Need For Procurement Processes in the Pharma Industry

Procurement in the pharmaceutical industry is evolving to address challenges like supply chain transparency and supplier performance. Key strategies include supply chain transparency and visibility, effective supplier relationship management, and sustainable sourcing. The COVID-19 pandemic has accelerated the need for digital transformation, with technologies like data analytics and e-procurement platforms enhancing decision-making and supply chain resilience.

Companies are focusing on spending visibility and control, category management, and supplier management to optimize costs and risks. Additionally, transparent procurement processes, such as open tenders, are being used to ensure quality and compliance. The industry is moving towards more strategic and collaborative procurement practices to improve efficiency and reduce costs while maintaining product quality and safety.

Steps in the Procurement Process in Pharma

The procurement process in the pharmaceutical industry involves several key steps, which can be adapted from general procurement processes and tailored to meet specific pharmaceutical needs.

Needs Recognition and Planning

Identify the need for pharmaceutical products, including reviewing drug selections and determining quantities required.

Requisition and Budget Approval

Create a purchase requisition and ensure budget availability. This step involves verifying the need and funding for the requested drugs.

Supplier Selection and Solicitation

Choose a procurement method (e.g., open tender, restricted tender) and invite suppliers to bid. Prequalification of suppliers may be necessary for restricted tenders.

Evaluation and Contracting

Evaluate bids based on quality, price, and delivery terms. Negotiate and finalize contracts with selected suppliers.

Order Management

Issue purchase orders and manage the delivery of pharmaceuticals. Ensure compliance with quality standards and regulatory requirements.

Invoice Approval and Payment

Conduct three-way matching (PO, invoice, goods received note) to verify order accuracy. Approve invoices and process payments.

Record Keeping and Monitoring

Maintain detailed records of all transactions for auditing and compliance purposes. Monitor consumption data to inform future procurement decisions.

Common Procurement Methods in the Pharma Industry

Open Tender

An open tender invites bids from all interested suppliers, promoting transparency and competition. This method often results in lower prices due to a large number of bidders. However, evaluating numerous bids can be time-consuming, and quality may vary among suppliers.

Restricted Tender

A restricted tender limits participation to prequalified suppliers, ensuring better quality assurance. This method streamlines the evaluation process but may lead to higher prices due to limited competition. Suppliers must meet specific criteria, such as Good Manufacturing Practices (GMP).

Competitive Negotiations

Competitive negotiations involve approaching a few suppliers for price quotations. This method offers flexibility and speed but lacks transparency and may result in higher costs due to limited competition. It is often used in private sectors for specific needs.

Direct Procurement

Direct procurement involves purchasing from a single supplier without competitive bidding. This method is quick and simple but typically results in higher prices due to the absence of competition. It is often used in emergency situations or for single-source products.

Challenges in the Procurement Process in Pharma

01

Supply Chain Disruptions

Global events like pandemics and geopolitical issues can disrupt supply chains, affecting drug availability and costs.

02

Regulatory Compliance

Ensuring suppliers meet stringent regulations is complex and time-consuming, posing risks of legal issues and reputational damage.

03

Rising Costs

Increasing raw material prices and regulatory compliance costs pressure procurement teams to find cost-saving strategies without compromising quality.

04

Quality Assurance

Maintaining product integrity while managing supplier performance is crucial to prevent supply chain disruptions and ensure drug safety.

Innovative Strategies for Pharmaceutical Procurement

Digital Transformation

Digital transformation in pharma procurement leverages technologies like RPA and AI to automate tasks, enhance transparency, and reduce errors. This approach streamlines processes, improves efficiency, and reduces operational costs, allowing for better resource allocation and decision-making.

Strategic Partnerships

Strategic partnerships involve collaborative relationships with suppliers, fostering innovation and improving supply chain resilience. Early engagement in product development enhances trust and communication, leading to better risk management and cost optimization through joint problem-solving and supply chain optimization.

Data-Driven Decision Making

Data-driven decision making uses advanced analytics to provide predictive insights into demand and supplier performance. This approach optimizes inventory management, reduces waste, and enhances supplier reliability, ensuring better supply chain management and strategic procurement decisions.

Blockchain Technology

Blockchain technology ensures product authenticity and supply chain transparency by tracking pharmaceuticals from production to delivery. It offers tamper-proof records, reduces counterfeiting risks, and enhances regulatory compliance, providing end-to-end visibility and improving supply chain resilience.

Sustainable Sourcing

Sustainable sourcing prioritizes environmentally responsible suppliers, aligning with corporate sustainability goals. This approach mitigates environmental risks, enhances brand reputation, and ensures compliance with social and environmental standards, contributing to a more sustainable supply chain.

Conclusion

The pharmaceutical procurement process is constantly changing to address challenges like supply chain transparency and supplier performance. Strategies such as digital transformation, strategic partnerships, and sustainable sourcing are being adopted to enhance efficiency and reduce costs. Open tenders and restricted tenders ensure quality and compliance, while data analytics and blockchain technology improve decision-making and supply chain resilience. These innovations help maintain product quality and safety while optimizing procurement processes.