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Pharmaceutical Manufacturing and Packing Sourcer

Coming up with the Goods

As a result of the severe economic problems of the last few years, the relentless pressure to ‘get more for less’ isn’t just a slogan anymore – it’s the new normal. But there are steps for coping with a flagging economy, tighter budgets and heightened environmental conservatism

We’ve entered a new era of financial limitations, tighter budgets and reduced staffing across industries – housing, education, healthcare, the arts and government. Disappointing employment statistics and worries about a double-dip recession only reinforce the need to put business and administrative spending under a microscope. Unfortunately, the pharmaceutical industry is not immune.

But the challenge doesn’t stop at financials. Stakeholders throughout the pharmaceutical ecosystem are paying increasingly more attention to the potential environmental impact of manufacturing and supply chain operations. As a result, companies are developing more stringent goals for using goods and services that demonstrate a verifiable commitment to sustainability. ‘Green’ is a double entendre these days.

Under these new austerities, rganisations need to adjust, refine, enhance and even discard a number of outdated business processes so they can function effectively and grow intelligently. The times are having a particularly strong infl uence over purchasing and procurement managers. These executives are expected to provide ‘spend savings’ – to help organisations transform the purchasing function into a center of profit and environmental performance.

The good news is that expanded number-crunching abilities and costsaving benefits of new technologies, from the cloud to collaboration software, are arming forward-thinking organisations with the tools required to drive more intelligent purchasing. From more granular price comparison charts to better contract compliance to group purchasing arrangements, organisations are able to implement penny pinching tools that not only save money with every purchase, but also contribute to sustainability goals.

This article outlines the steps that pharmaceutical and other organisations can take to adhere to these new normal paradigms and not be left behind.

Visibility Provides Control; Eliminating Maverick Purchasing

When it comes to gaining better control of your organisation’s purchasing costs, nothing is more powerful than visibility across the entire process. Instantly seeing who is spending how much and with which vendors enables executives and managers to curb spending in certain areas and, in some cases, revoke purchasing privileges for overspending employees.

This visibility into spending patterns provides the insight required to quickly identify cost-saving opportunities and better delegate every purchasing dollar. For instance, the healthcare industry often battles ‘maverick’ spending from doctors who prefer to purchase equipment from non-contract vendors. These purchases – called physician preference items – can run into the six figures, so a few percentage points of savings makes a big difference.

Organisations can also leverage visibility of the purchasing process to ensure more complete contract compliance and improve supplier relationships. For instance, a number of organisations now adhere to regulations for supplier diversity, or even local spending. By automating the supplier management process, organisations can achieve compliance with these regulations.

Look for obvious areas to monitor spending, such as large-ticket items for starters, and calculate the percentage of non-contract purchases. If you start small and work your way down the goods and services list, you can better control spending and weed out the non-compliers.

Negotiate in Numbers, Buy in Bulk

The ‘Wal-Mart’ model proved what buying in bulk can do for the price of consumer goods and services. A business should look no further when it comes to making purchases of ongoing and even one-off supplies and services.

For example, if a multi-office business or multi-campus university purchases paper towels and toilet paper every month, why not combine these purchases under one contract to obtain lower price points, instead of each location dealing with a separate vendor? Supplies from pens to trash bags to even computers and printers can be grouped into these types of bulk purchasing agreements. In some instances, even less-frequently purchased big-ticket items such as automobiles can generate cost savings if purchased under one contract.

Organisations need to identify high quantity goods and services, evaluate vendor contracts on these items and determine where vendor consolidation (and price re-negotiating) can take place. Tracking and consolidating this complex mix of purchasing across large organisations requires a high degree of automation – it’s too sprawling to track through paper purchase orders or even through discrete, ‘stovepiped’ online purchasing systems.

Secure and Document Legacy Knowledge

It’s a fact; baby boomers are slowly leaving the workforce. In some industries, such as the public sector, a significant part of the ageing workforce is located in purchasing departments. According to the US National Institute of Governmental Purchasing, 57 per cent of its members are more than 50 years old. As these workers retire, they often take critical knowledge about their organisation’s purchasing processes with them. “How does this vendor operate?” “Who needs to sign this invoice, and by when?” “Where can you get the best deal for this item?” The answers to these questions are not usually documented anywhere other than in a mental archive. But this ‘vapourised’ information is often the lifeblood of manual purchasing processes that still rule the roost at many organisations worldwide.

Don’t let these critical purchasing processes up and walk out the door. Document current processes now, identify opportunities for innovation (that is, move to electronic invoicing) and name the retiree’s successor as soon as possible. If possible, save this hard-won expertise in an automated procurement system so it is instantly available to anyone who needs it in the future.

Technology Advances Empower Spend Savings

Whether it’s automating processes or enhancing profitable customer relationships, technology has always been viewed as a cost-cutting solution. This has never been truer than in the purchasing world. The days of handshakes and winks with vendors are now negated by industry-specific purchasing regulations and eagleeyed CFOs.

The global adoption of cloud computing has opened the world of procurement solutions to organisations of all sizes and across industries. These powerful applications enable organisations to better control and monitor spending, better manage vendors and suppliers, ensure contract compliance with all purchases and, most importantly, automate the ordering of goods and services.

And now, with new mobile procurement solutions coming to market, administrators managers and executives can now be armed with key technology for reducing costs with every purchase their organisation makes. The question every manager now needs to ask is, “How is technology helping my organisation generate spend savings?”

Beyond Spend Savings – Purchasing with a Sustainable Mindset

Establishing a sustainable, or ‘green’ procurement programme involves first identifying the goals your organisation wishes to attain (that is, reduce overall carbon footprint, reduce waste, maximise the use of recycled products/materials), and then reporting on progress towards those goals. Integrating a green procurement policy into day-to-day operations can seem challenging at the outset, particularly when social and environmental considerations are given equal weight to matters of price, availability and performance.

While the process of negotiating agreements with suppliers and contractors is the ideal arena for promoting environmental practices, there are also a number of challenges involved. Perhaps the largest of those is balancing long term value with short term cost especially when, in times like these, the concept of ‘best value’ buying often skews toward the most attractive short-term costs.

The challenge for purchasers is to really research the commodities and product groups they buy to identify what sustainability means as a whole, as well as the impact these products take in terms of price and performance. As purchasing organisations continue to shrink, buyers need to know much more about a much larger swathe of products. Fortunately, there is a lot of information out there for people who are interested in green purchasing; certifications are getting better and labels abound, but there is still a lot to be learned.

Establishing Goals

In many organisations the trend is largely to focus on purchasing strategies that reduce carbon footprints, such as green building initiatives or sustainable office supplies. Goals may also include increasing water efficiency, minimising the waste stream, preventing pollution and preserving natural resources. Once an organisation has decided that green purchasing is part of the value proposition and has established specific goals, it’s time to find out how purchasing policies can help to meet those goals.

It is important to note that purchasing policies are established not only for professional buyers, but rather to support every employee in his or her day-today procurement of goods needed to operate. Typically, the simplest way to guide staff members is to promote specific green services and goods that have been qualified as ‘recommended to buy’ according to the policy.

However, this requires an understanding of green labelling. Preferred labels are those issued by independent third-party monitors such as those funded by the federal government or NGOs. These labels and certifications have the benefit of being supplier agnostic, but they are not are not necessarily comprehensive. For example, the Energy Star tag may indicate that a product is energy efficient, but it does not show that a product is recyclable or that it was manufactured in an environmentally responsible way. So, while third-party labels are helpful, suppliers do have a level of expertise about their products that is valuable and verifiable, and in many instances can offer guidance on ‘best value’ buying.

In fact, suppliers increasingly rely on their green products as a differentiator, and in some categories environmentally sound products are outselling traditional products. As this trend continues, costs for these products will go down particularly for those organisations that are able to buy in bulk or negotiate contracts as a group.

The Dual Role of Technology

Just as it is for general spend savings initiatives, technology is helping to expand green purchasing policies. It can streamline the process of formalising practices, and provides a platform on which to enable group purchasing as a means to drive down costs and ensure ‘best value’ buying. Automated procurement solutions also simplify green purchasing by, again, increasing organisational visibility into spending. Successful companies are moving towards technology to classify products as sustainable and provide users with the tools they need to quickly order these products, then track and report on the purchase.

With automated procurement solutions, purchasing professionals can quickly create RFPs and RFIs that specify environmental requirements. Technology also helps ensure that everyday employees who are buying goods and services can find the products and receive accurate recommendations in the purchasing marketplace. In order for a vendor to qualify to bid, it must not only provide information on sustainability practices and policies that match the RPF, but it must also include the information as part of the downstream catalogues for end-user visibility.

At the conclusion of every transaction, these tools then help the purchasing department report specifically on the degree to which the organisation has made progress against its overall goal for sustainability. “How much has our carbon footprint been reduced?” “What percentage of recycled goods do we now use in our operations?” Everything is ‘baked in’ to the platform.

The bottom line is that, in order to achieve a balance between short term and long term costs in green purchasing, it is imperative to understand what green really means for different products and services, and to create policies and workflows that will support the goals of the business. Technology provides enhanced visibility into how money is spent and simplifies cooperative spending, which in turn increases efficiency by enabling access to the right suppliers and products and improving group negotiating power. In short, e-procurement helps balance the costs and trade-offs associated with green procurement.

Conclusion

The relentless pressure to reduce spending is the basic condition of the new economy, with an eye toward sustainability following closely behind. That won’t change, but with the right guidelines and processes in place, organisations can take control of spending, reduce their marginal costs and environmental impact, while maintaining a consistently high quality of service and deliverables. Such is the underlying current that drives spend savings forward.


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Teresa Neal is Director of Product Marketing and Supplier Diversity at SciQuest, Inc where she is responsible for developing product and market strategy for SciQuest’s Commercial and Life Sciences eProcurement solutions, including pharmaceutical and biotechnology companies worldwide. She earned her doctorate in BioInorganic Chemistry from University of Notre Dame and holds an MBA from the University of North Carolina at Greensboro. Email: tneal@sciquest.com
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