For a long time the pharma industry has delivered high profit margins banking on patented and innovative products. However, times have changed now since generic drugs have started entering the market and emerging markets have started gaining prominence.
Gone are the days when the old school of strategic sourcing used to yield results. With the economic crisis and the change in the global supply chain scenario, the strategic sourcing scene has changed from what it was a decade ago.
If you ask anyone what the goal of strategic sourcing is, the answer that you would generally get is 'savings'. That might be one of the primary goals in the strategic sourcing kitty but is that the only one? Long gone are the days when the sourcing & procurement department was considered as just an order administration office. Now the sourcing team is proving its worth as a value adding component of the overall machinery of the firm and hence, has been rightly prefixed with the term 'strategic'.
Organizations have come a long way, stepping away from considering the purchase department as an administrative function which is limited to order management, to the current scenario of strategic sourcing and procurement. Sourcing personnel have now begun being involved in the development of requirements, specifications and value analysis (for example, automotive industry leads through concurrent engineering, VA/VE programs perpetually). However, traditional organizations which have a common team which handles sourcing as well as procurement activities often find that the transactional procurement activities take precedence over sourcing. This leads to savings leakages, opportunities lost and compliance issues. The scenario could be because of various reasons: time and capacity constraints, lack of skilled resources, lack of use of technology tools and non-standardized processes etc.
So, what are the ways out? A clear segregation between the transactional procurement and sourcing departments, outsourcing of the transactional processes and the non-critical activities/categories thus freeing time of the in-house resources to concentrate on more strategic work, and more use of technology like e-sourcing tools, process automation etc.
This New Year might bring in new challenges for the sourcing and procurement functions the world over, but with the best practices being put in place in the function, they would be well versed to meet the challenges head-on.