Cost, risk, on-time and in-full: Defining value in the customer-supplier relationship

19-Oct-2017 - Last updated on 20-Oct-2017 at 15:18 GMT

(Image: Getty/manfeiyang)

Pharmaceutical companies are more likely than their suppliers to cite cost improvement over time as the most effective metric for measuring supplier performance, according to a recent report.

The Drug, Chemical and Associated Technologies Association (DCAT) has released a benchmarking study examining the metrics and practices employed by pharmaceutical companies and suppliers to measure the benefits of value-creation activities, such as supplier-enabled innovation, supplier-risk mitigation, and improved supply-chain transparency, among other practices.

“In the case of the top metrics used to evaluate supplier performance for value-creation activities, it was interesting to note that both pharmaceutical companies and suppliers reported the same three leading metrics: cost improvement over time, risk mitigation, and on-time-in-full,” David Beattie, Ph.D., vice president, Bioprocess R&D at MilliporeSigma told Outsourcing-Pharma.com.

However, views on the effectiveness of these metrics differed with pharmaceutical companies more likely to use cost improvement over time and risk mitigation as the most effective metrics for measuring supplier performance for value-creation activities. Conversely, suppliers said they were more likely to use on-time in-full and are “much less” likely to use cost improvement over time, according to the report.

“Even though a majority of pharmaceutical companies and suppliers had formal processes in place to measure supplier performance for value-creation activities, a minority used customer-of-choice metrics to evaluate the performance of pharmaceutical companies,” said Beattie.

According to the report, one-third of the pharmaceutical companies have a process in place for suppliers to evaluate their performance. Less than half of the supplier respondents said that they have participated in an evaluation process of their pharmaceutical customers.

“Recently, there has been interest in the industry about taking a 360-degree view of the customer-supplier relationship,” added Beattie.

“In other words, not just evaluating supplier performance, but also asking suppliers to evaluate their pharmaceutical company customers through the use of customer-of-choice metrics. The study showed that there is still work to do to have that bidirectional focus.”