Health: What are the four keys to an efficient procurement strategy?

The fundamentals of a purchasing strategy are essential to guarantee performance and business competitiveness. They make it possible to meet business needs while optimizing costs and creating value. added. La purchasing department and its manager have a key role in the implementation of this strategy. First of all, it is crucial to define a clear purchasing policy that is in line with the global strategy of the company. This policy should take into account the objectives of cost reduction, to improve the Purchasing performance, ofresponsible purchasing and sustainable, as well as risk management linked to the Supply chain. Elle must also integrating the issues CSR. Social Responsibility of the Company and taking into account the impacts environmental and social purchasing.

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The 4 fundamentals of an effective purchasing strategy

The development of a purchasing strategy efficiency is essential in the health sector. Indeed, Purchasing Management in the pharmaceutical industry is a complex process involving the intervention of many actors, including public agencies, ministries, manufacturers and subcontractors, in a very demanding and often opaque market. A globalized Purchasing Department must also take into account political decisions and institutional regulations, which are all constraints for its overall effectiveness. Optimizing purchases then makes perfect sense. In this article, find out What is a buying strategy And what are the four keys to a buying strategy efficient.

Purchasing strategy: definition

Over the last few years, the procurement function has evolved significantly. Its role is no longer limited to ensuring the availability of products or services necessary for the production and proper functioning of the company. She has acquired new responsibilities that allow her to be increasingly involved in company performance, such as managing supplier relationships, maintaining margins, managing risks and seeking innovation. We are then talking more and more aboutstrategic buying.

The establishment of a Strategic buying requires the development of a Purchasing strategy efficient. What is a buying strategy ? It is all the means to be implemented to strengthen the contribution of the purchasing function to the overall performance of the company. It is therefore one of the performance levers that a company can apply to achieve its objectives, such as reducing the number of suppliers to massify purchasing volumes, digitizing purchases, implementing performance indicators, etc. purchasing strategy is expressed in this way through the objectives, means and resources to be implemented.

La purchasing strategy is also defined as all the elements and steps of the purchasing process, from the choice of supplier to the negotiation of the contract, including the management of relationships with suppliers and procurement techniques.

Reducing costs is one of the main objectives of the purchasing strategy, but that's not all. It can also aim to improve the resilience of the supply chain through the selection of suppliers or to implement innovative procurement, responsible purchasing strategies or the streamlining of procurement processes.

The specificity of procurement in the health sector

As in many sectors, procurement is an important part of institutional spending in the health sector. According to estimates, they represent around 20 billion euros per year, and even this figure concerns only public institutions. Purchases in public health institutions fall into two categories: operational purchases and investment purchases.

• Operational purchases relate to the purchase of supplies and consumables necessary for the daily functioning of the health establishment. They also include purchases of services, such as outsourcing catering, sterilization, and laundry maintenance, and procurement of work related to building maintenance. Purchases of drugs and medical devices also fall into this category. They are by far the largest item in a hospital's budget, as they represent around 50% of expenses. There are also energy charges.
• Investment expenses refer to the purchases of medical, technical or logistical equipment as well as the purchases of works that have an impact on the organization of the health establishment. They are strategic in nature.

In addition to the objectives of all procurement departments around the world, including optimizing the purchasing process and reducing costs, the procurement function in the health sector must also take into account the specificities of this sector when developing a purchasing strategy efficient. For example, stakeholders in a Purchasing function health are more numerous: ministries, public bodies, manufacturers or subcontractors, internal customers and the purchasing department. One buying strategy efficient must incorporate this specificity.

In addition, procurement functions in the health sector are also confronted with the obligations to comply with regulations defined at national or European level. All this can make it complex to develop a buying strategy efficient in this sector.

What are the different steps in developing a procurement strategy?

The development of a purchasing strategy takes place in 4 steps:

Purchasing segmentation

Purchasing segmentation is a crucial step in developing a purchasing strategy relevant. As the name suggests, it consists in classifying purchases into purchasing segments to make it easier to develop a buying strategy adapted for each homogeneous group of purchases. Segmentation is based on several criteria: supplier markets, products purchased and associated turnover.

The purpose of segmentation of the purchasing portfolio is to determine the weight of each family of purchases, to assess the issues related to each segment and to facilitate the processing of information.

Needs analysis

It is a quantitative and qualitative knowledge of each purchasing segment. This stage in defining the purchasing strategy involves three phases: the analysis of internal needs (the current and prospective state, the constraints encountered, the key figures...), the analysis of the supplier market (market structure, trends...) and the assessment of risks (technical, financial...) and the assessment of risks (technical, financial...).

During this stage, it is also necessary to define the priorities and the objectives of the purchasing strategy. The priorities relate to the general policy of the company. It is a question of finding a balance between the global vision of the company, the resources available and the development opportunities or constraints encountered. The list of priorities includes reducing costs, managing supply chain risks, optimizing supplier relationships, CSR, optimizing sourcing, etc.

To achieve these priorities, it is necessary to consider objectives specific to each structure within the company. The definition of the objectives of Purchasing strategy is performed using the SMART method (Specific, Measurable, Assignable, Realistic, Time-Related).

The development of the purchasing strategy

This step consists in identifying the levers of action to be used to achieve the objectives.

The development of a buying strategy Relevant is based on the Kraljic matrix method. The latter makes it possible to classify purchases into 4 main categories according to their level of criticality and their impact on business activity: lever purchases, strategic purchases, critical purchases and simple purchases.

• Leveraged or leveraged purchases: these are purchases that have a significant impact on a company's activity, but whose procurement risks are lower. This means that the purchasing function is in a position of strength compared to suppliers. This is a significant advantage in reducing costs, as one supplier can easily be replaced by another. It is also an opportunity to develop the supplier's innovation potential. In particular, one applies a buying strategy price/volume for this type of purchase.
• Strategic purchases: these are purchases that have a strong impact on the company's activity. They ensure its continuity. However, they represent a small part of the supplier portfolio. In general, these are rare resources or resources from restricted markets that are difficult to replace. For this type of purchase, the buying strategy should aim to maintain strong and lasting relationships with suppliers. These should be based on mutual interests or a win-win situation. We also talk about buying strategy of partnership.
• Critical purchases: they represent a low risk for business activity. However, they are also purchases made on limited or uncompetitive markets. Therefore, suppliers are generally in a position of strength. La buying strategy to adopt for this purchasing category consists in securing stocks and supplies, in maintaining relationships with suppliers and in implementing backup solutions. We also qualify this buying strategy differentiation strategy.
• Simple or non-critical purchases: these are purchases that have a very low impact on profitability and are easy to obtain. This list includes office supplies. La buying strategy to adopt for this type of purchase is to reduce the time and administrative burden associated with it, such as the digitization of purchases. This solution makes it possible to optimize procurement management processes through product standardization and automated process processing.

The implementation and management of the purchasing strategy

Once the strategy is defined, all that remains is to implement it and manage its execution. In addition to establishing a purchasing strategy adapted, the purchasing manager and his team are also the guarantors of compliance with this process.

Managing the purchasing strategy also includes monitoring the process. It is a question of evaluating its results. To do this, the purchasing team must determine which key performance indicators to use. Depending on the results, the purchasing strategy may also be subject to change.

The four strategic purchasing goals for the health sector

Four objectives — specific to pharmaceuticals — are necessary for the implementation of a Buying strategy adapted to the requirements of laboratories or health industries:

1. Acquiring the most reliable medical reagents or equipment in the right quantity
2. Selecting reliable suppliers of high quality products
3. Fast delivery of limited stocks
4. Ensuring the lowest possible total cost of acquisition

Objective 1: The acquisition of the most reliable medical reagents or equipment in the right quantity

Developing a narrow list of suppliers to reduce costs and monitor Purchasing performance is the primary objective of a Purchasing Department by developing a purchasing strategy winner.

This involves setting up clear purchasing procedures in order to accurately estimate the quantities of products needed without creating surpluses.

The digitalization of purchases through an ePurchasing solution makes it possible to centralize procurement procedures and strengthen the Purchasing Policy.

2nd Objective: The selection of reliable suppliers of high quality products

Two essential criteria for selecting suppliers: reliability and quality! Active quality assurance programs involve both monitoring the financial health of suppliers but also strengthening product controls over time. Monitoring tools on the Internet or from independent laboratories offer additional security.

3rd Objective: The rapid delivery of limited stocks

This involves the establishment of automated supply and distribution systems. Products in stock must be inventoried daily to limit obsolescence, but also to facilitate interfaces with stock deported from suppliers. The reliability of stocks will facilitate just-in-time delivery while ensuring a sufficient quantity in central or regional stores.

4th Objective: Ensuring the lowest possible total cost of acquisition

At this stage, the company aims to simplify the supply chain to achieve the lowest total cost possible considering the four cost components:

a) The actual purchase price of drugs, reagents, equipment etc.

b) Hidden costs due to poor product quality, supplier underperformance, or product obsolescence

c) The cost of owning the stock within the company (deported stocks in particular); and

d) Operating costs and loss of productivity linked to excessive administrative management.

Optimizing the Purchasing Function, other points for success

Mapping and Strategic Supplier Relationships

La mapping purchasing families is an important step for To pilot effectively the Purchasing function. It makes it possible to identify the segments strategic of the company's purchases, as well as the levers and priority purchasing families. This mapping facilitates decision making andstrategy development purchases adapted to each segment. La supplier relationship is also a central part of the purchasing strategy. It is essential to establish relationships of trust with strategic suppliers in order to develop win-win partnerships.

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Strategic Supplier Management: Selection, Satisfaction and Contracts

La purchasing department must take care of select suppliers reliable and competitive, while paying particular attention to them to ensure their satisfaction and loyalty. Managing tenders and supplier contracts is a key task to ensure quality and competitiveness benefits.

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Optimization of Tenders and Contractual Management in Purchasing

La Handover tenders must be rigorous and transparent, respecting the rules of Public order if required. Contracts must be contractualized in a clear and precise manner, in order to define commitments Reciprocal of the parties and the follow-up procedures. La digitalization And the dematerialization Of Purchasing process are also key elements in improving efficiency and Purchasing performance.

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Purchasing Optimization: ERP, Dashboards and Team Professionalization

Computer tools such as ERP. Enterprise Resource Planning make it possible to streamline operations and facilitate purchasing management. They also offer the possibility of setting up dashboards to track performance and KPIs. Key Performance Indicators of Purchasing function. Finally, the professionalization Of purchasing teams is essential to ensure the success of purchasing strategy. It is necessary to train and develop skills Of shoppers so that they can meet the challenges and requirements of their function. Of consultants and specialists in Purchasing field can also come as reinforcements to provide valuations complements.

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High-Performance Procurement Strategy: Key Foundations for Optimization, Value Creation and Competitiveness

The fundamentals of a purchasing strategy are based on a clear purchasing policy that is in line with the global strategy of the company, a mapping shopping families, a supplier relationship solid, rigorous management of tenders and contracts, a digitalization and dematerialization Of Purchasing process, as well as a professionalization Of purchasing teams. These elements make it possible to optimize purchases, reduce costs, create value added and to contribute to the competitiveness of the company.

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Keep in mind: R&D expenses for a Purchasing Department in the Pharmaceutical sector are predominant because of the specificity of the industry. R&D departments often use numerous suppliers worldwide for very small quantities of products.

In this context, the outsourcing of Spot Purchases (small and/or non-recurring orders) makes perfect sense, because it makes it possible to focus on Class A or B Strategic Purchases.