Pharmaceuticals Need a Prescription for Procurement

pharma Minerva Studio/Adobe Stock

Spend Matters welcomes this guest post from Pooja Pewekar, marketing manager at Zycus.

Unlike many other top-performing industries, pharmaceutical companies are still lagging when it comes to bringing in automation in their procurement process. Many have resisted adapting to newer technologies available that would make their procurement team’s productivity grow by leaps and bounds.

The problem here has been the general approach of the top management when it comes to the procurement function. Often considered administrative and non-strategic, procurement doesn’t receive adequate attention. However, it can’t be ignored that this team is the one closest to the market, monitoring supplier trends closely and making purchasing decisions that will be beneficial for the business.

Consider this: Pharmaceutical manufacturers often source their active pharmaceutical ingredients (APIs) and other raw materials from suppliers. These ingredients are so critical for the business that the manufacturers spend millions of dollars and manpower to identify the best suppliers. These suppliers are at times local and many a times international. Managing this information and process is extremely time consuming and tiresome. However, sourcing and supplier management tools can make the sourcing teams’ job a lot easier.

The other example that can be looked at is the vast amounts of money spend on outsourcing. According to a few recent studies, more than 50% of big pharmaceutical companies outsource contract development and manufacturing organizations (CDMOs), contract manufacturing organizations (CMOs) and contract research organizations (CROs). Even the other smaller players would also eventually move to outsourcing in the next few years. This will require huge sums of budget to be allocated to outsourcing alone. Through using procurement automation tools, managing these budgets get easier. Procurement folks can track all the PRs/POs, expense and control their budgets efficiently.

Furthermore, these procurement automation tools also make reporting and complying with various industry standards like HIPAA and the Sunshine Act easier. The reports can be standardized to extract desired information, saving millions that the company might end up shelling out due to violations.

And that's why it’s time for pharma to take procurement seriously. The advantages are massive, but have they prescribed to it?

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