Case Study: A Collaborative Approach to API Sourcing
The Challenge
Our client, a leading pharmaceutical company, was facing significant cost pressures due to increasing API prices. They were particularly concerned about the cost of a critical API used in one of their key central nervous system (CNS) products, and which accounted for a significant portion of their overall manufacturing costs. The company sought a solution to reduce costs without compromising quality or supply reliability.
Our Approach
We adopted a collaborative approach to address the client's challenge. We began by conducting a thorough analysis of the current sourcing strategy, including supplier performance, pricing trends, and market dynamics. Through in-depth discussions with the client's procurement team, we identified key areas for improvement, including:
Supplier Selection: Evaluate the existing supplier's performance and explore alternative options.
Negotiation Strategy: Develop a robust negotiation strategy to secure favourable terms and conditions.
Cost Reduction Initiatives: Identify opportunities for cost savings, such as bulk purchasing, supplier consolidation, and value engineering.
We then embarked on a rigorous supplier selection process, considering factors such as quality, reliability, cost-effectiveness, and sustainability. By leveraging our extensive network and industry expertise, we identified a new supplier that met the client's stringent quality and compliance standards.
The Outcome
Through collaborative negotiations, we were able to secure a significant price reduction of 58% on the critical API. This cost saving translated to an annual savings of $2.5 million for the client in the first year, and set to increase in future years as the product continues to grow.
The new supplier, benefiting from increased volume, was able to invest more in research and development, leading to further innovation and cost reductions. This virtuous cycle of collaboration and mutual benefit has strengthened the partnership between the client and the supplier.
Key Benefits
Significant Cost Reduction: A 58% reduction in API costs.
Enhanced Supply Chain Resilience: Diversified supply base and reduced reliance on a single supplier.
Improved Product Competitiveness: Lower production costs enable more competitive pricing.
Increased Patient Access: Lower costs translate to more affordable medications.
Stronger Supplier Partnership: A collaborative relationship focused on mutual growth and innovation.
By adopting a strategic and collaborative approach, we were able to deliver substantial value to our client and their patients. This case study demonstrates the power of partnership and the potential for significant cost savings and improved outcomes in the pharmaceutical industry.