Understanding how procurement delivers value beyond financial cost savings

Understanding how procurement delivers value beyond financial cost savings

Nick Pike, chief revenue officer at Vizibl discusses why pharmaceutical companies aren’t only interested in the financial benefits when it comes to collaboration. 

In just a few months, Covid-19 has triggered sweeping changes in how the world does business. This massive scale disruption has created a succession of different supply chain issues that many organisations now face. From supplier shortages to logistics and shipment issues, to considering sourcing from alternate suppliers, organisations are having to rethink their approach. 

Managing these supply chain issues can be especially challenging for those industries who are not responsible for everything they do, such as FMCG, telcos and pharmaceuticals. Pharmaceutical organisations, for example, often only control 30% to 40% of their destiny, the rest of their business sits in their extended ecosystems of various partners, academics, research laboratories and suppliers. And right now, this sector is in the media spotlight as the importance of and search for a Covid-19 vaccine continues. This has seen many pharmaceutical companies seeking partners and looking to collaborate to find a solution. 

Working with an extended ecosystem

Bringing new drugs to market quickly has always been a key business driver for the pharmaceutical industry, but now collaborating and innovating with their supply chain has become even more important. Previously, most pharmaceutical companies did all their research in-house, but now we are seeing them turn much more to external parties to help them both undertake critical research and productise findings.

But, to achieve this level of collaboration pharmaceuticals are heavily dependent on technology. Here at Vizibl we have been working with several pharmaceutical companies helping them to work more effectively with their key suppliers and vendors. Our supplier collaboration and innovation platform provides much-needed visibility for pharmaceutical companies to understand their current relationships; what they are spending with particular suppliers; and what they are delivering in both directions; and getting the prerequisites in place to enable a relationship whereby they can collaborate and innovate. 

What we often find is that the first thing pharmaceutical companies need to do to achieve this, is to provide transparency of data. With transparency of data comes trust. Once you have trust, then you can focus on solving the problems which are important to all parties involved. This is more relevant in current times because the way we used to build trust was to put executives on planes to fly around the world, meeting people to build relationships – now this needs to be done digitally. It is therefore important to have the right solutions and systems in place, where trust is built by showing what you are doing through communication and collaboration to bring new products to market. 

Aligning procurement with key business goals

One example of a pharmaceutical company that we have worked closely with is Astellas, a Japanese multinational pharmaceutical company. The firm’s procurement function and culture are largely unrecognisable from four years ago and as a result, has received great recognition across the business and externally from its partners. 

In particular, the Astellas procurement team had two key goals: it wanted procurement to be better aligned with the rest of the business, to improve speed, costs and agility. It also wanted to better collaborate with its partner ecosystem in order for procurement to deliver value beyond just cost savings.

Astellas’ procurement team undertook a detailed voice of the customer survey internally to get them aligned with global business stakeholders on what the business was looking to achieve and how procurement fitted into that. Astellas had a strong source-to-contract technology stack, but most of what it was doing was around contract risk management and its procurement tools were focused around procurement processes rather than creating value or innovation. 

The procurement team made good progress in terms of business alignment, achieving some significant financial savings, but it still needed to improve collaboration with its huge army of suppliers and the team was keen to figure out how to bring the talent and expertise within its supply chain into the organisation. 

Managing strategic vendors

Astellas started its Supplier Collaboration journey by focussing on their strategic vendors. For example, Astellas was working very closely with Genpact, a professional services and outsourcing vendor, with whom it was keen to have a more consistent and transparent relationship. Having put in place Vizibl to enable peer to peer collaboration between the Astellas and Genpact teams Astellas was also able to define its standard strategic operating procedures consistently and apply consistent procedures to other strategic vendors. 

Astellas also wanted to ensure that it was correctly investing resources and working with suppliers that had differentiating capabilities, engaging in programmes of work that were defined and measurable. This would enable procurement to bring that innovation and insight into the organisation and drive the business forward. As mentioned, key for the procurement team was how they would create value and differentiate not just Astellas, but also its extended enterprise ecosystem. A future-proofed organisation is one that is making the best use of its capabilities, and for companies like Astellas, a lot of its best capabilities were sitting in its supply base. Astellas was also keen to engage with smaller start-ups in a more agile and smarter way as it recognised that these entrepreneurial organisations deliver a lot of innovative ideas and concepts. 

Driving business value

Astellas found the decision to utilise Vizibl to underpin all these goals relatively simple. Having carefully researched the market, the procurement team found that there were a number of tools that could utilise operational performance and spend data, but none of these tools closed the loop and had the ingrained deep collaboration functionality and transparency modules on suppliers that Vizibl has. These were critical drivers for Astellas in the selection of the technology and today Vizibl is helping Astellas with real business problems, creating an ecosystem for collaboration with its suppliers and subsequently driving business value for the business that goes way beyond cost savings. 

That is particularly relevant and important right now given that pharmaceutical organisations need to bring new drugs on stream for both Covid-19 and other viruses, in addition to future vaccines that will prepare the population for the next pandemic.

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