A Fortune 500 Global Pharmaceutical Company Develops Commodity Procurement Strategy to Ensure Cost Containment
Global Pharmaceutical Industry Overview As expenditure control becomes prominent in the pharmaceutical industry, companies are compelled to return to old mainstay of the finance portfolio i.e., sourcing and procurement. Sourcing focuses on supplier selection and manufacturing supply chain whereas procurement drives the acquisition process for goods and services. Companies must take a more strategic approach […]
Global Pharmaceutical Industry Overview
As expenditure control becomes prominent in the pharmaceutical industry, companies are compelled to return to old mainstay of the finance portfolio i.e., sourcing and procurement. Sourcing focuses on supplier selection and manufacturing supply chain whereas procurement drives the acquisition process for goods and services. Companies must take a more strategic approach to address pricing pressures and manage the contract process efficiently across the global supply chain. This case study is a classic example of we helped a pharmaceutical company to achieve its procurement objectives.
Business Challenges Faced
A fortune 500 global pharmaceutical company was facing predicaments due to overdrawn budgets and increased spend. The ineffective purchase planning and poor negotiation strategies were dwindling their market share. The client wanted to stay abreast of market movements of key categories and commodities in order to ensure cost containment, better plan the budget and improve supplier negotiations. The company, therefore, decided to engage with SpendEdge to leverage market intelligence services to devise a successful commodity procurement strategy and meet their business objectives.
Improving purchase planning and negotiation strategies require companies to leverage market intelligence services. Request a proposal to access our procurement market intelligence solutions for FREE and develop an effective commodity procurement strategy.
Our Research Approach
To help the client build an effective commodity procurement strategy, the experts at SpendEdge analyzed cost drivers for various spend categories. They reviewed existing contracts and identified potential opportunities for spend management. Also, they assessed variables that could be correlated with price movements of key commodities such as agricultural, fuels, and petrochemicals. Collating data related to the cost structure, spend, commodity forecast helped the client to develop inflation forecasts at category, regional and global levels.
The insights offered facilitated the client to present fact-based arguments during supplier negotiation and make informed contracting decisions based on the expected market movements. Understanding the underlying fundamentals of commodities prices created the basis for informed sourcing decisions, budget planning, and supplier management. Tracking the inflation across key commodities also provided the client with the information required to devise a sound commodity procurement strategy.
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The engagement delivered tangible benefits to the client and helped them achieve yearly savings of $15 million though dedicated forecasting. The commodity procurement strategy further facilitated better negotiations and savings of $3 million to the client.
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Road map for Commodity Procurement Strategy
1. Perform spend analysis and aggregate total purchases across all organizational divisions.
2. Examine the supply industry, determine major suppliers, and understand competition dynamics.
3. Identify cost and performance drivers for specific supply or service in the commodity strategy process.
4. Develop a commodity acquisition strategy based on commodity profile.
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