Procure to Pay: Resource Consolidation and Process Improvement

Client
The client is the pharmaceutical business of a Japanese-based global health solutions holding company, engaged in creating and promoting new products and innovative solutions for better health worldwide, with a focus on four specialty areas: neuroscience, oncology, cardio-renal, and medical devices.

Challenge + Opportunity
The client was convinced that it would benefit from process improvement and resource consolidation of its procure-to-pay (PtP) operation.  It established goals to improve quality, provide standardized procurement practices, including a high-level of user support, shorten cycle times, and optimize resource utilization.  The client also recognized that significant savings could also be realized.

Not only was the PtP process inefficient, it was segmented and difficult to measure.  In its current state, the client used 22 contracted staff sourced from five different vendors. Existing technology (both systems and software) were not fully integrated or leveraged, automation was lacking as well as an end-to-end view for management.

TayganPoint started by documenting the current state process and metrics for each major PtP functional component … from vendor verification to procurement … from contract administration to accounts payable.  Analysis of this data identified performance gaps, inefficient resource (client staff and contract labor) utilization and excessive costing, with an overall assessment that the current state put the company at risk because it lacked accountability and offered little data transparency to monitor compliance with company procurement policy.  Furthermore, the client was missing critically important sourcing management opportunities due to the absence of an integrated end-to-end procurement process and strategic evaluation for best practices and pricing.

TayganPoint developed a future state vision for the client that would be supported by a consolidated outsourcing service company that specialized in these processes for the global life sciences industry.  The recommended solution reduced costs by approximately 35%) and provided management with significantly improved data for a business and process management opportunity.  The solution allowed the company to focus its employee resources on evaluating sourcing and process improvement opportunities to further reduce company expenses and improve the company profit margins.

Approach + Solution
Once it was clear that the benefits of outsourcing outweighed the existing organizational structure, the team proposed a communication plan to facilitate the transition of the current organization.  Going into the RFP process, the client could anticipate the following benefits:

  • Significant spend and operating cost savings (approximately 35%) in workforce overhead and technology,
  • Technology investment avoidance and reduce maintenance costs,
  • Calibrated performance metrics based on evolving business objectives that were regularly tracked and reported.
  • Improved internal focus on core business and internal customers,
  • Contractually committed service levels and savings, including future savings triggers,
  • A scalable operation to respond to evolving business needs,
  • The shift of delivery risk to outsource partner,
  • Quality user experience, including multi-level ‘concierge’ support; and
  • Improved business continuity.

After establishing a stakeholder-based consensus around the client’s PtP future state needs, and creating a proposed  governance structure, the TayganPoint team developed a comprehensive, end-to-end RFP process  that would allow the client   to assess a varied group of on-shore and off-shore PtP service providers/ vendors.    The three stage process included RFP content development, establishing evaluation criteria and process, and recommended negotiation steps, to ensure the client would be fully prepared to evaluate the proposals and execute.  The RFP itself included:

  • Current state overview
  • Future state requirements
  • Volume metrics
  • Vendor overview & capabilities
  • Solution options
  • Transition approach
  • Proposed schedules
  • Location options
  • Proposed terms & pricing
  • Scalability
  • Case studies & references
  • Tools & accelerators

The TayganPoint team developed the RFP, proposed and validated the governance model, identified the selection team, identified KPIs for the future state, and researched and recommended seven outsourcing firms to be the RFP.  TayganPoint also recommended a high-level change management strategy for ensuring successful transition to the approved BPO.

Results + Impact
TayganPoint’s thorough and detailed approach to understanding the client’s unusual current state  led to the client’s recognition of potential annual savings in PtP operations of at least 30% and important gains in efficiency, accountability and management insight.  A new streamlined organizational structure, which included a new vendor (BPO) relationship manager role, was proposed and accepted by the client.  Additionally, it seemed likely that the new outsourcing partner could absorb several related, non-process activities that were currently embedded in the staff work without additional cost.  Due to TayganPoint’s expertise and analysis, the client is realizing greater savings and future business opportunities than projected at the start of the engagement.

At the conclusion of the engagement, TayganPoint left the client completely prepared to execute the selection of a full-fledged business outsourcing partner and implement the future state PtP operation – all in less than one financial quarter.

About TayganPoint
TayganPoint is a management consulting firm focused on dynamic business transformation. Aligning people, process, culture and technology, they combine deep experience in strategy alignment, process improvement, change management and program management with extensive industry knowledge in Life Science, Financial Services, Healthcare and Energy.  TayganPoint delivers high value operations solutions that improve performance, delivering measurable and sustainable results to clients. Learn more at www.tayganpoint.com.

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