The AI revolution in pharma is well underway. We’ve already seen how AI is redefining how scientists discover and develop new lifesaving treatments, but applying it to other areas of pharma can deliver huge value, too.
One area in which AI shows huge promise and opportunity is within procurement and supply chain management – an area that is one (if not the) largest for business expenditure.
For the pharma industry, stress factors are intensifying every year. Regulators are imposing stricter environmental controls across the design, manufacture and transportation of pharma products. A new wave of medicines is creating a huge challenge for manufacturing and distribution networks. Falsification and counterfeit goods continue to plague the marketplace, while demand from emerging markets is growing.
In the face of these challenges, a new approach is needed to sourcing, procurement and supply chain management. And AI has the potential to revolutionize all three.
Simplifying sourcing and procurement
With increased competition and tightening profit margins, attention has returned to finding efficiencies and cost savings within sourcing and procurement.
Sourcing relates to the process of supplier selection and management and has become increasingly more important considering heightened logistical risks and complexities. On the other hand, procurement relates to the process under which goods and services are acquired and consumed by a business — both upstream and downstream.
Historically, sourcing and procurement processes have been incredibly laborious with teams spending hours or often days sifting through the internet searching for new suppliers to engage with. Correspondence is fragmented at best across platforms and email chains, and vendor ROI is difficult to compare.
AI tools can simplify and speed up supplier sourcing. It can allow businesses to search for suppliers based on specific criteria including location, product and service specifications within minutes. Teams then have an accurate list of new suppliers to explore and shortlist that matches the scope of work.
From this point, procurement teams can invite potential vendors to bid on a request, replacing traditional methods and reducing the amount of risk introduced into the supply chain.
Minimizing risk and costly mistakes
Risk is an unavoidable factor within supply chains, but procurement plays an important role in minimizing allowable risk from the outset. Risk can come in many forms, from poor quality goods, drug shortages or excessive inventory to counterfeit and falsified medicines entering the marketplace.
AI solutions can help to mitigate these risks, including fraud detection, supplier risk assessment, predictive analytics and contract review.
Information is abundant, but it’s not always in our language, or easy to find, or necessarily searchable in a ‘normal database’ which can allow errors and risk to creep into decision-making. When applied correctly, AI can quickly and concisely make sense of large data sets and present the most important information procurement, sourcing or supply chain professionals need to know to manage supply chain risk and act before it becomes costly or undermines compliance.
Climate change is the largest health threat we face. And pharma is both part of the problem and the solution.
Historically, very few control mechanisms have existed that support good practice and governance of supply chains. The more archaic procurement processes are virtually unauditable and that has, by default, made procurement an opaque sector over time.
To drive positive change and deliver on ESG, it’s vital that procurement professionals have full visibility of suppliers’ sustainability goals and contributions, so they can make the best fact-informed decisions about their sourcing partners. AI is a key part of the future of green logistics, in pharma and all other industries.
Carbon footprint reducing begins at the sourcing stage, and AI can allow procurement teams to make smarter, greener decision-making around suppliers and spending from the outset.
AI-supported strategic sourcing can create a holistic standardization of sourcing requirements, data gathering formats, and information storage. It involves continuous cycles of review, where companies evaluate spend, sustainability goals, supplier relationship management, data gathering approaches, and more.
AI-powered technology uses very large volumes of data to predict, learn and improve functions. And its accuracy and usefulness only improve as the volume of historical data collected increases. This will enable teams to move closer to what Gartner has identified as “autonomous procurement,” which has the potential to take efficiency and savings to new heights when the right building blocks are in place to help pharma organizations compete faster, smarter and cleaner.
Becoming more efficient and agile
The McKinsey Global Institute estimates AI solutions applied in the pharma industry could be worth $100 billion annually to the U.S. market alone.
Pharma has long been held back by procurement processes and supply chain networks that are neither flexible nor cost-effective. A radical overhaul is long overdue.
Digitization and the application of AI is key to future resilience and efficiency, moving from a network of manual, siloed systems to a formula that puts real-time visibility and centralization first, leading to operating efficiencies and agilities.
AI can bring this much needed visibility, providing accurate, normalized, connected and timely data to deliver real-time insight and predictions about what’s happening next across the chain. If an AI tool identifies a potential logistic disruption, businesses can act before it’s too late.