We often advocate for biotech companies to invest in formal procurement early in their life cycle. By taking some basic early steps to ensure the proper guardrails are in place, significant operational efficiencies are generated, and the company is protected against downside risk during a critical time of growth. Visionary CEOs quickly grasp why procurement has to be included their five-year operational plan, but they are not the only executive in the C-suite that should be focused on the benefits of building a procurement function.
Formal spend and supplier management represent a significant opportunity for biotech CFOs, providing proactive insights that can grow the top line, protect the bottom line, and assist with the ever-important issue of cash flow management.
The following provide a few examples of how investing in procurement can help biotech CFOs stay focused on sustainable growth:
Achieving scale and avoiding growing pains
Companies often aren’t aware of the cumulative spend and value leakage that result from not having common procurement systems and processes. Something as simple as making sure everyone knows what supplier contracts are in place for which products and services can make a vast difference. Having fewer suppliers to manage and invoices to pay on a predictable schedule – and with advantageous payment terms – allows the CFO to be strategic with scarce resources, holding less back ‘just in case.’
Realizing Economies of Scale by Rationalizing the Supply Base
When companies centralize more of their volume with fewer suppliers, those providers have the opportunity to achieve higher quality performance and improved internal efficiencies – some of which they will pass along to their customers as savings. This practice, known as supply base rationalization, offers a number of benefits to biotech CFOs:
· Projected demand volume can be leveraged for lower per unit prices, negotiated and contracted in advance
· Building mutually beneficial relationships with key suppliers opens the door to new innovations and protection against disrupted supply
· Fewer suppliers to manage makes the administration of the supplier base and their transactions less onerous on finance/accounts payable
Protecting Working Capital from Being Tied up in Excess Inventory
When procurement activity is not centrally managed, people may order the wrong item, order something that is already on hand, or make parallel duplicate purchases. While none of these common occurrences are intentional, they tie up precious working capital as inventory that may never be put to use. One of procurement’s core value propositions is their ability to guide the source, volume, and specification for specific business needs, preventing waste before it can happen.
Biotechs tend to run lean, and as a result there is often no budget left for a procurement function. That said, the pressures to reduce spend, mitigate risk, and improve the quality of supplier decisions will always be there, no matter the size of your organization.
Matchbook offers a unique alternative to achieve the aforementioned strategic objectives through a highly experienced team that can establish and scale procurement at your organization’s desired pace. We have decades of experience supporting hundreds of biotech companies, so our team understands the unique roadmap and requirements needed to build a sustainable, proactive, transparent, and scalable procurement function. Our team includes strategic procurement and sourcing experts across all categories of the biotech industry: R&D, clinical, manufacturing, logistics, supply chain, medical affairs, commercial, IT infrastructure and more.
Even if your team is months or years from having formal procurement in house, Matchbook can operate as an extension of your organization to source specific spend categories and negotiate supplier contracts that will optimize your working capital position.
Discover how our experienced consultants can help you reach your five-year plan faster by speaking with Matchbook today.