We sat down with expert Chris Strom, former service procurement manager at Bristol-Myers Squibb, to gain some insights into understanding successful vendor relationships and how to decide which procurement model fits your lab.
Whether you’re consolidating facilities due to a corporationwide rightsizing effort or incorporating laboratories into your infrastructure in response to a merger or acquisition, establishing and maintaining a high-value vendor relationship can be critical to your success.
Strom’s Advice about Lasting Vendor Relationships
Q: With so much merging and consolidation happening today, what’s important for procurement in terms of impact on services?
A: My experience of the consolidation that my previous company went through – it wasn't a merger, but it was definitely a consolidation of services – we did have to work to understand what our whole services infrastructure looked like. It’s pretty straightforward: you need to have a basic understanding of what your services are, and who your providers are, and that’s very difficult to do in a multisite large company. This issue is consistent across the industry, often people don't understand what their baseline services are. If a services company could add value in providing that understanding with their customers, that would be of great value.
We had a full-time MBA graduate student working for us one summer whose sole responsibility was to understand our maintenance spend – and he was unable to determine that baseline number. And that's very common, because it's challenging with all the supplier consolidations happening in the industry, and the many different, fractured ways of delivering services over different geographies. It’s a challenge to manage multiple vendor relationships in a single company – and the complexity significantly increases if you’re merging two.
Getting a real handle on the scope would be the logical first step. You need to first create an accurate asset inventory to be able to establish a baseline. Creating the supporting processes to maintain that inventory is also critical, because in today’s large pharma environment, that data is incorrect within weeks of completing the inventory. Once your baseline is established and cost is clearly understood, an analysis of how to manage and optimize the spend is possible.
Q: Having been through several consolidations, would you have made any decisions differently?
A: I would have liked to have a vendor in to do an evaluation of our current state of services so they could better understand how they could help us. We tried to figure this out ourselves and then have the service vendors come in – and in that situation, there's something lost in translation. We ended up having prolonged conversations attempting to understand the value that service providers bring to the engagement. In addition, I would try to integrate the service provider in a big-picture way. It's a competitive market and asking service providers to perform that evaluation without the guarantee of a contract is a big risk for them. Having our suppliers develop a deeper understanding of what our internal challenges are would be incredibly useful to deliver the right program to meet a customer’s needs. That would be a decision I would make differently.
Q: How do you know when a relationship with an existing vendor is going south? What are the telltale signs?
A: Unfortunately, I can speak with direct experience on that topic! We knew we had challenges when we were having too many meetings, processes weren’t set up correctly and were being circumvented, timelines slipped, and deliverables weren’t clearly defined, creating unapproved scope-creep. When you don't have the visibility into the work or the correct metrics to measure that work, then you know it's not working well. And there was clearly a lack of alignment within the vendor’s organization including gaps in levels of management where the effectiveness of making changes or addressing issues was low.
Q: What are the top challenges facing procurement today as they manage multivendor relationships in the lab environment?
A: As I mentioned, it's analyzing all the information about the services and spend associated to those services can be a challenge. Your job is to procure these services for the best value, but again, establishing that baseline could be difficult to measure. It's not just the vendor, it's developing all the tools and analytics you need to determine your actual spend. There are things that multivendor service providers do that are very difficult to measure that don’t affect the bottom line as well – it’s called cost avoidance.
Let’s take a simple example: escorting vendors into your facility. This is something that a lot of researchers have to do, taking them away from their mission-critical tasks. Some companies allow you to register a service engineer at the front door, and then they're okay to walk through the building themselves, thus avoiding having to ask researchers to leave their tasks. This activity is measurable, so I would call that real savings, but it's hard to quantify. Other examples of cost avoidance in the laboratory environment could be creating POs, maintaining individual asset inventories, creating metrics, follow-ups with service suppliers for field service reports, managing quality documentation, and so on.
Q: What's the one piece of advice you would offer procurement managers when consolidating services and making this change?
A: If you're talking about multiple service providers, I think a well-designed RFP is key in measuring suppliers in a consistent way. There are procurement managers who have a disposition to go to one vendor over another, and you have to throw that idea that out the window and give everybody a level playing field.
I’d also mention again that it would be important to bring someone in-house to document the existing processes. One of the seemingly simple yet biggest challenges across the industry is tracking assets. Companies have their own way of moving assets internally, and my personal experience was that ours was unbelievably poor. We didn't know how bad it was until we brought in a multivendor provider to manage this activity. Under the best of circumstances and conditions, they could do that work effectively. Our processes and systems created challenges that were not understood until our supplier attempted to engage in the process. Suppliers typically promise they can track assets without knowing how bad the client’s internal systems are. Make sure that the vendor understands and realizes what they’re getting into.
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