Why Predictive Procurement in Health and Pharma is the Future
Harvard Business Review has several articles that provide an excellent primer on the background of procurement in the health and pharma industries and the challenges they‘ve faced during the COVID-19 pandemic. The authors point to the need for procurement to play a leading role in addressing the challenges. Ultimately, many of the findings explain the importance of predictive procurement, a strategy that‘s critical to the future of health and pharma.
Done Right, Going Digital Enables Procurement to Be Strategic to the Business
Let’s start with a quote that is broader in nature. It’s not specific to the healthcare and pharmaceutical industries. It’s also not specific to the pandemic. However, it makes the point that digital acceleration should be a key goal for procurement teams across many industries. From April 2021’s “A New Paradigm For Procurement”:
“As enterprises increasingly depend on an expanding and evolving supplier ecosystem, better optimization of strategic planning and procurement is paramount. Critical suppliers are deeply integrated with day-to-day operations. And it is the successful management of these suppliers that delivers a competitive advantage leading to greater business impact. At the same time, digital acceleration and the need for agility have expanded the role of procurement and finance from cost-management functions to broader champions of risk management, strategic decision-making, and business agility.”
The Pandemic Exposed Flaws in Traditional Approaches to Procurement
We all remember the early days of the pandemic and shortages in critical medical supplies. Procurement and sourcing teams worked tirelessly to find solutions to disrupted supply chains. It was clear JIT models needed to be updated, and alternative suppliers were needed.
In the June 2020 Harvard Business Review article, “Why Investing in Procurement Makes Organizations More Resilient,” the pandemic’s impact on global supply chains is directly addressed.
“For decades, we’ve placed efficiency at the center of strategy: We’ve run operations as close to full capacity as we can. We’ve ordered from suppliers in ways that are tightly aligned with our production schedules. We’ve worked hard to minimize costs, ‘sweating assets hard’ under the guidance of the CFO, and we’ve delivered financial returns on a quarterly basis. In many ways, this is a system that has worked remarkably well. But as the COVID-19 pandemic has made painfully clear, it has a major flaw: It doesn’t help firms develop resilience.”
Organizations began to question traditional procurement metrics like cost savings. Instead, they had to look at other measures like resilience, agility, risk mitigation, and supplier relationships. Being able to see disruptions before they begin has become crucial to high-performing teams. Predictive procurement is the priority of CPOs, CFOs, and the future.
Why Predictive Procurement in Health and Pharma is the Future
The pandemic and its resulting supply chain disruption impacted all industries. But pharma and healthcare were under extreme pressure to quickly address shortages.
Healthcare has been treating the millions of people suffering from COVID-19 infections. The pharma industry had to ramp up the production and distribution of vaccines and medical supplies as quickly as possible.
In the case of these two industries, lives were literally at stake. Any failure at the procurement level wasn’t just an issue of profitability. Failure resulted in highly visible shortages, public scrutiny, and loss of life. The stakes couldn’t be higher.
Predictive Procurement Orchestration is Proving to be a Game-Changer
Organizations that adopt predictive procurement don’t need to get rid of their existing procurement software and move everything onto new systems. It’s unnecessary, so why add to the chaos by adding new software deployment, data conversion, and training?
The idea behind predictive procurement is that advanced technology (think machine learning and artificial intelligence) analyzes the massive amounts of current and historical procurement data now available. This is data on the scale that human analysis isn’t practical. Now it’s not only possible; it is incredibly accurate and can happen in real-time.
The adoption of predictive procurement addresses the issues referenced in the first half of this blog that the Harvard Business Review articles brought up. By adopting this strategy, procurement teams build supply chain resilience and agility. The “predictive” element—made possible by AI analyzing a dizzying array of variables in real-time—allows health and pharma companies to act before rising prices and product shortages. Through orchestration, a predictive procurement platform like Arkestro is able to influence or steer decisions in the right direction.
Predictive procurement is the key to health and pharma procurement teams avoiding supply chain disruption, championing risk management, and playing a critical strategic role in their organization. All while still maximizing cost savings.
Take the Next Step
Arkestro is the leading predictive procurement orchestration platform. Book your demo today to learn how Arkestro will help your procurement team predict and win faster cost savings while becoming a more important strategic partner.