The Procurement Pain Point
With a keen eye to rationalize their supplier base and to streamline their sourcing processes, the client – one of the leading pharmaceutical and biopharmaceutical companies that focuses on developing products for several diseases – approached SpendEdge to commission a spend analysis engagement that will help them in optimizing their supplier base and improve processes efficiencies. Additionally, this engagement would also help the client formulate effective tail spend strategies to save millions.
The primary objective of this tail spend analysis engagement was to develop an exhaustive assessment of the client’s maintenance, repair, and operations (MRO) category, which in turn, helped the client in streamlining their sourcing processes. With an organization consisting of centralized and local procurement spread across six countries and more than 20 business units, the client was facing issues with consolidating and identifying savings opportunities since they had no access to the full data on category spend through their central ERP system.
In order to understand what is considered best-in-class and identify what are the best practices followed by peer group companies belonging to the pharmaceutical industry and other sectors following comparable procurement practices, our procurement market intelligence experts followed a blended research methodology and obtained information from various secondary and primary research sources sources.
Procurement Insights Offered and the Outcome
To meet the requirements of the leading pharmaceutical products manufacturer with an MRO category spend of more than USD 80 million, SpendEdge employed a team of procurement experts with considerable experience in conducting similar spend analysis assignments. By designing a customized tail spend analytics framework and carrying out a detailed analysis of the spend data for various categories and sub-categories, our procurement experts developed comprehensive reports that covered the major aspects including supplier base optimization opportunities, demand aggregation opportunities, and opportunities for maverick spend reduction.
By leveraging contract rates and conditions through the implementation of service or commodity catalogs, this tail spend assessment helped the client ensure that the commodity or service will be purchased from the contracted supplier only at the contracted rate irrespective of demand origination. By identifying the risks due to the lack of long-term contracts and inappropriate sourcing practices, our spend analysis solution also offered suggestions such as obtaining a supplier specific report from the data management team and updating the buying team with more information regarding the supplier. Additionally, our solution also recommended the client to consider bulk purchases and discounts, conduct an internal supplier satisfaction and rationalization survey, and sign long-term contracts and benchmark rates. In a span of just five weeks, the client was able to achieve about 26% savings in few categories and about 57% reduction in the supplier base.
This spend analysis case study offers information on how we helped a global pharmaceutical company identify significant process improvement and savings opportunities.
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