Effective spend management strategies were the key differentiator in the success or failure of fast-growing biotechs through the global pandemic. Whether or not labs could reduce expenditure quickly and adapt to supply chain disruption defined not only their rate of growth, but whether or not they survived.
As we exit out of a time of economic turbulence and edge closer to 2022, we’re curious: what’s in store for biotech organizations in 2022? And how will spend management evolve?
Here are our four predictions for the future of spend management for biotech organizations.
1. Streamlined purchasing cycle times will define competitiveness
As expected, demand is beginning to increase as we exit out of the global pandemic. And given the last few years, the demand for fast and effective drug and vaccine development has never been so prevalent.
With this increased demand comes pressure to reduce costs, improve regulatory compliance, and most importantly, speed up cycle times between drug development and product deployment.
Without a fast and autonomous way for lab teams to purchase what they need, when they need it, however, product cycle times will remain slow, outdated, and reactive to financial performance.
Through 2022, operational executives at biotech labs must prioritize operational efficiency across the entire procure-to-pay process. Finding new ways to empower science teams to purchase goods and services instantly will result in greater competitiveness, reduced bureaucracy, and faster deployment times.
To speed up your purchasing cycle times in 2022, we recommend streamlining four core areas:
- Spend visibility and control
- Category and vendor management
- Supplier relationship management
- Reducing backend administrative costs
While you can’t control supply chain disruption, you can control the rest of your spend management ecosystem. Make sure that optimizing it becomes a top priority.
2. Supply chain disruption will continue
Unfortunately, it’s predicted that supply chain disruption will be a mainstay through 2022. Consequently, many biotech labs will continue to suffer from slow purchase-to-receive timelines.
Adapting to this version of ‘new normal’ is critical for the success of a lab. It calls for vendor diversification, innovative workarounds that ensure projects remain on track, and most importantly, stronger supplier relationship management.
Supplier relationship management is not a new concept, but many spend management teams fail to maximize its impact because they do not implement it rigorously.
Through 2022, it’s important that biotech labs pay closer attention to supplier relationships so they can benefit from things like streamlined operations, reduced administrative costs, and greater negotiating power.
3. Strategic planning will take a front seat
‘After the fact’ spend management is now a thing of the past. Instead, financial leads at biotech organizations must begin working proactively to mitigate cash flow turbulence, reduce wastage, and decrease unnecessary and fraudulent spending.
The only way to become proactive, however, is to ensure that all spending aligns to high-level organizational goals. Only then can you guarantee that every cent is spent on furthering the overall mission of your organization.
Meticulous cash flow management like this requires a detailed eye. Ultimately, if you spend too much too quickly, you risk running out and stalling operations; if you cut too much from your science teams, you risk stalling deployments and stifling growth.
4. Indirect spending optimization will decide growth
In parallel with more control over spending, greater visibility will become a foundational mission for finance leads in 2022. Building this foundation will improve the management of spend categories and suppliers, and will help optimize spending on indirect and often neglected areas.
To optimize your indirect spend categories, we recommend focusing on these foundational areas first:
1. Start by tracking metrics: If you can’t see it, you can’t manage it. The first step to indirect spend optimization is to build a visible spend management process. This way, you can account for every cent you spend.
2. Begin consolidating your vendors: When you have a clear picture in place, your next step is to begin looking at areas where you can reduce costs. One such method is to conduct a vendor consolidation exercise.
3. Conduct vendor performance analysis: Alongside your vendor consolidation process, it’s important you build a framework that lets you conduct in-depth vendor benchmarking. You need to understand metrics like on-time delivery performance, expectation management, and accurate pricing. By doing so, you can begin leveraging things like greater negotiating power.
Indirect spending optimization will be your driving force for growth in 2022 and beyond. Neglect this step and you risk falling behind in 2022.
Spend management predictions in 2022 and beyond
If COVID-19 has taught biotech labs anything, it’s that the future is uncertain. Harnessing the power of digital technology and advanced analytics, then, is the only way to make accurate predictions and remain adaptable to drastic change.
Ultimately, smart and simple spend management in 2022 comes down to two core elements: the right technology and advanced analytics tracking. With this foundation in place, biotech labs can walk into 2022 and maintain an agile advantage over ‘big pharma’; finance teams can achieve regulatory compliance so that they can successfully scale; and most importantly, science teams can regain their time to concentrate on what matters most: the science.