by martieLast Updated : Jul-21-2023
A life science or Biotech company deals with many struggles, including long drug development life cycles. An inefficient Procurement process shouldn’t be one of them.
Whether you are a lab manager frustrated with tracking purchase orders in Spreadsheets or a financial controller struggling with poor cash flow visibility, the answer to these problems is a streamlined procurement process for your life sciences company.
This article will show how leading Biotech and Life sciences enterprises leverage an efficient procurement process to increase productivity and better understand drug development costs.
Life science procurement refers to acquiring goods, services, and equipment for scientific research and development in biology, medicine, and pharmaceuticals.
The procurement process typically starts when scientists identify a need for a specific item or service. For example, they might need laboratory equipment, chemicals, or specialized software. They then create a detailed list of requirements, specifications, and quantities needed.
Next, they contact suppliers or vendors who can provide the requested items. They might search online, contact established suppliers, or attend trade shows to find the best options. It’s important to compare prices, quality, and delivery times to make the right choice.
Once the supplier is selected, scientists often issue a purchase order to the supplier. This often includes ensuring that the vendor received the purchase order and confirming the delivery dates.
After the supplier receives the purchase order, they start the process of fulfilling the order. They gather the items, package them properly, and arrange delivery to the specified location. Sometimes, there may be additional steps, such as customs clearance for international orders.
When the items arrive, scientists inspect them to ensure they meet the specifications and are in good condition. If there are any issues, they communicate with the supplier to resolve them.
The items are then stored in the lab, and if there is an inventory system, the inventory is updated to reflect the quantity on hand,
There are some unique challenges with procurement in life sciences organizations; let’s address some of them.
One of the primary challenges in life science procurement is the limited availability of suppliers for specialized equipment, chemicals, and services. This scarcity often arises due to the niche nature of certain scientific requirements, leading to a restricted pool of vendors. Additionally, suppliers may face regulatory hurdles, impacting their ability to provide specific products or services.
The life sciences industry is heavily regulated to ensure safety and adherence to ethical standards for quality of life. Consequently, navigating through complex regulatory frameworks becomes a significant challenge in procurement. Compliance with regulations such as Good Laboratory Practice (GLP) and Good Manufacturing Practice (GMP) adds layers of scrutiny and documentation requirements, contributing to potential delays and increased costs.
With long drug development cycles, life sciences companies must closely monitor their burn rate. Research institutions and organizations often have restricted budgets, making acquiring high-quality equipment or materials necessary for cutting-edge research challenging. Additionally, the cost of innovative technologies and tools in the life sciences field can be prohibitively high, leading to compromises or delays in procurement decisions.
The pace of technological advancements in the life sciences industry is remarkable but can also present a challenge in procurement. As new technologies emerge and become integral to scientific progress, staying updated and identifying the most suitable vendors becomes increasingly difficult. Evaluating the credibility and reliability of new suppliers or technologies adds complexity to the procurement process.
Life science procurement heavily relies on global supply chains. Disruptions caused by natural disasters, political unrest, or unforeseen circumstances can disrupt the availability and delivery of essential items. Supplier shortages, delayed shipments, and increased lead times can hinder research timelines and impede scientific progress.
The constantly changing prices of lab supplies pose a significant challenge in life science procurement. The costs of essential materials, reagents, and equipment can fluctuate unpredictably due to market demand, supply chain management disruptions, and economic conditions. This volatility makes it difficult to plan and allocate resources effectively, putting a strain on research budgets.
This section will discuss how you can leverage procurement technology to streamline and overcome some of these challenges. We will address three areas where technology can significantly impact procurement: purchasing, vendor, and contract management.
When you are just starting, it is ok to directly place the orders with the vendors and then use a Google doc to track the open purchase orders.
But as your lab strength grows, this process is not scalable.
Tracking purchase orders becomes a challenge, and knowing what purchase order is open and what needs follow-up becomes an issue.
That is the time to look for automating the purchasing process. We will now cover a step-by-step process for automating the procurement process for Life sciences.
The first step is to automate the purchase request process so that it is easy for scientists to submit a purchase request for review and approval.
The biggest challenge with purchase requisition is entering all the required data to create the purchase request. Scientists often need to go to a vendor’s website and then manually copy and paste the data from the shopping cart and then paste it into a purchase request.
This is cumbersome and error-prone because someone can fat-finger a quantity or unit process.
That is why automating the purchasing process is important so scientists can easily create a purchase requisition.
Let’s see how this can be done using a purchasing system like ProcureDesk.
A scientist logs in to the procurement system and clicks on the vendor’s name to assess the catalog.
The system then navigates them to the vendor’s website so that they can easily pick what needs to be purchased.
Here is an example of how this will work with Fisher Scientific:
After selecting the item, they can click on “send cart to procurement system”
The data is automatically copied to the scientist’s purchase order request:
Here is how it looks:
No more copy and paste and errors.
Regarding purchasing approvals, it is a challenge to figure out who should approve a purchase request.
That is why you should automate the approval process.
Here is how this can be automated using a purchasing system:
First, set up an approval workflow based on your purchasing policy. For example, if the lab manager must approve all purchase requests, that becomes the first step. Let’s say you want the finance department to review requests above $10,000, which becomes another step in the approval process.
Here is how you can set this up in ProcureDesk:
Once the configuration is set up, the system automatically routes the purchase request to the appropriate person.
The approvers also get daily spending notifications to stay on top of the approvals.
Moreover, mobile approvals make it much easier to approve on the go. Here is an example of mobile approvals:
Once the purchase request is approved, a purchase order must be generated and sent to the vendor. If you have a manual process, the scientists need to collaborate with the accounting department to get a PO issued.
This could lead to delays in issuing the purchase order to the vendor.
By automating the purchase order process, you can ensure that a PO is issued to the vendor as soon as the purchase request is approved.
With purchasing systems like ProcureDesk, you can automate purchasing order generation.
Here is an example of how a purchase order document looks in ProcureDesk:
The system then automatically sends the purchase order to the vendor.
With built-in email tracking, it is super easy to track if the vendor has received the purchase order and whether they have opened it.
You can also have the vendor acknowledge the purchase orders so that they can confirm if they can meet the requested quantity and delivery dates.
Scientists need to track the delivery schedule once the PO is issued to the vendor.
ProcureDesk makes it simple to track purchase orders. Since the purchase orders are in one place, it is easier to track by status of the purchase order.
You can also track the delivery status by creating an ASN (Advance Shipping Notice), and the system notifies you as the delivery moves through different stages. You automatically get a notice when the product is delivered.
The next step is creating a receipt so the accounts payable team knows the product has been delivered.
Here is an example of how you can create a receipt in ProcureDesk:
To make it easier, ProcureDesk also provides a mobile app that allows you to create a receipt without the need to be in front of your computer.
Ensuring the vendors are properly vetted is a challenge for many life sciences companies because they don’t have a vendor onboarding process.
Especially when you have to maintain compliance with GMP requirements, you need a vendor onboarding process.
Here is how you can automate your vendor onboarding process.
Gathering vendor information takes time and collaboration between internal stakeholders, Accounts payable, and vendors.
This is a time-consuming process involving many back and forth over email.
This is how you can simplify the process in ProcureDesk:
Instead of using emails for capturing vendor information, you start the onboarding process in ProcureDesk.
Here is how easy it is to capture all vendor information:
You can either upload the information yourself or request a vendor to fill in this information by sending a vendor onboarding request.
The vendor then creates a profile and uploads any required documents.
A common requirement for life science companies is to ensure vendors are vetted for GMP(Good Manufacturing Practice) requirements.
This means that appropriate procurement team members should review the vendor information to assess vendor qualifications. It could be time-consuming if you need constant back and forth over email.
You can simplify this process by implementing a vendor approval process where a request can be automatically routed to AP, quality control, and so on for approval.
Here is how you can set up an approval process for new supplier onboarding:
A vendor often needs to provide much-supporting information during the onboarding process.
For example, Material Safety Data Sheet (MSDS) or Safety Data Sheet (SDS), Quality Agreement, GMP Compliance Statement, etc.
If you don’t have a central place to track vendor documents, it is very difficult to find them when needed.
You need to obtain the latest version for some of these documents every year. That means you are continuously chasing vendors to obtain the latest information.
With ProcureDesk, you can store all versions of documents in one place. The system tracks the expiration dates of documents and automatically informs the vendor when they need to upload a new document version.
It is that simple!
Here is an example of how document management works in ProcureDesk:
Tracking your commitments with contracts is a key compliance requirement. Most importantly, you want to track the milestones for contract payments to accrue the expenses accordingly, especially for large CRO(Contract Research Organization) contracts.
Here is how to automate the vendor contact management process.
The first step is to automate the process of requesting a contract. If you currently don’t have a process for contract review, we recommend setting up a similar process.
This process can be easily configured in the contract management module. Here is an example of how you can achieve this:
Once approved, the contract should be moved to a contract repository. A contract repository allows you to store structured content regarding your contracts so that it is easy to find when needed.
Here is what you should store in the contract repository:
Here is an example of how it would look in ProcurDesk:
If you have contracts with commitments to meet, then linking contracts to purchase orders makes sense.
By linking the contracts, you can easily track what is already purchased and pending.
Let’s assume you negotiated an awesome contract for 10% off your lab supplies. The only provision is that you should purchase at least $500K annually to achieve those discounts.
By linking the contracts, you can easily track how much is spent and what remains to be purchased and ensure you get the best price.
The last thing you want is the automated renewal of contacts you wish to cancel. Also, you don’t want key contracts to expire because you didn’t provide a renewal notice.
All this can be easily solved by having a process to receive automated notifications when a contract is about to expire or renew.
The best is to set up renewals in advance so you have enough time to research and decide on potential next steps.
We recently worked with a life sciences company that started operations 1 year back. They have their lab and around 10 scientists. They wanted to grow the team to 20 scientists in the next 9 months and were concerned with scaling the procurement operations and processes.
Manual Processes: Scientists relied heavily on manual procurement processes involving spreadsheets, email communication, and paper-based approvals. This led to time-consuming and error-prone workflows, increasing the risk of mistakes and delays.
Lack of Visibility and Control: The manual procurement process made it difficult for the finance team to gain real-time visibility into spending patterns and accruals.
Compliance and Audit Concerns: The manual process made it difficult to comply with the key requirements for AP. For example – Invoice approval before payment. Since the approvals were happening over email, it was difficult to promptly provide evidence for cost control.
Recognizing the need for a comprehensive procurement solution, the finance team implemented ProcureDesk to transform their procurement processes.
After implementing ProcureDesk, the team realized the following key maximum benefits:
The first thing we did was to implement punchouts with key lab supplies vendors. This included vendors like ThermoFisher, Fisher Scientific, VWR, IDT, etc.
With the punchout process, scientists could easily browse the vendor’s website, pick what they want, and effortlessly copy the data to their purchase request.
That reduced the time it took to create a purchase request by 50%.
All the scientists had to do then was submit the request for approval.
With automated approval, the system routed the request to the appropriate person for approval. With the mobile app and integration with Slack, the approvals happen in no time. We also implemented a self-approval process for small purchases.
One of the main issues for scientists was there was no place to track the orders placed across different suppliers. That leads to confusion on who ordered what.
There were always more orders placed than required, leading to extra inventory.
With ProcureDesk, the purchase orders were getting tracked in one place. Everyone on the team can easily see what has been ordered, what is delivered, and what is still waiting to be delivered.
With the receipt functionality, scientists can track who received the items in the lab, and if the items are on the way, the built-in tracking functionality allows scientists to track where exactly the product is.
This enables better communication and planning within the team.
No more duplicate orders and bloated inventory.
The AP team was also struggling to process invoices on time. There was no way to know if the invoice is ok to pay. That led to every invoice being approved by scientists.
Scientists are busy doing science, so they have no time to review and approve invoices. This means the AP team has to chase scientists to get approvals continuously.
Since the invoices were not approved on time, the team was already behind on closing books.
With ProcureDesk, we automated the matching process so that invoice approval is only required if the invoice doesn’t match the purchase order and receipt.
If all three documents matched, we automatically sent the invoice to their accounting system for payment.
We also enabled e-invoicing so the vendor can submit the invoicing using the cXMl process. That eliminated the need for manually processing the invoices.
The team now closes books on time, and no one has to work weekends to close books.
In conclusion, a streamlined procurement process can significantly benefit Biotech and life science companies (like pharmaceutical companies) by addressing their challenges and enhancing overall productivity and cost management. Various struggles often accompany the long drug development life cycles, but an inefficient procurement process should not be one of them.
By adopting an efficient procurement system and software solutions, lab managers can eliminate the frustrations of manually tracking purchase orders in spreadsheets. This streamlined approach allows for better organization, improved supplier communication, and enhanced procurement pipeline visibility, ultimately saving time and reducing errors.
Financial controllers, on the other hand, can benefit from a streamlined procurement process by gaining better cash flow visibility. By optimizing the procurement cycle, they can effectively manage expenses, anticipate costs, and make informed financial decisions for better supply chain solutions. This increased transparency contributes to better financial planning, competitive advantage, and resource allocation.
What you should do now
Whenever you’re ready… here are 4 ways we can help you scale your purchasing and Accounts payable process.