AstraZeneca Annual Report and Form 20-F Information 2008

Supply and manufacturing

Core to our continued business success is our ability to provide a secure, high quality, cost-effective supply of our products worldwide.

We continue to drive operational excellence, make adjustments to our manufacturing base and make effective use of strategic outsourcing to maximise the efficiency of our supply chain whilst maintaining the highest standards of quality and security of supply at every stage.

Our supply chains are structured to be flexible and responsive to the changing needs in our local markets. During 2008 we maintained our focus on driving continuous improvement to our supply system, as part of a wide-ranging cost and efficiency programme. This has delivered significant benefits in recent years, including reduced manufacturing lead times and lower stock levels, which have been achieved without compromising high levels of customer service and quality. Further improvements are planned using principles that focus on what adds value for our customers and patients, whilst also eliminating waste. In line with our commitment to strategic outsourcing to maximise supply chain efficiency, we plan to outsource all of our active pharmaceutical ingredient (API) manufacturing within five to 10 years.

We continuously review our manufacturing assets to make sure that they are being used in the most effective way, whilst preserving the flexibility we need to respond to fluctuations in demand. During 2008, we completed the sale of facilities in Germany and we closed our packaging site in Canada. Capital expenditure on supply and manufacturing facilities totalled approximately $179 million in 2008 (2007: $191 million; 2006: $201 million) across a range of projects. We also recently announced the establishment of regional offices to optimise further our supply chain activity. This includes sourcing centres in Shanghai, China and Bangalore, India, established to identify high quality suppliers in those regions to support the growing market demand there. We will also establish a regional packing strategy, to improve our ability to respond to customer requirements, while equipping the business for Emerging Markets growth.

The introduction of new manufacturing processes has brought further opportunities to drive efficiencies across the global supply chain.

Our drive for efficiency and effectiveness resulted in announcements in 2008 of planned workforce reductions in our Supply organisation, which includes the closure of three sites, Porriño in Spain, Destelbergen in Belgium and Umeå in Sweden. Our facilities in Macclesfield (UK) and Södertälje (Sweden) will also be affected. Subject to local consultation, we expect these moves to result in headcount reductions of approximately 1,400 across the business by 2013. We recognise the impact that significant business change can have on our employees’ morale and productivity and the increased risk of industrial action. We aim to manage these risks by ensuring that throughout the implementation of these changes we continue to consult fully with staff representatives and act in line with local labour laws. Our Human Resources policies and processes are also focused on ensuring that the people affected are treated with respect, sensitivity, fairness and integrity at all times, and you can read more about this commitment in the People section.

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