Innovative solutions to complex procurement processes for the chemicals and pharmaceutical industries
Activities are shifting from operational tasks to flexible risk management and market monitoring: hardly any other industry is as reliant on agile and forward-looking procurement as the chemicals and pharmaceutical industries when it comes to buying chemicals and raw materials.
Just-in-time production, inventory levels that are kept to a minimum and a long list of international manufacturers: supply chain resilience has been an important issue for companies in all industries, and not only since the outbreak of the COVID-19 pandemic. Manufacturers in the chemicals and pharmaceutical industries are particularly vigilant, as reliable procurement at all times is especially important for them. But what happens when raw material producers are hit by short-term supply bottlenecks or disregard environmental standards? And who should respond to these incidents first? We provide an insight into the current challenges facing buyers in the chemicals industry – and show how the automated procurement of operating materials and C parts can help.
Complex challenges for the chemicals and pharmaceutical industry
Be it in the south, west, north or east of the country: large chemical and pharmaceutical companies, whose products and materials are used across the globe, can be found almost everywhere in Germany. Only in the rarest of cases do the raw materials required come from the immediate vicinity, which is why buyers find it difficult to avoid global supply chains. Conversely, trade wars, punitive tariffs and political requirements have an automatic impact on the procurement’s work. The question as to whether the raw materials come from Russia, China or African countries such as South Africa or the Congo is irrelevant. Buyers always have to keep an eye on global developments so that can take prompt action when faced with supply bottlenecks or fluctuating raw material prices. It becomes even more critical when major "force majeure” events, like the current COVID-19 pandemic, paralyze the assembly lines of entire countries and make stable supply chains impossible.
"Protecting people and nature is a matter of fundamental importance in the chemicals industry and is also playing an increasing role in product selection in procurement," explains Milena Reinke, Procurement Manager – indirect goods at specialty chemicals manufacturer Sika. One example is the Chinese government's five-year plan with its ambitious climate and environmental protection targets, which has been implemented in an increasingly restrictive manner in recent years. If producers based in China fail to meet the requirements, factories are closed without further ado.
Last but not least, the transportation of dangerous goods is another challenge. Despite numerous handling regulations and warnings, these are not always heeded by suppliers and distributors. Not only producers and freight forwarders, but also customers have a responsibility to ensure that hazardous chemicals are transported and processed safely. Complying with regulatory requirements is extremely important, but requires a great deal of manual effort that buyers don't always have time for.
More resources for risk management
Ensuring security of supply while paying close attention to costs and compliance guidelines: this is no mean feat for procurement. When economic crises are thrown into the equation, operational buyers suddenly become risk managers for the entire company. In order to be able to focus more to the quality of suppliers and goods and to react in an even more flexible manner to price fluctuations, buyers in the chemicals industry should pay close attention to their own processes in order to automate as many workflows and time-consuming tasks as possible – for example when it comes to procuring operating materials and C parts: "We know from our customers' experience that C parts only account for one-fifth of the total purchasing volume. However, they make up 80% of all orders and two-thirds of suppliers," says Timmy Lack, sales manager at Wucato.
So how can buyers tell that their procurement structures are inefficient?
- Maverick buying
Scenarios in which departments end up order operating materials on their own initiative without involving procurement can prove costly for the company as a whole. This lack of transparency results in conditions and prices that have already been negotiated being ignored, and the opportunity to cut costs by bundling orders also remains unexploited.
- Multiple suppliers for same items
Another issue closely related to that of "maverick buying" is the procurement of the same items from multiple suppliers. For buyers, this makes price negotiations with individual companies more difficult and leads to too many suppliers being inefficiently managed by different employees.
- Considerable manual work involved in master data management
An unpopular task, but one that is nevertheless necessary for the company as a whole: master data management. If it is neglected, it is difficult to keep track of procurement processes and avoid unnecessary orders.
- No automated invoice run
The automated management of customer, contract and product data has the advantage that buyers have a better overview of invoice runs and can take action more quickly if incorrect orders are placed. Companies without these automated processes lack the flexibility they need to react to price fluctuations and negative market developments.
- Lack of clarity about internal process costs
Product and supplier data, quotations and invoices, or purchasing volume information: data as far as the eye can see. Strategic buyers can only use this data for optimization measures and savings if they have a transparent overview and a detailed monitoring system in place.
Automate time-wasters to focus on the important things
Wucato allows buyers to accelerate their procurement and efficiently cover their requirements for operating materials and C parts from the comfort of their desk. Suppliers and distributors offer more than 15 million items on the procurement platform, including special operating materials for laboratory equipment, such as protective gloves, pipettes or wide-neck bottles. "Wucato is our reliable partner at our side, and has helped us maximize the organizational efficiency of our procurement process for C parts. Now we have time for what is really important," confirms Milena Reinke from Sika.
Frequently required products can also be ordered automatically to save even more time. In order to boost transparency, buyers can use Wucato to consolidate suppliers and invoices in one digital location, and can also set up all of their internal approval and consultation processes.
Reap the benefits of digital procurement processes in online chemicals trading
Chemicals and pharmaceutical companies miss out on significant opportunities if they fail to use their procurement department as a market observer, information provider and risk manager. Timmy Lack explains: "Buyers are virtually on the front line in the sense that they are witnessing the increasing complexity of international raw materials trading and realizing just how important it is to make quick decisions to cover their own resources. This is a process that takes time - time that can be gained thanks to automated C parts procurement."
Thanks to digital analytics and qualitative data, procurement also holds enormous potential for reducing costs and driving digitalization throughout the company. Many optimization measures in procurement have a direct impact on other areas and can also foster improvements there.
So what else are you waiting for? Accelerate your procurement now and find out about the advantages offered by Wucato, Germany's leading B2B procurement platform.
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