(Source: National Cancer Institute on Unsplash)

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Pharma and life sciences companies have been on the cutting edge of scientific innovation for decades, but some organizations in this industry are still dependent upon unreliable sourcing and procurement methods. In 2020 and 2021, the COVID-19 crisis exacerbated long-standing supply challenges, especially a shortage of components to develop much-needed drugs and medications.

Thankfully, organizations are taking a hard look at their procurement processes. These internal analyses are leading to much-needed improvements and innovations that could help pharma and life sciences companies prepare for the next big disruption.

Challenges in Pharma Procurement

According to U.S. Pharmacist, the costs of manufacturing and storing excess supply to meet fluctuations in demand are one barrier pharma manufacturers struggle with. "Excess stock in the warehouse is risky from a business standpoint," says Christina M. Bookwalter, Clinical Pharmacist. "It costs money to store and maintain product in anticipation of sales and profit. Therefore, businesses may operate on a just-in-time model by manufacturing the product when it is needed in order to keep costs down and maintain efficiency."

Bookwalter goes on to say that "the drug-manufacturing process is wholly dependent on the supplier of raw materials. Often, there are multiple manufacturers for a drug, but there may be only one producer of the raw material."

The challenge for pharma and life sciences manufacturers is to balance their need to produce goods at cost with the potential risks and demands of the market. To address this challenge, these organizations will need a range of procurement innovations, such as enhanced visibility of spend, supplier diversity, and indirect spending optimization.

Enhanced Visibility and Spending Control

There has long been a need for transparency, speed, and control among procurement organizations. Companies in every industry must be able to respond quickly to disruptions in global supply chains. This need is much more pronounced in the pharmaceutical and life sciences industries, as their ability to meet demand is often linked to patient outcomes.

By deploying upgraded technologies, pharma and life sciences companies will soon gain unprecedented visibility into their spending. This will give them opportunities for cost savings, but it will also provide them with a wealth of data that will allow them to predict future demand and scale up spending to meet needs.

Supplier Diversity

Supplier diversity programs are proactive strategies in which the organization partners with minority-owned, women-owned, veteran-owned, LGBT-owned, and disabled-owned suppliers, or with small or historically underutilized businesses. Supplier diversity is often approached as a topic of equity and inclusion, bit is also an innovative strategy for creating a more agile procurement function.

Partnering with a diverse supplier base can promote innovation through the introduction of new products that might not otherwise be available to the organization. It can also contribute to supply chain flexibility, as partnering with diverse suppliers can improve pharma and life sciences companies' ability to procure goods and services from multiple channels. If one channel is disrupted, organizations have a range of channels to procure much-needed goods and services.

Finally, supplier diversity drives competition, which in turn leads to innovation. Existing and potential vendors who intend to secure supply contracts have an incentive to offer new solutions to problems, better efficiency, and better products.

Indirect Spending Optimization

Indirect spending can be a challenge to manage effectively, as units within the organization may acquire goods and services without direct input from the procurement function. But by allowing the procurement team to take the lead in indirect spending, the organization can realize new opportunities for savings and reduce the risk of rogue spending.

This type of oversight must be backed by technology. Pharma and life science companies that have gained visibility over their direct spending should use the same or similar technologies to gain full visibility into indirect spending.

It may require operational changes as well, which calls for change management. For example, getting a handle on indirect spending may require the organization to consolidate capital expenditures, fragmented enterprise-level purchases, and spending on professional services under a single system. Despite such a change, it could be the innovative approach the organization needs to drive savings and drive ROI.

Don't Miss the Virtual Summit

In the coming years, pharma and life sciences companies that apply these innovative procurement strategies to their operations will gain a significant advantage over their competitors. More importantly, they'll be better positioned to serve the needs of the customers and organizations that rely on them, even during times of significant disruption.

Procurement innovation is set to be an important topic at the next ProcureCon Indirect event, a virtual summit happening online from May 18^th to May 20^th. Don't miss your opportunity to register for the event for free.