Metrics are an important tool for pharmaceutical companies to evaluate the success of the customer-supplier relationship and the value delivered to their companies. Cost reductions and reduction in cycle time are commonly used metrics, but what measures go beyond these traditional metrics? Procurement organizations in pharmaceutical companies are charged with delivering value through practices such as supplier-enabled innovation, supplier-risk mitigation, and improved supply-chain transparency, among others.  How and to what extent are pharmaceutical companies and their suppliers able to quantify the value derived from these activities?

To answer those questions, Value-Based Metrics, a benchmarking study released by the Drug, Chemical & Associated Technologies Association (DCAT), examines the practices and key metrics used by both pharmaceutical companies and suppliers to measure the benefits of value-creation activities in the supply of direct materials used in pharmaceutical/biopharmaceutical development and manufacturing.  The study was developed by the DCAT Research & Benchmarking Task Force and administered by Cell Associates, a St. Louis-based marketing and research company.

“We are delighted to be able to offer these valuable insights as part of a complimentary service, DCAT Benchmarking, to our member companies,” said DCAT Executive Director, Margaret Timony. “Because the DCAT membership includes both innovator and generic drug manufacturers and suppliers of ingredients, development and manufacturing services, and related technologies, we were able to survey both sides of the pharmaceutical customer-supplier relationship. This report will help our member companies evaluate where they stand in relation to their peers.”

A sampling of key findings

The use of value-based metrics was fairly high among pharmaceutical companies and suppliers, but they differed in their views on the effectiveness of those metrics.

• 82% of the pharmaceutical companies surveyed had formal processes to measure supplier performance for value-creation activities while 67% of suppliers surveyed indicated they participated in such a process
• 63% of pharmaceutical companies considered the metrics that they use to measure supplier performance for value-creation activities to be quite effective, but only 43% of suppliers felt that the value0based metrics to which they were subject were quite effective

The top three value-based metrics used by both pharmaceutical companies and suppliers were:

• cost improvement over time
• risk mitigation
• on-time-in-full

The most common number of successful supplier-enabled innovation projects that resulted in measurable value in a given year ranged from 1 to 10 projects.

• 67% of pharmaceutical companies were involved in 1 to 10 projects per year involving supplier-enabled innovation with measurable value
• More than  55% of suppliers were involved in 1 to 10 such projects per year

Comparatively, customer-of-choice metrics (i.e., metrics used to measure the performance of pharmaceutical companies in the customer–supplier relationship) were used on a less frequent basis for both pharmaceutical companies and suppliers.

• 33% of the pharmaceutical companies had an evaluation process in which suppliers were asked to measure their performance (i.e. customer of choice).
• 50% of suppliers said they participated in such a process

Methodology

An online survey was conducted from May 2017 through July of 2017; 397 DCAT member companies consisting of both pharmaceutical companies and suppliers of direct materials used in pharmaceutical/biopharmaceutical development and manufacturing were invited to participate. The study sample excluded providers of supply-chain/logistics services, consultants, or other support services.  One-third (33%) of the survey respondents worked in pharmaceutical companies while two-thirds (67%) worked in companies that supplied pharmaceutical companies with direct materials.