Optimizing Procurement: Best Practices for Pharma Industry

May 25, 2023 | Procurement in manufacturing industries

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May 25, 20232 mins

To improve procurement in the pharmaceutical industry, it's important to focus on strategic sourcing, supplier management, risk mitigation, and cost reduction. By implementing best practices, it's possible to optimize the supply chain, save costs by up to 15% and improve supplier performance by up to 20%.

Procurement in the pharmaceutical industry presents a unique set of challenges, including stringent regulations, complex supply chains, and the imperative to maintain high product quality and safety. To navigate these challenges successfully, pharmaceutical companies must embrace best-in-class procurement and sourcing practices. By doing so, they can optimize their supply chain, reduce costs, and foster stronger supplier relationships. From adhering to regulatory requirements to ensuring timely access to critical medications, procurement in the pharmaceutical industry plays a vital role in supporting the delivery of safe and effective treatments to patients. 

What are the best practices in procurement for the pharmaceutical industry?

Strategic Sourcing

One key best-in-class practice for pharma companies is strategic sourcing. This involves analyzing spending data to identify areas of opportunity, consolidating supplier bases to achieve better pricing and quality, and establishing a supplier performance management program that includes regular supplier evaluations and feedback sessions to improve collaboration and innovation. Pfizer is one example of a pharma company that implemented a strategic sourcing initiative and achieved significant cost savings and improved supplier relationships. 

Supplier Relationship Management

Another best-in-class practice is supplier relationship management. This involves developing long-term, strategic relationships with key suppliers through regular assessments, joint business planning, and supplier development initiatives. The benefits of SRM include improved supplier relationships, reduced supply chain risk, and increased product quality. Roche is one example of a pharma company that implemented an SRM program and achieved these benefits. 

Risk management

Risk Management is critical for pharma companies. This involves conducting supplier risk assessments, contingency planning, and supplier performance monitoring to mitigate supply chain disruptions, quality issues, and regulatory compliance risks. Merck & Co. is one example of a pharma company that implemented a comprehensive risk management program and was able to minimize the impact of supply chain disruptions during the COVID-19 pandemic. 


Compliance is a key consideration for pharma companies, which must ensure that all of their suppliers meet regulatory requirements, including GMP, GCP, and GLP regulations. Novo Nordisk is an example of a pharma company that implemented a supplier compliance program and achieved improved compliance, reduced risk of regulatory non-compliance, and increased product quality. 

Cost reduction

Pharma companies can achieve cost reduction through supplier consolidation, process optimization, and negotiation with suppliers. Sanofi is one example of a pharma company that implemented a cost-reduction program and achieved significant cost savings while maintaining the quality and compliance of its products. Sanofi also implemented a lean manufacturing program that improved the efficiency of its manufacturing processes and reduced waste. 

In addition to these best-in-class practices, pharma companies can also benefit from innovation, sustainability, and technology adoption in their procurement and sourcing operations. For example, they can adopt digital platforms and analytics to streamline procurement processes, reduce costs, and improve supplier collaboration. They can also implement sustainable procurement practices that reduce environmental impact and enhance corporate social responsibility. 

Analytical reports from companies like Gartner, Deloitte, McKinsey, and Forrester support the adoption of these best-in-class practices and highlight the benefits that pharma companies can achieve. For example, a Gartner report found that companies that implement a strategic sourcing approach can achieve cost savings of up to 15% and improve supplier performance by up to 20%. Similarly, a Deloitte report found that companies that adopt an SRM program can achieve cost savings of up to 5% and increase innovation by up to 10%. 

In conclusion, pharma companies face unique challenges in their procurement and sourcing operations, but they can overcome these challenges and achieve significant benefits by adopting best-in-class practices.  

FactWise Source-to-Pay increases supplier diversity to help mitigate risk and offers comprehensive, holistic, dynamic supplier analytics so that buyers make data-driven decisions across the entire procurement journey, right from sourcing and negotiations to order tracking and payments, and leaders can maintain oversight across suppliers and internal teams to increase and monitor compliance. At FactWise, our singular focus is to build truly distinctive procurement software that delights users and generates sustainable positive impact for the organizations we serve, by providing transparency and insights to leaders, streamlining and automating processes to improve efficiency, and driving bottom-line impact by unlocking savings potential. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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