The cost-saving benefits of proper indirect procurement management is astounding.
World-class procurement organisations operate at 21% lower labour costs and have 29% fewer staff.
And yet, most corporations fail to give indirect procurement the attention it deserves.
At face value, this makes sense.
Why dedicate time and resources to managing a segment of procurement that makes up less than 20% of a corporation’s entire spend?
In this article, we’ll explore why getting a handle of indirect procurement is especially important for pharmaceutical companies where compliance with rigid procedures is paramount.
Indirect procurement, also known as tail spend, long-tail spend and class-c spend, makes up around 80% of an organisation’s supplier base.
As previously mentioned, the main challenge with managing indirect procurement is that they only consist of 20% of total spend volume.
Indirect procurement is primarily made up of low-frequency and low-value payments.
In the pharmaceutical industry, indirect procurement consists of many one-time payments to unique event vendors, training and development and clinical trial participants.
They also include some low-frequency payments to digital and print services, as well as the purchase of certain lab equipment.
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In a recent survey of Billhop users in industries with complex processes, it was revealed that setting up a single supplier in their ERP systems took anywhere from 10 days to 6 weeks. This timeframe is a conservative estimate, considering broader research from the Harvard Business Review, which suggests that larger organisations might take up to 6 months for new supplier onboarding.
Gathering insights from our client base, we’ve highlighted the most important and time-consuming tasks in supplier onboarding for indirect procurement, along with an estimated total cost for onboarding a single supplier.
This estimate assumes some level of automation in the process, and the procurement hourly rate is based on industry standards in Europe.
It's important to note that the listed tasks do not include the time required to wait for other parties, such as suppliers filling out questionnaires and providing payment details.
In many cases, the cost to onboard a supplier exceeds the value of the invoice.
Billhop is an innovative cards payment platform that gives businesses the freedom to pay with their chosen corporate cards.
Given that the vast majority of B2B suppliers are not card-accepting, Billhop’s solution helps bridge the gap by transforming card payments into bank transfers.
Pharmaceutical organisations do not need to onboard their low-frequency, low-volume suppliers in order to pay them.
In 2018, a major global pharmaceutical company, with an annual sale of over €10.5 billion and a workforce of 20,000+, turned to Billhop for help with their indirect procurement.
They found that setting up a single supplier in their ERP system took about 10 days, prompting them to seek ways to streamline their procurement processes for better efficiency.
In the section below we’ll discuss the specific use cases of this pharmaceutical company.
In the pharmaceutical industry, keeping up with the latest research and collaborations is crucial. Representatives and healthcare professionals often travel for events dedicated to different diseases, including major international conferences on cancer or cardiology.
These events involve more than just attendance fees; there's a big need for print materials, making them one-time expenses. For pharmaceutical companies, these costs are significant.
Upon examining a subset of data from our pharmaceutical client base, a striking trend emerges.
Approximately 36.5% of their indirect procurement payments processed through Billhop are allocated to conferences and associated expenses such as hotels and travel.
This stands out as the most substantial section, emphasising a significant financial commitment to supporting professionals in these events. To put it in perspective, the second-largest category, equipment parts, accounts for 11.8% of their payments.
Setting up each event vendor in your ERP system, only to never pay them again, takes time and money. Processing the expenses of many travellers adds more complexity to indirect procurement.
Billhop's pharmaceutical client effectively handles these challenges. With Billhop, they pay for event expenses using a credit card, avoiding the complexities of lengthy ERP supplier onboarding. This aligns with the client's goal of making indirect procurement more efficient.
Training and Certification in the pharmaceutical industry are crucial for ensuring drug safety and quality. Certifications from organisations like the Food and Drug Administration (FDA) and the European Medicines Agency (EMA) conduct inspections to ensure that pharmaceutical companies comply with Good Manufacturing Practice (GMP), which demonstrates the safety, purity, and efficacy of drug products during clinical testing and after approval.
These regulations require suitable quality management systems, integrity of materials, appropriate operational processes, and compliant laboratory facilities.
To achieve certification, employees need training, and internal processes must be reevaluated.
Billhop's pharmaceutical client efficiently handles one-time payments to independent trainers, experts, and auditors for training and certification needs using cards.
In the health and care research field, new data from the NIHR Clinical Research Network (CRN) reveals a significant recruitment rate, with over 100 people in England joining every hour between 2022 and 2023.
Users of Billhop, particularly in the clinical research sector, often engage one-time doctors for drug consultations or participation in clinical trials. These doctors play a crucial role in advancing medical research.
Phase 1 clinical trial compensation can vary widely, ranging from €140 to €12,000, depending on the trial's duration.
While setting up suppliers on the ERP system has established protocols, the process becomes less straightforward for ad-hoc and one-time payments, causing confusion and delays.
To address this challenge, utilising card payments for compensating clinical trial participants and doctors proves to be an efficient solution, ensuring timely and streamlined transactions.
As outlined in Visa's 2023 Payment Trends, the B2B payments space has been slower to innovate compared to consumer payments. B2B buyers now seek cost-efficient, digital-first, and fast payment services.
Billhop brings the ease of consumer payments to our B2B clients.
As the landscape evolves, seizing the opportunity presented by corporate card payments becomes imperative for corporations aiming to stay relevant in the changing dynamics of B2B transactions.
Book a demo with our sales team or download our white paper to learn more about Billhop’s indirect procurement solution today!
