Managing strategic sourcing across the globe in regulated the Life Sciences industry is complex due to the difficulty in interpreting country regulations relevant to anti-corruption activities, involving transactions like Contract Research Organization (CRO) consulting services, investigator grants payments, and key opinion leader speaking engagement etc. These high value, low volume services form the bulk of the corporate expenses whereas direct material spend is a huge part of Cost of Goods Sold (COGS) that the Chief Procurement Officer (CPO) may have to monitor frequently. Product contact material like gloves and filters which were earlier considered as indirect expenses, are now considered as direct materials, requiring quality inspection due to regulatory implications. Lack of proper checks identifying the right suppliers especially if the Health Care Practitioner (HCP) is an employee of government hospitals and relevant compliance controls for procurement transactions are not sufficient as the Chief Sourcing Officer (CSO) deals with globalization and competition.
Long sourcing and contracting cycles with complex terms, delayed or overpayments, inefficient use of time and resources during procurement, manual paper-based collaboration, point to point EDI, onboarding suppliers and ineffective insight into their behaviors are some of the challenges faced in Life Science industry. Enforced compliance in the procurement business process is required to streamline sourcing, improve efficiency in purchasing, reduce cost and allow CPO / CSO to focus on reimagining the digital business. Digital business requires new business practices, agility, speed for time to market and time to value to provide a new value proposition for your stakeholders. Digitalization of products and services requires enhanced catalogs and superior service levels. To compete as an ecosystem, Life Sciences companies outsource what is not core, to third parties who are the experts and can do the same job with lower cost and higher quality. Out-licensing and in-licensing agreements, and innovative business models will prevail in the shared economy. Minimizing profit leakage, while efficiently distributing life impacting products and services is a common theme across bio-pharmaceuticals and medical device segments.
The SAP Life Sciences digital business framework offers complete spend management in context of the digital economy. SAP offers a business network for buyers i.e. Life Sciences companies to analyze spend, source, procure, settle invoices and track performance i.e. collaborate with sellers like service providers, suppliers and contractors that broadcast their catalogs, fulfill obligations and settle payments. Traditionally, SAP Ariba supported indirect materials and spare parts via Maintenance Repair Operations (MRO) where as now, Life Sciences companies can leverage direct material Supply Chain collaboration via the SAP Ariba business network.
SAP can support direct materials leveraging various external manufacturing strategies and business process like toll manufacturing, where service provider performs a processing function, following specification for certain fees i.e. mark up on processing cost on behalf of Life Science manufacturer and the supplier does not take the title to raw materials. In contract manufacturing, the supplier does take the title to raw materials and may be involved in procurement of Active Pharmaceutical ingredients.
The SAP Ariba collaborative supply chain addresses the quality aspects required in regulatory industries like recording non-conformance, deviations, inspection results and integrates with back end for lot disposition decisions. Ariba supports the forecasting to gain early visibility into potential supply disruptions and consignment inventory that can help to reduce working capital as inventory visibility and transparency is provided across the supply chain.
SAP Field Glass offers a unified platform for managing contingent, temporary labor and a specialized talent pool, along with independent contractors that add value to operations. Field glass provides a statement of work object that enables onboarding CRO, forecasts milestones and approves deliverables for invoicing. Life Sciences companies can leverage earned value reporting, performance management and bench marking during entire duration of R&D or clinical trials.
SAP Concur for Travel and Expenses supports employee and contractor trip requests, collaboration with business partners and payment approvals. Payments or transfers of value can be categorized under various spend categories like R&D expenses, Academia/University related research expenses, information provision related expenses to meet country and state regulations. Concur manages business rules to capture attendees and manage special handling options for pre-registered events, to allow spread of cost to include no-shows supporting country regulations for HCP payment transparency.
In summary, best performers in regulated industry excel in three key areas to drive efficiency for operational excellence initiatives: Aggregate, disparate spend data into a single repository, analyzing purchasing data insights leveraging predictive analytics tools and implementing real-time business network for collaboration. For more information, check customer video – http://www.aribalive.com/2017/las-vegas#recapvids
These capabilities have enabled leading Life Sciences companies to create clear competitive advantages through their sourcing and procurement operations for goods and services aligned with regulatory compliance guidelines. With the advent of new technology like block chain, machine learning, and artificial intelligence; SAP is best positioned to re-imagine business models, trigger exponential thinking around business process and re-imagine work i.e. day in life of various roles from procurement and sourcing line of business in the Life Science industry.