Reflecting on 35 Years of Procurement Transformation - Pharmaceutical Technology

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Reflecting on 35 Years of Procurement Transformation
The past three decades have driven a purchasing evolution to a procurement revolution.


PTSM: Pharmaceutical Technology Sourcing and Management
Volume 8, Issue 8

Technology. Three and a half decades ago, purchasing technology consisted of the three-ply traveling requisitions and a telephone for ordering. When doing a detailed purchasing analysis, we were armed with a sharp pencil, lined paper, and a basic calculator. Early manufacturing resource planning systems with purchasing modules that aided in planning and produced a printed requisition were soon implemented. By the mid- to late 1990s, the first P2P (procure-to-payment) systems were available that automated the full cycle of requisitioning, approvals, ordering, tracking, receipt, and payment. Next to arrive was technology that allowed procurement to do online bidding (i.e., reverse auctions). Today, procurement technology has evolved to significantly improve process efficiencies (less headcount required), automatically analyze spend (identifies more savings opportunities), drive incremental savings (bottom-line impact), and enable effective control and contracting of critical spends (risk management). New solutions now allow organizations to compete better by using a true marketplace approach that automatically does the bidding and negotiation for the buyer. Solutions that perform combinatorial optimization for complex global spends result in new levels of savings and end-user satisfaction.

Best-practice adoption . In the late 1970s, best purchasing practices were more associated with good inventory-management processes. The purchasing focus was on how to work with suppliers to receive goods just-in-time with suppliers owning the inventory until needed by the manufacturing line. I was associated with some of these early, difficult efforts that often were performed just-in-case because the risks were just too high to not keep adequate inventory on hand. By the mid 1990s, procurement began adopting a new best practice, strategic sourcing, a seven-step disciplined process that ensured well-defined specifications, requirements, supplier and market knowledge, and a competitive process used for bidding and negotiation. With each passing year, more procurement analytics and strategy have been used to continually make improvements to the acquisition process, overall cost benefits, and total value provided. Best practices also have been developed for supplier management and supplier relationship management that focuses on getting ever-increasing value from the supply base beyond simply savings.

Organizational design. When I was starting out, purchasing departments were fragmented, decentralized functions that primarily existed to ensure that goods and services were delivered on time. During the past 15 to 20 years, a new model evolved and perfected where a central procurement group establishes common policies, procedures, and technology that allow corporations to develop the appropriate local, regional, or global strategies to maximize savings and value from the supply base.

In closing, the past 35 years have witnessed a remarkable transformation for the organization tasked with managing a company's overall third-party expenditure. The evolution of purchasing to procurement has allowed corporations to enhance profitability in new ways. With a best-practice procurement organization in place, more dollars are dropped to the bottom line, and incremental value is elicited from the supply base on an ongoing basis.

Gregg Brandyberry is senior vice-president of FedBid, and formerly senior advisor for A.T. Kearney Procurement and Analytic Solutions,
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