The dialogue partners
Prof. Dr. Patrick Da-Cruz is Professor of Business Administration and Healthcare Management at the Faculty of Healthcare Management at Neu-Ulm University of Applied Sciences (HNU) and Academic Director of the MBA programme Leadership and Management in Healthcare.
Before joining the HNU, Mr Da-Cruz worked for well-known strategy consultancies in the pharmaceutical/healthcare sector and in management positions in companies in the healthcare industry in Germany and abroad.
Prof. Dr. Patrick Da-Cruz is Professor of Business Administration and Healthcare Management at the Faculty of Healthcare Management at Neu-Ulm University of Applied Sciences (HNU) and Academic Director of the MBA program Leadership and Management in Healthcare.
Before joining HNU, Mr. Da-Cruz worked for renowned strategy consultancies in the pharmaceutical/healthcare sector and in management positions in healthcare companies in Germany and abroad.
Dr Nicolas Busch is a medical doctor and partner at the management consultancy Boston Consulting Group in Munich. In particular, he advises European health insurance companies, healthcare systems and service providers on optimising their care approaches and identifying new opportunities through digitalisation.
What are the main challenges in procurement?
Prof Dr Florian C. Kleemann: Procurement is a highly networked function both internally and externally, especially as an interface to the procurement markets. In this respect, it is always aware of all significant fluctuations, crises, etc. - such as market distortions, material bottlenecks or interruptions in logistical supply routes. A current example of this is the increasing piracy in the Red Sea, a key shipping route between Asia and Europe.
More fundamentally, the task of procurement is to supply the company with everything that it does not produce itself, with the exception of capital and personnel. There is typically a conflict of objectives between stable (qualitative) supply and the most favourable prices and costs possible. With increasing external procurement, also known as outsourcing, the importance of suppliers and their innovations increases. This increasingly results in the challenge of generating innovation contributions. An additional difficulty, however, is that procurement has long received little attention in most companies. However, as supply chains become increasingly complex, the workload is now growing - and resources are now lacking to cope with it.
Procurement often leads a niche existence, even in the pharmaceutical industry. Has the coronavirus pandemic and the geostrategic upheavals changed anything here?
Prof Dr Florian C. Kleemann: For far too long, procurement has felt very comfortable in its role as a "cost killer" - it may be motivating to see the successful savings "in black and white" after intensive negotiations. But of course their importance is also reduced to this issue. However, the pharmaceutical industry had relatively stable margins for many years. This meant that it was not really dependent on (cost-orientated) procurement for a long time. This only worked as long as a) the margins remained adequate and b) the supply chains were stable. This changed abruptly with the complexity drivers mentioned in the question. And although there were, of course, some bottlenecks in the healthcare sector - also accompanied by the media - procurement was able to cope with these crises solidly overall. This led to a broader perception and recognition of the procurement function at the height of these impacts. Unfortunately, with some distance, I cannot recognise that this has now resulted in a completely different perception of procurement in structural terms.
You hear "resilience" more and more often as a buzzword in connection with supply chains. What do you mean by this and what relevance does the approach have in the pharmaceutical environment?
Prof Dr Florian C. Kleemann: It feels like the term is often used to describe something like "crisis resistance". But resilience means more than "strength" or "stability", namely the combination of robustness or resistance and flexibility or agility. After all, something that is designed to be extremely stable is typically not very flexible and very rigid. Conversely, something that is primarily flexible is not stable enough. Resilience attempts to combine these aspects and develop solutions that are as robust and yet agile as possible. In the pharmaceutical environment, we have certainly seen this in recent years with coronavirus vaccine production - but also with the increasing material and subsequent supply bottlenecks. In the former case, we were able to ramp up supply and production capacities very quickly through cooperation and flexible solutions in combination with existing financial resources. The combination of agility and robustness therefore worked well here. In the case of drug shortages, on the other hand, we are seeing a lack of stability in the supply chains - for example, due to a lack of redundancy in the supplier base. If I only purchase certain active ingredients, such as cephalosporins, from one supplier or from one region, a shortage there will of course affect me much more than a shortage from another supplier.
What impact does the topic of sustainability have on supply chain management in the pharmaceutical industry?
Prof Dr Florian C. Kleemann: Even if there are sectors that have an even higher proportion of external procurement, the procurement volume in the pharmaceutical industry is often over 50% of sales, i.e. value creation and production take place to a very large extent with external partners, i.e. suppliers. However, while you can control and manage your own production yourself - and thus, for example, the environmental impact or working conditions - this is a challenge with suppliers, especially international ones. This means that procurement naturally has a corresponding lever here, if this is desired or required.
However, it is also important to realise that the topic is currently receiving a great deal of attention in Europe and North America. This is also reflected in increasing regulatory pressure through legislation, in Germany for example through the Supply Chain Due Diligence Act. In other countries and regions, however, including important procurement markets for the pharmaceutical industry such as India and China, the demand is significantly lower. In some cases, the (supposed) European "missionary zeal" is even met with complete incomprehension and rejection from suppliers. Whether and how much procurement can actually do to promote sustainable business practices in the supply chain also depends on what mandate and resources are available for this. After all, the focus on sustainability often ends where it starts to noticeably "cost money".
How will the topic of AI affect procurement in the pharmaceutical industry?
Prof Dr Florian C. Kleemann: The topic of AI and its impact on procurement is simply still too new and most use cases are still too immature to make reliable statements. The currently hyped "generative AI" with tools such as ChatGPT is only a fraction of the potential capabilities. In contrast to previous technology trends, however, I would assume that not only operational procurement will be affected, but that tactical tasks, such as negotiation preparation or even strategy development, can at least be supported or even automated. To conclude, I have a clear recommendation: don't put this topic on the back burner. Rather, the possible applications should be examined again and again and then implemented selectively.
Thank you very much for the interview!
The content and statements presented in the interviews reflect the perspective of the interviewees and do not necessarily reflect the position of the editorial team.
