How to Make Finance and Operations Align in Your Purchasing Workflow
In our recent webinar, we share some procurement best practices for biotech and pharmaceutical companies.
In fast-growing pharmaceutical and biotechnology companies, saving time is critical. Lab operations are extremely time-sensitive, and orders and purchases can make or break a project.
- Lab procurement best practices, such as creating an efficient lab purchase approval process.
- Ways to automate large purchase order volume processing.
- How to strategically manage the vendor-buyer relationship so you can save on contracts and get visibility into your purchases.
Here’s what our guest speakers had to say.
Meet the speakers
Procurement Manager, Sanmed Diagnostics
Craig Seaver is an experienced biotechnology professional with extensive experience working in the biotechnology purchasing management industry.
Currently, Craig is the Procurement Manager at Sanmed Diagnostics, where he takes a multifaceted approach to solving novel problems, including creating efficient and accurate accounting while prioritizing operational efficiency, and developing smart procure-to-pay and invoice tracking processes to stay within budget goals.
Managing Partner, AdaptaLogix
James Neal founded AdaptaLogix to address a profound need for pharmaceutical and biotechnology companies: his organization solves pharma-specific financial, supply chain, and manufacturing challenges.
The AdaptaLogix NetSuite platform is specifically designed for the pharma industry, and it focuses on understanding the nuances of each customer’s organization and their unique processes. James and his team continuously look for opportunities to deliver more value in less time, helping customers accelerate and scale into commercial success.
The key takeaways from the event
The biggest procurement challenges for biotech and pharma organizations
1. Keeping organized
“The biggest challenge is just trying to keep everything organized,” explained Craig. “Being a small R&D lab, we purchase all sorts of different things from every vendor under the sun. There’s just so much going on from emails, from trying to keep on top of inventory, to just making sure that all of the scientists are on the same page about where the projects are headed and how much budget is left.”
“The actual placing of the orders is a process that is difficult to handle manually,” James elaborated. “From a standpoint of reporting back to finance, it’s tough to know how much inventory there is, and even tougher to know how much the company owes because they’ve already committed to the purchase orders. This pain is felt across the organization, especially as you start to grow and get more people ordering across more departments.”
Keeping a handle on purchases is a common challenge heard among members of the biotech and pharmaceutical industry. When manual processes drive the procurement function, keeping up with demand can be exhausting not only for procurement managers, but for the entire organization. Ultimately, this leads to tension.
2. Tension between finance and the wider organization
“There is a lot of tension between the finance and the operational side because they just want to get the stuff in R&D teams,” James explained. “They need to be able to just order things without friction. Purchasing isn’t their job. Their job is actually doing R&D. So finding better alignment really makes the process as frictionless as possible.”
Craig added: “In addition to that we find a lot of organizations where departments are really segregated and siloed apart from each other.”
Siloed departments are bad news when it comes to efficient purchasing. It’s critical that biotech and pharmaceutical organizations align on organizational-wide goals and ensure that inter-departmental communication is as transparent as possible. Unfortunately, that’s not always the case.
3. A lack of clear communication
“There’s not nearly enough communication between departments to make sure that everyone aligns,” shared Craig. “A big part of that is just the language that needs to be passed back and forth.”
“Oftentimes there’s a big wall thrown up between departments because they can’t talk in the same language. Either having a liaison, or having a piece of software that can translate things into easy-to-read graphs is extremely valuable to trying to align these organizations.”
- Craig Seaver, Procurement Manager, Sanmed Diagnostics
Communicating in the same language isn’t just about communicating in English, French, or German. It’s also about using easy-to-understand procurement terminology that non-procurement professionals can understand. This way, team members can enter correct information on an invoice before it goes to the AP department, and AP teams won’t need to follow-up with them to clarify misguided information.
Inside the Procurify Platform, teams can clearly communicate with one another via in-platform comments. This helps build transparency and context around each purchase request made, and gives approvers the opportunity to loop in other key stakeholders for clarification on orders. Comments are also saved so there’s a clear paper trail for future reference.
Purchasing automation: when is the right time?
“For a lot of biotech companies, even ones that are starting out mid-sized or even large size, purchasing automation should be a core process,” Craig discussed. “Having automated three-way invoice matching, having automated approval workflow, it’s essential.”
From the get go, organizations should look to deploy a purchasing automation tool like Procurify and steer clear of adopting manual processes. While manual purchasing workflows might work for a short time, they negatively impact an organization in two ways:
- They build a ‘way of doing things’, which breeds resistance to change when the time for automation does come.
- They don’t scale. As an organization grows in complexity, manual processes often become key bottlenecks.
Of course, this is a best case scenario. For many, however, adopting purchasing automation tools early on isn’t always a financially-viable option. In this case, Craig suggested answering a few key questions to determine your readiness:
“Is your purchasing department overwhelmed with what seems to be routine operations? Are you starting to have breakdowns in communication between finance and operations? Are you having a breakdown in communication anywhere else? Is your organization having a hard time just keeping track of their POWs? Or keeping track of your spending in general? If so, it’s high time to look for an automation solution,” explained Craig.
Understanding your evaluation criteria for purchasing automation software
“There are two things to consider here,” Craigs said. “The first is: does the software in question fit the current processes (or do you want to change the process to fit the software)? And, what are some of the new features that the software will provide and do we have a use for them?”
These two questions are great launchpads into a deeper software discussion. And having transparent answers will help you narrow down exactly what kind of purchasing software works best for your organization. Of course, these two fundamentals are the tip of the evaluation criteria iceberg.
“Teams need to be able to log in and understand exactly what they’re looking at with very little to no training,” shared James. “Also, you need to know whether you require specific functionality. Do you require sourcing? Are you in need of PunchOuts ? Or will you need three-way matching? You need to understand your current financial system and how it connects. Having a list of these kinds of four or five different points will help you identify what the right solution is.”
When to deploy a dedicated procurement solution vs the procurement module of an ERP system
Knowing the value of a dedicated procurement solution compared to the procurement module in an ERP system is game changing. Both offer the chance to streamline the purchasing process, but procurement tools often carry more weight.
“If you think about a lot of R&D materials, you’re not looking at those to be created in your ERP system or else you’d have this incredibly long list of things that you’re only going to use once,” elaborated James. “That’s a perfect example of when you’d deploy a procurement tool like Procurify.”
“People will come to us all the time and say, ‘can’t we just use concur?’ Well you could for the very early stuff. But then as soon as you start doing anything where you need to actually bring materials in for a supplier and you want to start storing item numbers of that supplier, you’re completely out of the gate. Also, the purchase order doesn’t end up in that suite. So now the finance department doesn’t see purchases.”
- James Neal, Managing Partner, AdaptaLogix
Blending ERP solutions with Procurify is the most effective way that biotech and pharmaceutical organizations can build a transparent, automated, and end-to-end procurement function. But to do this requires the right integrations.
Integration considerations to make
“The biggest part is not getting everything integrated into tools like Procurify. This impacts vendor bills hugely, where you’ve got people who sometimes make a purchase without running it by procurement or finance. Then boom, an invoice shows up or you end up with a lot of things on auto pay and you have no control.”
- Craig Seaver, Procurement Manager, Sanmed Diagnostics
To secure a solution that works best for your organization, there are some key integration considerations to make, including:
- Best of breed vs all-in-one: do you want a solution that does exactly the job it was served to do or compromise with one that claims to do a little of everything?
- Find integration points: some solutions integrate at the PO and vendor bill level. Some only integrate on the vendor bill level, so you will lose visibility into purchase orders and spending.
- Will it scale? Do you see this solution still working when your organization increases in size?
- Intuitive and user friendliness: if it is not intuitive, your team will not use it.
- Cost: this includes the cost of the solution itself, the cost of individual licenses, and the cost to implement the solution into your existing tech stack.
Creating a proactive procurement process: 5 things to remember
Building a proactive spend culture and ensuring that finance and operations align in your purchasing workflows requires not only an automated and integrated technology solution like Procurify, it also requires an integrated organization where communication is transparent, expectations are clear, and where there’s a proactive spend culture.
To build a proactive spend culture, though, requires these five things:
- Communicate and set expectations
- Plan for risks and having a game plan ready
- Be able to have access to data and visibility to spend
- Building a process that gives you context
- Using automation to eliminate menial tasks and focus on value added activities
To find out about how Procurify works, watch a demo here.