Case Study

Healing merger pains

Integrating source to pay is just the tonic for one pharma giant

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Who we worked with

A major player in pharma.

What the company needed

The good news: the business was growing quickly. The bad news: mergers and acquisitions had turned its source to pay (S2P) processes into a fragmented mess. That led to cost overruns, wasted money, and unpredictable purchasing at its facilities around the world.

How we helped

We transformed the company's S2P processes to bring out the value from its mergers. To do so, we - Expanded e-sourcing to power smarter purchase decisions - Launched e-procurement and catalog buying to tighten controls over spending - Extended e-invoicing to improve accounts payable

What the company got

More efficient S2P processes with a potential impact of $40 million for the business over five years.

Growth is always great, but for this global pharma it came with a downside: the company's global mergers and acquisitions were wreaking havoc on its source to pay function. The company needed to rebuild this function—and do so fast—in order to control spending, contract management, and transactions.

Challenge

Herding stakeholders

This business, spread over four countries, had more than 100 stakeholders across leadership, sourcing, finance, and business. There was no clear view of priorities. The company faced:

  • An array of systems, practices, and silos in each country. Without standard ways of working, people managed processes inconsistently
  • Difficulty controlling spending as budgets weren't visible
  • Employees who didn't stick to contracts or processes

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Solution

Diagnosis—and digital tech

First, we partnered with the client to diagnose its S2P infrastructure. The goal: unearth ways to integrate processes with digital technology. We analyzed the data and used benchmarks to find ways to improve S2P.

Here's what we found:

  • Big gaps in the contract management system: Sample audits showed that information on most vendors was incomplete or wrong—and that hampered procurement
  • No one was minding the store: More than half of all goods and services ordered arrived late—not surprising, given that nobody was keeping track of vendor performance
  • Unplanned spending: With reactive processes, the company's actual spend was higher than planned
  • Accounts payable chaos: Staff were still processing many low-value invoices by hand—and making lots of mistakes as they did. So payment processing was slow
  • Compliance gaps: All too often, vendors' final invoices didn't reflect the agreed payment terms

We had our marching orders. We had to build smarter processes. And we did.

To help the company meet its goals we:

  • Increased the use of e-sourcing
  • Introduced catalog buying, identified the best vendors, and improved the process for purchase orders
  • Encouraged the use of e-invoicing to reduce processing errors and payment delays

Impact

With digital, mergers pay off

With increasing use of technology, spend under management for the firm increased from approximately 55% to 80%. And there's more good news. Over the next five years the firm could expect to save:

  • $16–17 million using e-sourcing to increase spend under management and tactical buying
  • $8–12 million through robust contract management systems and increased visibility
  • $7–8 million from more efficient procurement transactions
  • $6–7 million from more efficient payables processes, rationalized payment terms, and discount penetration

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