The modern art of buying for pharmaceutical CPOs
As the business of health changes, are Chief Procurement Officers fully equipped to adapt? In today’s rapidly moving business environment, they are expected to deliver much more than just transactional administrative support.
According to recent research by Tungsten Network, 62 per cent of senior business decision makers have placed more focus on the amount their business pays for goods and services compared to last year. This has had the knock-on effect of putting more demands on procurement leads, according to Kevin Wilbur, President AP Automation for Tungsten.
“As an e-invoicing specialist providing insight and analytics support to CPOs across the globe,” he said, “we see that reducing expenditure, demonstrating value to key stakeholders and developing strategic partnerships capable of providing the business with a competitive advantage are all activities required from the modern CPO, particularly in the pharmaceutical trade.”
The roots of the evolution to the CPO’s role can be traced back to changeable economic conditions, the influx of generic cheap drugs, regulatory hurdles and constant looming patent expiration dates. These factors have put profits under pressure and increased risk in the industry, subsequently moving the topic of procurement up the agenda for pharma businesses.
Referencing Accenture’s study of the pharmaceutical industry, which shows the whole peer group return to growth for the first time in four years, Kevin said “it’s easy to understand why controlling costs is crucial in 2016”. The on-going competitive pressures and widening remit means CPOs must consistently innovate.
As CPOs are vital in creating a competitive operating model, the role is coming under increased scrutiny. David Powell, Senior Director of Global Finance Processes at AstraZeneca, discusses in an interview how procurement has gone from being the poor cousin, to a partner at the heart of business decision.
“Our newly appointed CPO has focused on transforming the approach to procurement, introducing world class procurement practices,” he said. “It is fair to say that a significant amount of savings has been made from these procurement activities. It is these savings that are helping to transform the way in which we work.”
As businesses recognize the value of procurement it is important CPOs are fully equipped with all the tools necessary to deliver competitive advantage. Technology is one area that can support this. A recent survey by ProcureCon Healthcare found the large majority of senior pharma procurement professionals believe technology delivers the value for in the area of spend analysis.
When Gartner studied the use of procurement technology across Europe, however, only 22% of UK businesses are using digital procurement systems. Kevin from Tungsten reflected that this is “surprising when considering the benefits on offer”.
“Recently, one of Tungsten Network’s businesses identified savings of £80m through the use of spend analysis,” he said. “The technology provided the appropriate data to negotiate better deals and make better savings on the procurement of items ranging from temporary staff hire to stationery.”
Through equipping CPOs with enabling technology, for example to provide a greater level of visibility over expenditure, enhanced supplier integration and the ability to eliminate inefficiencies, ultimately everyone benefits and businesses will have a procurement operation capable of adapting to the changes in market conditions.
“It’s about delivering competitive advantage,” concluded Kevin. “While healthcare needs are growing globally, the pharmaceutical industry will necessarily be subject to varying economic conditions and increased risk. CPOs with the greater visibility that technology like Tungsten’s allows are stronger, enabling them to make smarter business decisions.”