Benchmarking Survey. Survey Results. Tender Management Practices in the Life Sciences Industry
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1 Survey Results Benchmarking Survey Tender Management Practices in the Life Sciences Industry Survey Results, Report 3: Tender Management Solutions An assessment of how life sciences manufacturers organize and govern the tendering function. Background Historically limited to only a few sectors of the life sciences industry, tendering encompasses most segments now, including specialty and biosimilar drugs, along with medical devices. Currently, more than 25% of the global pharmaceutical market is procured through some form of tender. 1 In addition, many emerging markets have either explored, implemented, or are expanding tendering opportunities to achieve cost savings for their healthcare budgets. The tendering process is governed by specific laws. The process tends to be very formal and rigid with limited interactions with the tendering authority. Overall, the aim of the procurement authority is to increase the competitive environment, while achieving greater savings. A notable piece of differentiation for tenders in the life sciences industry is cyclicality. The ongoing or permanent need to procure a certain class of device or drug necessitates the re-publishing of many tenders after a specified duration of time. This increases the importance of planning, which can provide a potential competitive advantage if performed properly. 2 Benchmarking Study HighPoint Solutions conducted a benchmarking study in June 2016, which surveyed more than 30 life sciences companies, capturing a snapshot of the state of tendering in the industry. Study respondents represented all segments. Results will be shared in four separate reports: At A Glance Survey Background Tender Management Solutions Relevance of an IT Solution for Tender Management Characterization of Current Tender Management Solutions Monitoring Publication of New Tenders Outsourcing of Tender Management Tender Data Capture Integration With Other Systems Best Practice Standalone Solution or Integrated? Tender Tracking Tendering Excellence with HighPoint HighPointTHOR 1. The Tender Organization 2. Current Tender Environment and Awarding Criteria 3. Tender Management Solutions 4. Tender Management Challenges
2 Tender Management Solutions In this third report in the Tender Management Benchmarking Study series, HighPoint Solutions shares survey results related to the tender management solution across all phases of the tender lifecycle. Relevance of an IT Solution for Tender Management Based on survey feedback, IT solutions are reported to be relevant or very relevant along all phases of tender management. Our results analysis revealed that based on company-wide tender revenue, once tender revenue reaches upwards of $1 billion, there is a reported increase in relevance of an IT solution for tender management. Two likely reasons for this shift could be: 1) limited need for an harmonized global tender management solution for a company below $1 billion (especially, if the company is based out of the US, its primary market may not see any value in a tender management IT solution); and 2) a second reason may be the cost aspect, which may be too high for smaller companies. Looking at the end to end tender management software landscape, it appears that there is a lack of an intermediate solution. This creates a gap for those companies not wishing to invest a large amount but willing to implement a solution. The relative drop in relevance for big companies may be linked to the fact they either already have a solution in place or the necessary workforce power to cover the end to end tender management process. 2
3 Characterization of Current Tender Management Solutions In reviewing survey feedback regarding how companies characterize their tender management solution, lack of integration of data is the first issue discovered. This means that corporate-wide visibility cannot yet be provided in most of the companies. At the same time, most of the companies are trying to formulate global reporting by aggregating data. It seems that at a limited number of companies, tender management solutions are viewed solely as a repository for contracting documentation. The fact that most of the tender authorities provide the contract documentation may explain this aspect. Monitoring Publication of New Tenders Most survey respondents reported that they are still monitoring tenders manually without the use of any technology input. 3
4 Outsourcing of Tender Management Survey feedback revealed that the higher the number of tenders the higher the propensity to outsource the tender screening activities. We could hypothesize that below the threshold of 115 tenders, the return on investment is better on data sourcing than an entire BPO service. Above this threshold, using a service may be worth the cost. Tender Data Capture Survey feedback revealed that a lot of companies still use local nonintegrated systems to capture tender data. While functional, this approach doesn t leverage the advantages of a global tender management, which would provide visibility to the other teams. In addition, local databases are not compatible with a broader tender strategy. To learn from other countries, global teams need data to be available. This is supported by the existence of a regional solution. It demonstrates the increasing interest of tender management from global teams. 4
5 Looking at data capture by industry, the only notable difference across industries was Medical Device companies, which reported no use of local hard copies and local databases. In the high tender volume market, companies reported more reliance on a global solution than any other. In fact, out of all survey respondents, the only companies leveraging a global solution had more than 500 tenders a year (although the above is expected, the respondents being mostly from global roles may slightly skew the results toward more global solutions). Integration With Other Systems Survey respondents reported that the most commonly practiced integration points are the ERP system followed by master data and pricing systems. The low reported amount of integration with revenue management solutions demonstrates that complex tracking of tender revenue is not yet in place unless it is done directly by the tender management system. 5
6 Best Practice Standalone Solution or Integrated? Ultimately, what s interesting is to know whether the tender management solution should be a standalone solution or integrated. When analyzing the number of integration points with the tender process assessment, integration emerges as a best practice. Further supporting this, all best in class companies reported integration of their tender management solution with Master Data and ERP system for pricing. Tender Tracking The next step is to track outcomes. Clearly, the more outcome details tracked, the better the overall process ultimately becomes. Typically, details such as the number of extended tenders and missed deadlines are only tracked by wellfunctioning processes. 6
7 Tracking performance is a key aspect of the tendering process. It s another phase where a tender management solution can be of great help. Especially in terms of a major quantity deviation from the initial agreed upon conditions or a direct financial impact any incorrect claimed chargebacks. However, 20 percent of companies surveyed reported not tracking fulfillment of the tender and ultimately bear the risk of revenue leakage. Digging into the tender process assessment, it seems that to avoid crucial issues, implementing a dedicated BI Solution with reports/dashboards is the right approach. 7
8 Get on the Path to Tendering Excellence with HighPoint Solutions To successfully compete in the tender and contracting market, life science companies need a strong and robust tender organization with a global-to-local tender strategy, supported by clear processes and organizational structures. HighPoint Solutions can help you optimize your tender organization by developing the following key dimensions: Practical planning and advisory services for Life Sciences organizations looking to expand or optimize current Tendering functions Data, insight and analytic services to increase awareness of Tenders in-country and ability to win Evaluation and implementation of technology to support Tendering data and processes Augmentation of existing teams with experienced Tendering resources HighPointTHOR Tender History and Opportunity Repository The proper planning of tenders is one of the key challenges for companies. Proactive market screening for upcoming tender opportunities and ensuring all opportunities are captured in a database is one of the best practices we recommend. HighPointTHOR can provide exactly this screening and alert notification, as well as all historical opportunities back to The licensed service offers: Upcoming tender screenings, on a daily frequency all issued tenders by a Public Authority in Europe, through TED (Tenders Electronic Daily), will be entered into HighPointTHOR. Alert notifications can be sent to a specific distribution list or user group. Historical tender data includes all historical tenders issued by a Public Authority in Europe according to the EU PPD (since 2011 and published through TED). 3 Contact For additional information on any of the material you ve read here, please feel free to reach out to Ruven Remo Eul directly. Ruven Remo Eul European Life Sciences Director Ruvenremo.Eul@highpointsolutions.com About HighPoint Solutions Since 2000, HighPoint s team of consultants has provided clients in the highly regulated life sciences and healthcare industries with business consulting and technology solutions that continue to deliver business value and competitive advantage to more than 280 clients worldwide. US: 301 E. Germantown Pike, East Norriton, PA EU: Cours de Rive 13, CH-1204, Geneva, Switzerland
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