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Life Sciences & HealthcareComprehensive Diagnosis for Long-term Procurement Strategy in the Pharmaceutical Industry


The pharmaceutical industry demands continuous development of new drugs, reduced time-to-market, and stringent quality control. Recently, the industry has been undergoing rapid structural changes, including integration with IT technologies, expansion of biopharmaceuticals, forays into beauty and health food sectors, and globalization.

The client, a top-tier domestic pharmaceutical company, is recognized for its high profit margins and exceptional product development capabilities. However, its procurement team faced challenges in building the capabilities and systems needed to support KRW 1 trillion in revenue and sustain the company’s growth. In collaboration with Looxent, the client conducted a comprehensive diagnosis of its procurement functions and designed long-term initiatives.

Limited Recognition of Procurement’s Role in the Pharmaceutical Sector

In the pharmaceutical industry, where rapid development and quality are critical, decision-making and execution tend to prioritize R&D over procurement. This pattern is not unique to the client but prevalent across domestic companies. In contrast, global firms elevate procurement’s status through practices like job rotations that place technically skilled employees, including those with R&D backgrounds, in procurement roles. Additionally, global firms often adopt integrated global or regional procurement strategies, unlike domestic counterparts, where procurement teams primarily respond to departmental requests.

Given this context, expanding procurement teams in line with revenue growth presents practical difficulties. The question of how to broaden procurement’s role and demonstrate its value is a common challenge for procurement teams across the pharmaceutical sector.

Core Direction: Efficiency and Specialization

Amid resource constraints, creating value for internal stakeholders while contributing to company growth begins with efficiency. Increasing the proportion of strategic procurement activities that generate real value hinges on reducing transactional tasks.

A coverage analysis revealed that most procurement costs were already managed through the procurement team, indicating sufficient coverage. However, analysis of task allocation by item importance revealed inefficiencies: while high-priority items lacked sufficient expertise, a disproportionate amount of time was spent on non-core items and daily operations.

To address these gaps, the latest trends in procurement efficiency were proposed, including:

  • RPA (Robotic Process Automation): Automating repetitive tasks.
  • Tail Management: Simplifying non-core item tasks through MRO providers.
  • Approval Process Differentiation: Streamlining approvals based on cost significance.

To enhance item specialization, it is essential to expand procurement’s role during development stages by strengthening Early Sourcing Involvement (ESI). This requires a combination of procurement skills and technical knowledge to communicate effectively with engineering and R&D teams. Practical steps include:

  • Gaining expertise in assigned items.
  • Expanding the supplier pool.
  • Adjusting processes to integrate ESI.
  • Reassigning responsibilities, designing training programs, and resolving user department issues.

Efficiency, Specialization, and Incremental Role Expansion

The project further identified areas for procurement’s future role expansion through interviews, surveys, and benchmarking. Key focus areas included:

  • Procurement’s organizational positioning and roles/responsibilities (R&R).
  • Strategic procurement activities.
  • Supplier management.
  • IT infrastructure.
  • Training and evaluation systems.

Interviews with internal stakeholders assessed expectations of procurement, while benchmarking similar domestic and international firms informed organizational structure and procurement coverage. Based on these findings, a roadmap was developed, outlining quick-win initiatives, priorities for execution by 2020, and gradual tasks for subsequent years.

Project Impact and Feedback

The client recognized this project as a timely opportunity to define the direction for procurement team operations to support corporate growth. Feedback highlighted the value of:

  • Listening to internal stakeholder perspectives.
  • Proposals for changes to internal R&R.
  • A roadmap for long-term strategic direction.
  • Gaining external expert insights to build momentum for execution.

This project serves as a benchmark for enabling procurement teams in the pharmaceutical sector to drive growth through efficiency, specialization, and incremental role expansion, setting a foundation for sustainable success.



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T  02-546-8222      F  02-546-8226      E  service@looxent.com 

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© 2024 LOOXENT. ALL RIGHTS RESERVED.


LOOXENT

A  21F. Parc.1 Tower2, 108, Yeoui-daero, Yeongdeungpo-gu, Seoul, Korea 07335

T  02-546-8222      F  02-546-8226

E  service@looxent.com 

© 2024 LOOXENT. ALL RIGHTS RESERVED.