Procurement functions are becoming increasingly constrained by insufficient resources. As a result, a growing number of med tech companies have begun to outsource the procurement of non-core materials and empowered supply chain partners to manage Approved Vendor Lists (AVLs) on their behalf.
However, many Medtech companies are still reluctant to do so due to perceived risks and challenges such as; quality of storage & distribution conditions and management of supplier relationships.
While there are risks associated with outsourcing, there are many more advantages. More and more companies are beginning to discover the benefits of procurement outsourcing which include improvements in spend management, contract compliance, supply chain complexity reduction, and savings from sourcing that are above the levels typically achieved by internal procurement departments.
Procurement outsourcing can add value across the spectrum of procurement areas, including transactional, analytical, project and consultative activities.
The key advantages of procurement outsourcing include;
1. Cost Savings
According to a recent KPMG survey of professionals in the medical device and service provider industries, cost reduction and improved service delivery are two of the primary drivers for outsourcing. Outsourcing procurement can deliver cost savings on globally sourced materials and the elimination of mark-ups from several suppliers.
2. Supply Chain Complexity reduction
By choosing the right third party organisation that fits your requirements you can vastly reduce complexity in your supply chain. With other individuals handling parts of your supply chain, you can invest more time into other aspects of your business.
However, when choosing a procurement partner, med tech companies must ensure that they select a trusted and experienced organisation to avoid risks such as
3. Supplier Quality Management
Med Tech companies are not only forced to comply with strict quality control standards and process controls, but they must also ensure their supply network investments satisfy global regulatory requirements. By outsourcing procurement to a professional supply chain company, med tech companies can be confident in their partner’s ability to manage the quality of supply.
4. Continuity of Supply
The Med Tech industry is under pressure to improve the quality of its goods whilst reducing costs. The importance of ensuring on-demand availability of certain products has made Med Tech firms hesitant to rely on third parties to source, purchase and deliver inventory as required. By choosing a professional organisation with a track record in this area, med tech companies can be assured of supply continuity, whilst keeping their costs down.
This blog is adapted from the whitepaper ‘Procurement Outsourcing in the Med Tech Industry: Challenges & Opportunities’