Drawing on almost two decades of experience, I have learned some fundamental differences between Purchasing and Procurement. Purchasing focuses on short-term goals such as buying goods and services for the organization by placing purchase orders and following up on receipts to ensure the correct quantity and quality were delivered. On the other hand, Procurement is the art of acquiring goods and services by matching the needs of the clients, conducting market research, identifying, and selecting vendors, negotiating contracts, and building relationships with key stakeholders and manufacturers. In other words, Procurement focuses on strategic, long-term goals which help gain a competitive advantage that allows the alignment of corporate strategies and goals.
Having the right sourcing and procurement expertise can yield great results. For example, short-term cost savings and long-term growth and value creation. In years past, the procurement life cycle had a straightforward objective, be cost-effective and provide high-quality service. The tools and concepts to support these goals were relatively simple—from just-in-time delivery and vendor-managed inventory to planning and forecasting.
Nowadays, the environment is rapidly changing. There are innovative technologies, new processes, and software to help improve performance. Companies centralize procurement organizations and outsource manufacturing and distribution to more capable third parties that specialize in those areas. Although there is substantial progress, companies still face major challenges.
There is an increased focus on becoming faster and more transparent. Faster is not only speeding upcycle and turnaround times but also improving the toolbox to make more informed decisions. In the same way, transparency will allow more visibility and collaboration with other links in the chain. This is an important tool for meeting regulatory requirements and mitigating risk.
The 4 pillars of global procurement
Excellence in Procurement management is a mandate for success and is directly linked to a company’s business strategy and a key factor to growth and profit. A company must manage the 4 pillars of the global procurement organization: People, Process, Technology, and Supply Chain.
Take Procure-to-Pay (P2P) process as an example which is a repetitive and administratively time-consuming task. Procure-to-Pay automation is the process of improving the efficiency of the process by automating manual tasks. This is a key tool in eliminating inconsistencies and delays, enabling efficiency in procurement management, and enjoying cost savings. Process automation handles both the tactical and strategic sides of procurement. It starts from purchase requisition to vendor and contract management.
Today’s procurement challenges
There are many challenges afflicting procurement leaders today, such as sole suppliers, availability of products, price volatility, potential frauds, quality, delivery risks, maverick spend, and compliance to name a few. Procurement professionals must be familiar with challenges and identify the best suppliers to ensure stable and quality delivery of goods and services.
Risk mitigation is a key component and has a significant impact on the bottom -line. The key takeaway regarding the art of Procurement – having a centralized, efficient, transparent, and digitalized procurement organization can reduce risks, improve spending, streamline processes and be a key contributor to the company’s growth.
Strategic Approach to API Sourcing
Our sourcing team has long-term API manufacturer relationships developed from a combined 50+ years of technical experience sourcing for big pharma and specialty generics companies. When you work with LGM Pharma for your API sourcing needs, it will be as a true partnership.