process, please refer to chapter 7.2. Any
Segregation of
xxx employee requesting goods or services.
Duties (SoD)
principle Within the context of this policy the SoD principle refers to the
separation of responsibilities and roles along the source-2-pay process in
order to prevent fraud and errors. Roles for requisitioning, ordering and
payment must be separated.
"shall" & "must"
The words "shall" and must" express mandatory subjects. The word
"should"
"should" expresses recommended subjects.
Source-2-Contract
Part of the generic procurement process, please refer to chapter 7.1.
Sourcing strategy
A defined strategy to meet the objectives of the category, goods or
services. The sourcing strategy describes the structure of the future
supplier portfolio (duration of contracts, number of suppliers, payment
terms, Incoterms, single/dual/multiple sourcing).
Supplier
Any third party providing or intending to provide goods or services to xxx.
Terms & Conditions
E.g. payment terms,Incoterms.
Total Cost of
Ownership (TCO) A principle used for determining the economic value of direct spend
and investments prior to supplier awarding. t evaluates all costs
involved in the life cycle of the goods or services.
White Paper A White Paper Agreement is a negotiated and physically or electronically
Agreement signed contract between two or more parties in which a specific
purpose is mutually agreed upon for a specific time period.

3 Responsibility
The Hotelkeeper of each xxx organization shall implement this policy in the
respective organization and shall monitor compliance with this policy .
Functional responsibility for implementation of this policy may be delegated
by the Hotelkeeper to local management . Such delegation shall be
documented appropriately . Every xxx organization must design their local
processes and procedures to meet the minimum principles of this policy.

All xxx employees executing procurement activities shall apply the principles
laid out in this policy. All other relevant procurement procedures as well as all
applicable local laws and external regulations must be applied.

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4 Authorized Procurer
The concept of the Authorized Procurer is established to highlight the numerous
types of employees involved in the procurement activities at xxx

The Authorized Procurer is any xxx employee who performs a procurement role
within the procurement process. The Authorized Procurer is authorized by local
management and responsible for defined activities related to finding , selecting
and maintaining suppliers or buying goods and services for xxx . The
Authorized Procurer may be authorized for the whole source-2-pay process or
be authorized for some activities of this process only. Likewise, the
Authorized Procurer can be authorized to conduct
activities of this process for the whole spend of its organization , or only for
some defined goods or services . Authorized Procurers may belong to a
Procurement I Sourcing/Purchasi ng/Buying Department but can also belong to
other departments.

Examples for an Authorized Procurer may be Lead Buyer, local buyer,

assistants, team leader, project engineer, line manager, marketing manager,
sales manager, etc..

5 Basic Principles
Authorized Procurers at xxx strive to meet the demands of internal
business partners and suppliers by:

Ensuring that goods and services are provided on time, in quality and
in line with regulatory and social requirements.
• Enabling continuous supplier innovation, competitive conditions and
process efficiency.
• Managing Total Cost of Ownership (TCO) for all direct spend and CAPEX.
• Improving working capital by effectively managing payment conditions
and consignment stocks.

The Segregation of Duties (SoD) principle is a central instrument of control to

enhance the security of internal xxx processes . The Authorized Procurer
must not be responsible for requisitioning , ordering and paying activities for
the same business transaction, those must be segregated.

5.1 Procurement Involvement

Authorized Procurer(s) must be involved in the procurement process and level
of involvement shall be defined in each local unit.

The early involvement of the Authorized Procurer in the planning of demand

requirements is required to enable the Authorized Procurer to leverage market

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 know- how for the benefit of the business in an optimal way, in particular
when looking for

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 the optimum price/performance ratio and the best suppliers. Authorized
Procurers have, in accordance with their signature authority, the mandate to
make any statement or commitment of a business nature to suppliers.

Exceptions shall be approved and documented in accordance with chapter 8

of this policy.

5.2 Ethics and Compliance

Each Authorized Procurer shall conduct business activities in a professional,
honest and ethically correct manner as defined within the xxx Code of
Conduct . Fair treatment shall be ensured for suppliers while driving
competition during the source-2
-pay process . This includes safeguarding that potential conflicts of interest
are transparently addressed to and managed by the Authorized Procurer 's
supervisor . Appendix 1to this policy describes in more detail how a conflict
of interest should be managed.

All suppliers must abide to the fundamental principles set forth in the xxxi
Suppliers Code of Conduct (SCoC ). Any deviations from the Supplier Code of
Conduct (see References in chapter 9) shall be documented by the Authorized
Procurer , commitments to the suppliers own codes that impact xxxi processes
require prior approval by Corporate Compliance . If xxx commits to a Code of
Conduct owned by a supplier this shall be published in the xxx intranet.

The Authorized Procurer shall utilize a risk-based approach to determine how

adherence should be evaluated and monitored . Any xxx employee who
detects violations must document and report any detected violations to the
Authorized Procurer.

5.3 Confidentiality
Information related to a supplier that has been obtained through procurement
activities, including pricing, terms and conditions, must be treated as
confidential and may only be used for the purpose of procurement activities.
Each unit shall implement adequate processes to safeguard such confidentiality
and abide by any confidentiality obligations under contractual agreements (i.e.
CDA with a supplier).

6 Procurement Organization
Procurement of xxxis either centrally managed or locally managed.

Centrally managed procurement is realized by central functions that manage

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 procurement for xxxi as a whole. Global procurement functions are

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 responsible to manage selected suppliers globally and to take sourcing
decisions for spend within their responsibility.

An overview of global Authorized Procurers can be found here :

The Lead Buying concept is described in gSOP-MM- 005.

Locally managed procurement is realized by Market Units (MU), Production

Units (PU), Business Units (BU), Compounding Center (CC) orInnovation &
Development Center (I&D) through local buying. Organizational set-up ranges
from individuals authorized to procure to dedicated procurement departments.

7 Procurement Process Framework

This document uses a process framework to describe the minimum principles
that shall apply to all procurement processes at xxx.

The procurement process framework is segregated into two parts: source-2-

contract is focusing on strategic activities, whereas purchase-2-pay covers
operational activities.

Authorized Procurers may only be authorized to perform defined activities

within this process. Furthermore, not all process steps may be carried out in
every procurement transaction . Exceptions to the process are documented
within chapter 8.

Source-2-Contrect

Figure 1:Source-to-Pay Process

7.1 Source-2-Contract
7.1.1 Demand
Demand analysis

Demand may arise from different sources such as sales or budget plans, new
projects (e.g.I&D/ R&D projects), or ad-hoc. This demand, based on a given
business need, shall be reported to the Authorized Procurer. The objective is to
achieve transparency of all business requirements and be able to evaluate
whether xxx has an existing supplier and/or contract in place to cover the
identified demand.

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 Business Owners must involve the Authorized Procurer as early as possible to
align with the scope and requirements (e.g. quantity, detailed description,
place and latest date of delivery, regulatory aspects).

Demand description

Descriptions of the good or service must be completed in an adequate manner

and in written format (e.g. specification). The Business Owner shall
describe them in a supplier- and product-neutral way . For very complex
demands, the business requirements should be defined and agreed in a
cross-functional team to consider existing internal knowledge (e.g. supply
markets, products, suppliers, cost drivers).

7.1.2 Sourcing Strategy

A sourcing strategy should be defined by the Authorized Procurer for
categories, goods or services that contribute significantly to the organizational
units overa ll spend, that have the prospect of potential savings or that are of
strategic interest in another way.

For centrally managed spend (see section 6), the global divisional
procurement organizations are responsible for defining the sourcing
strategy . For Lead Buying categories, a formal, written sourcing strategy
must be documented (see also gSOP- MM-005).

A sourcing strategy shouId include:

• Scope (demand definition, target state e.g. single vs. multiple sourcing),
Market analysis,
Risk assessment, Make-or-buy analysis,
• Supplier capability assessment.

When new suppliers are considered a supplier selection process according to

gSOP- MM-010 may need to be followed.

7.1.3 Tendering
The major outcome of the sourcing strategy is the bidder list of suppliers,
which shall be invited to the tender event. A tender event defines the process
of receiving proposals, quotations and cost estimates from the selected
suppliers. It builds the basis for the comparison of the initial quotations and
future negotiations. Two types of tender events can be applied:

• Request for Proposal (RfP) to obtain potential/creative solutions and

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 2. Request for Quotation (RfQ) when the type of good/service and
quantity is clear.

For both types, a common tender document structure, definition of expected

format and level of detail, as well as sufficient time ahead of the response due
date should be ensured. Suppliers must be provided with equal information.

As a principle, quotations should be requested from several suppliers in

order to maximize competition . The Authorized Procurer shall use his or
her professional judgment in order to evaluate the need for requesting
quotations from different suppliers and to avoid monopolistic situations of
supply. The following criteria should be used to determine the number of
quotations required:

• Value to be calculated based on the estimated total contract lifecycle

volume,
• Duration of agreement and urgency of demand,
• Market situation,
Amount of resources required in relation to the expected benefit.

Regional/divisional thresholds should be set-up by RFO/DFO.In the absence of

any regional/divisional threshold matrix, each Hotelkeeper shall define and
document appropriate thresholds as per the template below. The minimum
number of quotations to request depends on the demand type and value.

Local and market-specific requirements should be considered for the threshold

definition.

Demand Type

one-time-buy
demands
Value Threshold

to be defined
to be defined
to be defined
to be defined
- --
Minimum Number of Quotations Required

x
x
x

recurring
to be defined x
demands
to be defined x

Figure 2:Threshold Temp late for the Minimum Number of Quotations Required
Revised quotations or supplemental documents requested by xxx as part of the
negotiation process shall be submitted in writing.

A written justification is required when it is not possible to obtain

competitive quotations due to justified reasons (e.g. patent protection,
uniqueness of design, limited sources, unique market conditions).

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 The Authorized Procurer shall be accountable for the adherence to the tender
process rules.

To compare proposals and quotations a structured approach should be used

with specific supplier selection criteria for the technical and commercial parts.
These criteria should be objectively measurable and relevant to ensure that
all quotations are considered in an equal and neutral way.

The technical and commercial evaluation should be clearly separated into two
independent evaluations parts.

The Authorized Procurer should conduct a ranking of quotations by

applying the supplier selection criteria to the technical and commercial
parts. The final ranking should focus on achieving the highest value for xxx
in regards to quality , costs and time.

7.1.4 Negotiation
xxx may enter into negotiations with its suppliers to achieve the optimal level
of contractual conditions which are economically advisable. Negotiations shall
be led by the Authorized Procurer and aligned with the internal business
partners . All suppliers who meet the predefined criteria should be invited to
the negotiation in order to ensure fair competition . During the negotiation all
aspects of the demand must be clarified and taken into account . The
negotiation results shall provide a clearly structured overview of the different
options from business requirements and commercial aspects which are used for
the supplier awarding.

The Authorized Procurer shall decide, in accordance with internal policies,

when to include other functional experts such as Legal, Accounting or
Treasury into the negotiation process.

The type of negotiation (e.g. personal, electronic, auction etc.) shall be decided
by the Authorized Procurer taking into consideration the most efficient and
effective process.

7.1.5 Supplier Awarding

The supplier award decision shall be based on the documented evaluation
results of the quotations to determine the best available option that meets
xxx's needs. Award decisions shall be made jointly by the Business
Owner and the Authorized Procurer . The process shall consider business
(e.g. quality ), compliance and legal requirements . Commercial results of

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 the negotiations and internal stakeholder meetings must be documented in a
transparent way.

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