The funny thing about companies is that they all tend to follow the same patterns and tendencies. Early stage biotech firms are no exception. In the early days, everyone is concerned with research, speed to market and getting the operation off the ground. Very little thought is given to procurement, often until it is too late.
While procurement processes and technology are understandably not the highest priority from day one, doing a few things right at the right time can make all the difference in terms of resource longevity and competitive advantage.
- Don’t wait until bad habits form
Most biotech companies wait too long before introducing formal procurement. Desirable behaviors are easy to adopt but hard to achieve once other habits are established. As a result, the change management effort associated with implementing procurement processes, technology and standards after ‘bad’ habits have formed is just as painful for procurement professionals as is it for affected employees.
2. Keep an open mind
Seasoned employees might know which supplier(s) they want to work with, but they may not be considering or evaluating all available options. In some cases, the suppliers with whom they have previous experience may not be the right fit for the needs and culture of an early-stage company. Only the due diligence made possible by formal sourcing can determine that fit. Open-minded and unbiased decision making identifies the supplier(s) best suited for an early stage biotech today, and ensures the right fit for the journey ahead.
3. Don’t let suppliers get too comfortable
It is a challenge to negotiate pricing with suppliers that expect to win or keep a company’s business. Challenging (overly) secure suppliers by objectively comparing them to the competition allows a biotech company to keep them on their toes, avoid over paying and ensure the best ROI in each case.
4. Stay focused on the highest value
According to The Hackett Group’s 2017 Sourcing Cycle Time and Cost Measurement Study, managing the new supplier selection process from requirements definition to onboarding requires an average of 240 hours. Senior-level team members at an early stage biotech have a lot on their plates and must spend their time on the highest value initiatives. Despit the need for supplier selection, managing a supplier selection process does not usually qualify as a high-value initiative. Getting the project started and making the right supplier selection can be effectively supported by a specialized and experienced procurement consultancy.
5. No PO? No pay.
Many companies pay supplier invoices without first requiring a purchase order (PO). This seemingly simple habit can lead to risks as spend increases over time and becomes harder to audit. Establishing a purchasing process or issuing PO instructions early on can help mitigate this risk. Additionally, many companies outsource procurement in their early stages to build foundational processes and ensure governance on-demand.
6. Set supplier performance expectations up front
Many supplier proposals don’t include Key Performance Indicators (KPIs). Without product requirements or service performance indicators, companies may pay for products or services that don’t meet their needs and expectations. Worse yet, they may be left without recourse if something goes wrong. Setting up core KPIs from the outset can ensure successful outcomes and serve as a foundation for stronger supplier partnerships. When there is a procurement function in place, they should be engaged alongside legal to ensure each Master Services Agreement (MSA) or Statement of Work (SOW) is written to include KPIs and payment milestones. These will protect the company and ensure suppliers provide quality deliverables on time and on budget. Where a procurement function does not exist, an outsourced procurement consultancy can provide equivalent oversight and support during contract negotiations and MSA/SOW writing.
7. Beware information silos
As biotechs grow, it is increasingly challenging for teams to access valuable information and share supplier data. This can easily lead to supply redundancy, wasted time, duplication of efforts and risk. Employees can’t easily access internal information and bring in a new supply partner for each new need. Companies must establish processes that not only speed up the time to demand fulfillment but also maintain a centralized database of approved suppliers.
8. Give thought to leadership requirements
Early stage biotech companies who introduce procurement early tend to hire a leader who is either too senior or too junior. Senior procurement talent can easily feel overwhelmed with the amount of ‘rolling up their sleeves’ required to support the initial, largely transactional, demand. Hiring someone too junior does not provide the company with the experience and confidence required to collaborate side by side with senior employees. Companies must accept that procurement’s leadership requirements will be a moving target during this phase of fast, early growth and articulate their leadership requirements before posting a procurement leadership position.
9. Right team right policy
When procurement is done well, it can be incredibly enabling, transparent and scalable. People and policy should be able to work together to ensure everyone has what they need with minimal friction and at an efficient price. If category-specific expertise is required but does not exist in house, teams should not hesitate to seek out the external support they need to make the best decisions for their business while facilitating their own growth and evolution.
10. Data must be better than clean
Whatever tools and systems companies contemplate using as they grow, it is important to start with a focus on visibility and clean supplier data. While this may seem like an obvious statement, data quality continues to be a challenge for companies of all sizes and maturity levels. Clean data facilitates the implementation of any future supplier or spend-related system, ultimately enabling employees who are then able to reach better, faster outcomes with the right suppliers.
A specialized and experienced third-party sourcing and procurement consultancy can help early stage biotech companies successfully navigate these challenges. Matchbook is the leading strategic procurement partner to emerging biopharma companies, bringing precision to each decision through on-demand sourcing and procurement support. Contact us to explore how we can help you.