Procurement and executive teams in the life sciences sector are facing increased pressure to adapt and optimize.

Today, ensuring long-term business success requires more than just cost management — it demands continuous improvements across procurement processes, systems and organizational responsibilities.

As life sciences companies progress rapidly through drug development and commercialization, the need for an adaptive procurement function becomes critical to managing suppliers, costs and risks. For most companies, 60% to 70% of their cost structure is based on purchased goods and services. As business requirements change, the ability to have suppliers change and meet new requirements can become a competitive advantage. Yet having a flexible supply base requires alignment between processes, policies, systems and organizational responsibilities.  

Many factors are driving the need for procurement process change. The ability to onboard new suppliers — capturing correct names, addresses, tax identification numbers and bank accounts — becomes ineffective, and needs to be securely automated. Or a company might have an inefficient accounts payment process, resulting in delays in supplier payment. As a result, supplier relationships become strained, prompting suppliers to stop shipping or discontinue relations altogether.

Additional business risk occurs when a company is out of compliance with government regulations like the Physician Payments Sunshine Act and Foreign Corrupt Practices Act (FCPA). And mergers, divestitures and acquisitions — common occurrences in the modern-day life-sciences sector — require alignment of disparate procurement processes, policies and systems.  

In order to move from an idea on a whiteboard or PowerPoint slide to implementation, organizations must change the buying habits of their employees and suppliers. While large global life players may have their own change frameworks, many emerging companies in a rapid growth phase deploy an ad hoc approach. An early-stage company with a core group of employees can be nimble and quickly adapt to change, but later-stage organizations need a more formal change-management framework to implement new finance, purchasing and legal systems.  

An essential component of effective change is adoption of a vision of how processes, systems and people will work efficiently to buy goods and services. Too often, procurement and finance leaders jump into recommending a new policy, process or system, begin implementing it, and assume that colleagues can assimilate something new into their daily workload. They need to realize the interconnectedness of the procurement function, so that they can successfully align organizational responsibilities, processes, purchasing policies, and systems. All employees involved in the buying process need to understand their roles and buy into the common vision.

A well-developed procurement vision, along with a compelling story, will win the support of colleagues, suppliers and executives and overcome resistance to change. Clear communication helps the organization understand changes and their impact on the procurement function. This communication can take many forms, including town halls, e-mails, internal websites and social media forums. It's essential the communication is clear, consistent, and targeted to the appropriate audience.  

Training is another critical change-management technique. Procurement and finance need to explain to employees how to use new processes and systems, and fulfill organizational responsibilities. This training can take many forms, including workshops, e-learning, and job aids.

Company-wide communication and training aren’t one-time events; good habits take time to develop, and there is always resistance to change. To address it, companies need to engage in ongoing monitoring and welcome feedback on possible areas of improvement.

To thrive in the life sciences sector, the procurement function must embrace a change-management mindset that addresses growing economic pressures, regulatory challenges and the complexities of supplier relationships. The benefits are substantial, including improved cost management, enhanced supplier relationships, and increased operational efficiency, especially during mergers and acquisitions.

By focusing on strategic change management, life sciences companies can optimize spend, mitigate risks, and secure long-term success. The time to act is now: Procurement leaders who embrace change will drive impactful results, while those who resist will be left behind.

Dave Stowe is a senior procurement adviser at Tunnell Consulting.