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August 04, 2023

Tender and deal management: The journey to excellence

For life sciences companies, improved tender and deal (non-tenders) management is a must – but there’s more to it than buying software.

Few processes impact a life sciences organization’s bottom line as much as tender and deal management. Tenders, the bidding processes that public hospitals must use to procure goods and services, represent up 70% to 85% of revenue for medical technology companies and 25% to 40% for pharmaceutical companies. They are complex, rigid processes that require rapid, seamless collaboration to produce bids that meet the bidder’s revenue and profit targets as well as customer- and often country-specific requirements. Optimizing the management of tenders—and deals, their private-sector contracting counterpart often used by buying groups in the US, Germany, Netherlands and Japan—represents a major opportunity.

Despite its importance, tender and deal management often relies on manual, disjointed processes using spreadsheets and emails. Those responding to tenders and deals lack a single repository of reliable information as well as standard systems, price governance, audits, and business approach.

On average, six departments within MedTech devote 200 to 500 hours to each tender, with salespeople spending up to 50% of their time on tender-related administrative work.

This disjointed approach often leads to a lack of visibility, which may leave organizations only 35 days to prepare and submit bids. Cumbersome information sharing, meanwhile, makes it difficult to decide which opportunities to compete for, and which prices and other terms to offer in bids. All this means excess cost and lost opportunities when prices are set too high, or lost revenue and profits when bids are too low.

Given all this, achieving tender and deal excellence is an opportunity to increase revenues at pharmaceutical and medical technology companies 3% to 5%, boost profits up to 3%, and reduce tender- and deal-related costs up to 25%, all while limiting the risk of non-compliance penalties.

So what must life sciences do to improve their tender and deal management?

Some have started to reevaluate their strategies. Often, that reevaluation begins and ends with an all-in-one tender and deal management technology platform integrated with other core business systems. We have found, however, that achieving excellence also requires optimizing people’s roles and skills, as well as business processes, across the tender and deal management lifecycle. Here’s what that journey entails at each stage:

  1. Discovery

    Increased visibility into current and upcoming (anticipated) opportunities allows the entire organization to plan better—gathering the information, systems and processes required to properly bid for existing tenders and to shape tenders before they are published. By identifying opportunities 12 to 18 months in advance, the sales team and account managers will have ample time to prepare a business plan and lobby to become the preferred supplier, all with the help of a guided sales workflow with predefined tasks and milestones. This also provides time to shape the tender or deal by encouraging the issuer to include requirements and weighted award criteria that will help your organization win. This step is critical; many experts estimate that nearly half the work required to win a tender occurs before it is published.

    Collecting and analyzing data can also help life sciences companies make informed decisions about which opportunities are worth spending the time, money and effort to pursue. Once the business connects to multiple local online publication platforms, smart search with AI can be used to automatically find information about upcoming tenders and deals. Machine learning (ML) can automatically make recommendations, based on specified business criteria, regarding whether to bid on each lot of the published tender. Once qualified, the publication details can be imported into the tender and deal management tool, automatically creating the bid proposal structure for submission.

    Discovery also requires a dedicated bid team with clear roles and responsibilities and the skills to carry them out. Workflows should define what data various collaborators, such as sales, finance, demand planning, and legal and compliance require.

  2. Execution

    Execution comprises all the work required to create and submit a winning bid for a tender or deal—and, if it is won, fulfilling the terms of the contract and maximizing the resulting revenue and profit.

    This includes managing and tracking opportunities and proposals in the bid pipeline and ensuring proposals are submitted before the deadline. Tender and deal managers must update the business case first prepared during the discovery phase (or develop a new one if details of the published tender dictate). This requires analyzing the requirements as well as past tender performance, previous winning prices, strategic goals of the business, and likely bids from competitors. In the process, tender and deal managers must collaborate with functions such as sales, finance, demand planning, finance and legal to build a winning proposition while adhering to company policies.

    In this phase, AI can help estimate both optimum pricing and win probability. Automated scorecards can simulate alternatives, taking into account pricing and qualitative award criteria scoring, and ultimately arrive at an optimal winning bid scenario that is still profitable. The pricing and legal functions must be updated to ensure compliance with corporate policies.

    If the bid is won, the tender or deal manager needs to update the system and capture outcome details. To ensure that required products are available at the proper time and place, the manager must update the supply chain, as well as corporate planning, finance and sales to ensure proper budgeting, forecasting and invoicing for the contract period.

  3. Governance

    Governance is the process of ensuring the company fulfills the requirements of bids it has won, but also of improving the performance of the entire tender and deal management process. This is accomplished by replicating what worked well and making improvements where needed.

    Another essential function is measuring and optimizing metrics such as volume delivered vs. volume called for in the contract; profitability; and penalty avoidance for non-delivery. The account manager must be kept informed of the contract performance and any possible extensions. They should also both proactively advocate for such extensions to maximize revenue and delay the publication of a new tender (which would require new competition). While monitoring contract performance, the account manager should focus on ensuring pull-through sales under the current contract, while planning for and shaping future opportunities.

    Reporting on various metrics and decision outliers, as well as tracking key performance indicators (KPIs) such as win and conversion rates and supply fulfillment rates, helps all players understand what needs to be improved.

Replacing siloed, manual tender and deal management systems with a single technology solution speeds a life sciences company’s journey to excellence.

It can automate and standardize common processes, while giving all stakeholders a unified view of data, processes and the status of tenders and deals. Rather than building such a tool in-house, we recommend choosing an off-the-shelf solution for the fastest, most efficient rollout, as several solutions have matured considerably.

While some may believe the deployment and integration of such a global tool is too long and expensive to be feasible, we have implemented several solutions with multiple life sciences companies in as little as 12 months across more than 80 markets around the world. Because excellence in tender and deal management involves new tools, processes and skills, change management is required to assure adoption of the new platform through training and education about its benefits.

Assess your readiness

In our experience, many life sciences companies believe their tender and deal management capabilities are more mature than they really are. In some cases, the level of excellence in one geography or business unit is not matched by the entire organization.

Rigorously assessing the right KPIs is the only way a business can properly understand its current level of excellence and where improvement is needed. The sooner life sciences organizations begin pursuing tender and deal management excellence, the sooner they will reap the rewards of increased revenues and profits with lower risks.

To learn more, visit the Life Sciences section of our website or contact us.

This article was written by Robertjan van Amstel de Vries, a leader in Cognizant’s Life Sciences practice.

Cognizant Insights Team

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