Demystifying pharma procurement: Opportunities, challenges and way forward

By Lakshmipriya Nair and Akanki Sharma

Spend optimisation is a key goal for companies across sectors in an increasingly competitive and complex marketplace. And, the pharma industry is no exception. In this milieu, with sourcing and procurement accounting for over 50 per cent of the total costs in the pharma/biopharma industry, it is a function that needs to be handled with a more coordinated and strategic approach given its massive potential to cut costs as well as improve quality and productivity across the pharma value chain.

Therefore, Express Pharma, in association with SAP India, as part of the Life Sciences Industry Knowledge Exchange Forum, recently hosted a webinar on Foundation Excellence – Network and Spend Optimization. Conducted in partnership with the Indian Pharmaceutical Alliance (IPA) on June 25, 2021, it was an endeavour to understand the needs and challenges, as well as share learnings that are pivotal to transforming this vital function. Procurement leaders and technology experts came together to evaluate trends and chart out strategies to make procurement and sourcing a key enabler of business goals.

The event commenced with introductory addresses delivered by Viveka Roychowdhury, Editor, Express Pharma and Express Healthcare; and Rajesh Kuppuswamy, Advisor, Health Sciences Industry, SAP India, which set the context for the sessions that followed.

Both pointed out that India Pharma Inc was on the cusp of embarking on new business models, with a wide portfolio of markets and products. Kuppuswamy stressed the importance of adopting new business models, new processes and new solutions to enable progress.

Roychowdhury highlighted that as the sector dealt with escalating costs due to myriad factors including global clinical trials, trade wars, geopolitical tensions, investments in infrastructure and technology, and the cost of manufacturing new therapeutics, there was an urgent need to build a resilient and agile procurement cycle in pharma companies, to deal with disruptions and challenges and ensure spend optimisation as well.

A panel discussion on ‘Demystifying procurement for Indian pharma organizations: Related opportunities and challenges for Indian pharma companies and the way forward,’ was a major highlight of this event which had some great takeaways for the participants as well.

Here is a summation of the inferences drawn and lessons learnt from the views, concerns and insights shared by the eminent speakers and panelists:

Procurement has great value potential

As the industry awakens to the importance of a supply chain that has the flexibility to tackle spontaneous or sudden challenges or opportunities, it needs to realise that procurement strategies too need to be aligned and responsive to global trends and business goals.

Pharma veteran, Shirish Belapure, Senior Technical Adviser, IPA reinforced this learning as he took the participants through the evolution of the function over time. Admitting that problems like lack of synergy between departments, fragmented reporting system, low-risk awareness, lack of incentives for procurement professionals had adversely impacted the growth of this function and often led to a lot of wastages and inefficiencies, he also said that now it was rapidly transforming with the help of better strategies, growing focus by top management, improved technology, etc.

The major learning from his session was that a good procurement strategy can usher significantly improved outcomes in various aspects of sourcing and procurement including vendor management, specification management, transparency and benchmarking, on-time deliveries etc. Better knowledge management, forecasting accuracy, improved material management, better regulatory compliance, enhanced preparedness for the future were also some of the benefits of good procurement strategies. It can give insights that will help in making key business decisions, thereby becoming a great source of value creation.

Break down silos, build cross-functional synergies

Dr Mahesh Bhalgat, COO, Syngene International, gave a detailed overview of the disruptions caused by the pandemic and the chinks that it revealed in the pharma industry’s operations. Speaking on the supply chain ecosystem, he said that it was still not the way it should be and some troubles need to be resolved. He also emphasised that the supply chain should evolve constantly to be efficient and effective in an ever-changing landscape.

He pointed out the importance of shedding the traditional and often outdated methods of procurement to adopt a more tool-based approach, which will usher end-to-end visibility, better growth, better supply chain security and last-mile tracking into the procurement and supply chain life cycles.

The most important takeaways from his views were that as the dynamics of the pharma industry change, organisations and their leaders will have to adopt a growth mindset that will enable them to constantly evolve and stay relevant. They will have to enhance synergies between different departments and collaborate better to embrace best procurement practices which will improve the profitability and efficiency of their operations.

Choose the right technology to get the desired outcomes

Procurement should be viewed as a profit centre than a cost-centre, opined Dr Madhu Talla, Senior Vice President – Global Procurement, Ajanta Pharma. He asserted that data gathered through this function about various vital aspects including materials, market trends and competitive landscape can be invaluable in taking key business decisions. He said that this data should be cascaded to various stakeholders to get the best outcomes and drive efficiencies.

He also detailed the prerequisites for a procurement technology and recommended that aspects such as cost of technology and return on investment (ROI), ease of use, compatibility and ease of integration with other platforms, ease of customisation, future-readiness of the technology, etc should be considered.

The key insight from his session was that the right technology can help companies with cost optimisation and provide spend visibility, real-time market intelligence and enable the best way to deal with volatility in supply and demand. Choose a technology platform that can enable collaboration across the pharma supply chain so that real-time data is shared with all stakeholders and the Bullwhip effect is reduced.

Identify the problems to find the right solutions

Sachin Ghosalkar, Senior Vice President – Operations, Indoco Remedies, spoke at length about the pain points in pharma procurement. He said that challenges in procurement were spread across capacity planning, network optimisation, quality control, sales losses, risk management, real-time data availability, etc.

The points he raised he highlighted that it was vital for organisations to identify the problem areas in their existing procurement lifecycle to adopt the right solutions and strategies.

Collaboration, digitalisation and automation are crucial for progress

Acknowledging the pain points, Anurag Sharma, Partner, Consulting – Technology, Deloitte Touche Tohmatsu India LLP said that pharma procurement departments are faced with significant challenges in supply relationship management, technology harmonization, workforce management etc. He went on to highlight that while the pharma industry has done well in terms of direct spend control, it hasn’t managed indirect spending such as IT, MRO, Office supplies, Travel, Marketing and R&D effectively.

However, he also pointed out that there was huge untapped potential in procurement as it can play a very pivotal role in driving innovation, achieving marketing success, controlling costs and risks, managing volatile supply market, etc. He particularly stressed how pharma MSMEs needed to upgrade their procurement practices and technology.

Speaking on the course, corrections needed, he said that inter-departmental synergies and external collaborations will be crucial to build an agile procurement lifecycle that is flexible, transparent and responsive. He also emphasised on digital transformation and automation to improve spending visibility and control, category management, supplier management, indirect spend optimisation, and end-to-end product lifecycle cost view.

The most important deduct gained from his perspective was that while automation and digitalisation can bring accuracy, reduce manual errors, improve efficiencies, monitor and control workflows and enable regulatory compliance in procurement, collaborations were pivotal to build tech capabilities and people strategies that will be aligned with procurement goals and business goals.

Opt for technology that will stay relevant in the long run

A tech transformation in pharma is imminent given the need for continuous innovation in the sector. However, Debashis Majumder, Director-SAP Intelligent Spend, Management, India, as a tech expert, advised the industry to take a longer view and opt for technology solutions that can adapt to changing market dynamics, offer flexibility to innovate and can be easily customised, so that they provide significant benefits and a competitive edge to organisations at least over the next 10-15 years.

He also elaborated on the advantages offered by cloud and network-based approach and recommended technologies that integrate AI, ML and blockchain and give an edge over the competition. He advocated process-centricity over function-centricity and said integrated technologies can enable better risk management, quality collaboration, data security and regulatory compliance across the pharma value chain.

Assuring that SAP can help pharma companies integrate their entire supply chain to usher better efficiency and efficacy, Majumder also gave an overview on SAP’s solutions and how they enabled intelligent spend management.

Giving more insights into the technology, he said that SAP’s cloud-based, innovation-driven, one-stop solution that features intelligent technologies, digital platform and an intelligent suite can offer predictive insights and help reimagine end-to-end processes for significant benefits ranging from improved speed/cost performance to supply chain resilience. He urged the participants to reach out if they needed more information about how SAP can partner in their tech transformation.

Preparing for new realities

Thus, the event served as a great platform for the exchange of pertinent information on building a resilient and agile procurement lifecycle that will be key to gain striking economic benefits to the top and bottom lines of businesses. The knowledge exchange between the speakers and panelists revealed insights that will be critical at strategic and operational levels, to create a more perceptive ecosystem within organisations and foster progress.

This event was the first in a series of industry knowledge exchange programmes which will be organised by Express Pharma and SAP. Stay tuned to know about our upcoming events.

[email protected]
[email protected]

[email protected]
[email protected]