A survey of biotech and pharma procurement experts shows a need for more formalized communication and improved technology.
The role of procurement in modern competitive enterprises is rapidly evolving. Once a function dedicated to purchasing administration and cost containment, procurement is now a key strategic player with a broad value proposition. At the same time as procurement's potential is expanding, their processes – especially those for identifying and qualifying suppliers – need to evolve as well. The procurement function has made a shift toward less tangible metrics, such as contribution to strategy, innovation, collaboration, and integration. Procurement is looked upon to lead sourcing activity that identifies the best in class providers of goods and services. All of the processes and solutions procurement uses must leverage the full capabilities of their supply partners.
Taking into account the transformation being seen in the role of procurement, the emphasis must be on finding suppliers that are able to satisfy requirements beyond cost savings – without adding time to the supplier discovery process. The need for a highly efficient procurement operation is acute in the pharma and biotech sectors, where suppliers serve as trusted partners due to the highly specialized nature of the supply chain and the pressure for timely delivery. As a result, an accelerated process for identifying suppliers that fit tailored and well-defined needs is critical. This pressure may have the secondary effect of causing project teams to shorten the supplier discovery process, sacrificing total impact in favor of just keeping the process moving.
A recent survey of 40 procurement specialists in the biotech and pharma industries conducted at the 2015 ProcureCon Pharma conference provided evidence that there is a significant opportunity available for improvement in this area. 32% of the survey participants said they manage procurement annual spend budgets of $500 million to $1 billion. While this indicates the high stakes associated with procurement, half of the respondents indicated that his or her company's sourcing strategy was annual, ad hoc upon request, or did not exist at all. There are clearly opportunities to improve enterprise-wide processes, and procurement must invest in skills and agility so that even short term contributions are possible.
A company called tealbook is working to help procurement in biotech and pharma companies rise to the challenge. They have built a supplier discovery and knowledge management platform that centralizes information and instantly connects supplier capabilities with specific requirements when needed. The company's proprietary VET (Validation Expertise Tool) capabilities cogently develop outbound requests and organize inbound responses. Users of tealbook also have the ability to connect with colleagues in similar settings to improve the size of their network. tealbook allows procurement to receive alerts when internal stakeholders have a supplier need, prompting procurement to engage sooner in the process.
If the recent survey of procurement experts is any indication, what tealbook offers directly addresses several of the shortcomings in current procurement operations.
Survey Results
In the ProcureCon survey, the top sources of supplier information identified by participants were internal partners, Internet searches, and external resources such as magazines and trade publications. The vast majority of respondents said they share information with internal partners in person (78%) and through email (70%), while only 25% said they use online portals. 83% of procurement executives estimated that an initial supplier search could take 1 to 6 weeks, or more, to complete. These time consuming approaches also fail to save and centralize supplier information for future use. If procurement wants to speed up the supplier identification process and better leverage their preferred source of information – their internal peers – they need to take an entirely new approach, one that tealbook was designed to support.
The survey also revealed what companies are looking for in their suppliers. Survey participants identified supplier diversity, contract management, and supplier innovation as the three most important facets of their searches, while savings/cost avoidance was the least important measure. Supplier diversity is often difficult to achieve; a challenge that is highlighted by the fact that company executives are prone to rely on previous relationships with suppliers simply because doing so alleviates the need for extensive Internet searches and long email chains with internal partners. Good intentions aside, when the pressure is on to deliver, people have a tendency to fall back on the companies they already know, even if it means sacrificing total impact.
Another specific area procurement executives seem to find daunting is internal communication. The survey revealed that the majority of procurement executives (68%) struggle to coordinate communication between suppliers and internal stakeholders. Another 45% are most challenged by communicating the value of procurement's involvement to these same business leaders. It would seem that a formalized process for procurement, one in which technology is harnessed as a tool to organize and streamline efforts, while also facilitating access to supplier information and empowering internal stakeholders, might be a key element in demonstrating procurement's value.
Identifying Solutions
Procurement executives are expected to communicate with other departments and internal stakeholders during the supplier discovery process. Not knowing when or how the right supplier will be chosen, however, often causes friction between these departments and delays project timelines, introducing inefficiency throughout the system. When internal stakeholders trust procurement's supplier identification process, they have less incentive to attempt their own due diligence. Not only does such a duplication of efforts take internal stakeholders away from their primary responsibilities, it can create confusion about which suppliers are best qualified to meet their needs.
What makes such collaboration possible, said many of the survey respondents, is having executive level buy-in and support. Open channels of communication and full visibility ensure that supplier relationships are established in line with overarching company objectives, and resulting engagements will more likely be of commensurate value to the organization. Collaboration with all levels of management is increasingly important because of the large pools of spend procurement teams have responsibility for influencing.
In addition to top-down support, procurement can better meet expectations by creating cohesive strategies around the sources of information that increase their speed and ensure creation of maximum value. One means to that end will be greater utilization of technology to facilitate supplier identification and discovery. However, when asked to identify their satisfaction with the technology solutions used to gather supplier data on a scale of one to five (five being extremely satisfied), most of the survey participants responded with a three and no participants identified themselves as being extremely satisfied. Many respondents shared the sentiment that on-demand access to information on suppliers could vastly improve procurement efforts, because processes which used to take weeks could be completed in a matter of minutes.
It is in a company's best interests to have an efficient procurement process. This not only saves time, it also to ensures that suppliers are chosen for their contributions to operating effectiveness, diversity, and innovation. Procurement will continue to be integral to a company's success as it is uniquely positioned to cut a company's costs and, more importantly, create value through the supply base. Investing in those abilities – and the technology that supports them – will ensure that procurement performance and impact continue to grow in line with the needs of the organization as a whole.
Conclusions
The authors of the report outlining the results of the ProcureCon Pharma survey made four categorical recommendations to help streamline procurement processes and make them more efficient:
• Commit to building relationships with key stakeholders and harnessing the supplier and category knowledge that exists within the organization
• Define a sourcing strategy that can bring innovation into the business in a sustained fashion
• Explore ways to eliminate tactical workload, including automation and aggregate market intelligence
• Adopt proven technology solutions that assist with the identification of suppliers and retention of stakeholder knowledge
Procurement executives need technology that simplifies their processes and acts as a one-stop shop for supplier intelligence and identification. This is a void tealbook is designed to fill. The strength of tealbook is their formalized structure for organizing, aggregating, and streamlining supplier knowledge. The large dollar amounts managed by procurement suggest a strong need for operational efficiency and value creation. If procurement executives are to positively influence massive budgets through optimal suppliers, they need access to as much information about the available pool of suppliers as possible.
This survey of procurement executives in the biotech and pharma industries discussed in this article pertains to one specialized field, and yet the findings speak to the larger trends around procurement in modern corporate culture. Current operational models demand and expect increasingly faster turnaround but they provide procurement executives with few means to achieve their goals. Having the ability to develop tailored internal databases of suppliers will go a long way towards putting the right tools in the hands of procurement executives so that they can introduce the best supply partners to the rest of the organization.
To view the full survey and results, please visit http://procureconpharma.wbresearch.com/improving-strategic-supplier-discovery-through-technology-mc
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