First, let’s consider some classical procurement strategies for cost savings:
- Prioritize / rationalize spend so you don’t buy what you don’t need most
- Provide spend visibility for more informed spend decisions and compliance to preferred vendors
- Aggregate spend with lower cost vendors to achieve overall savings
- Automate routine labor intensive tasks to save on labor costs
- Close purchasing loopholes, overcharges and spend leakages
- Hold suppliers accountable for low quality services or materials that create negative impacts
Ok, does this sound like a motherhood and apple pie approach to purchasing? Well then, let’s see how some integrated software solutions might help achieve these savings.
The Management Cycle
If you look into a financial planning tool like Hyperion Financial Planning or their SaaS version called PBCS (Planning and Budget Cloud Service), you’ll find that it easily allows you to create a Project (Trial) Level Plan which includes Company, Project (Trial), Cost Center, Natural Account, and Vendor. You can create both annual budgets and/or updated quarterly/monthly forecasts. You will also be able to see how well you forecast expenses and the reasons for forecast inaccuracies.
With a little help from an experienced systems integrator, you can be up and running on Hyperion Planning or PBCS in 4-8 weeks (depending on your specific requirements). Benefits include:
- Advance trial spend visibility for better spend sourcing decisions as well as prioritization by both project and expenditure category within a project
- Aggregation of planned trial spend per category for better volume based supplier negotiations
- Improved forecast accuracy resulting in more accurate funding forecasts, truer financial accruals and improved cash management
It should be pretty clear that there can be some large savings associated with these types of planning benefits. So let’s move on now to the second step in the Management Cycle – Execution.
Ok, so you’ve done some good project / vendor level planning of your clinical trial expenses. Now let’s see how your company is spending versus these plans. Anyone sense an impending problem here? Well, if you’re not tracking actual spend by project and vendor in your ERP system, you won’t be able to compare to your forecast and know if you are over/under spending.
While spend tracking by project can be achieved with a number of different ERP solutions,Oracle E-Business Suite (EBS) and Cloud Financials include a Project Costing module which is particularly useful in associating projects/tasks and vendors with actual spend. It starts up-front in the procurement process with Purchase Requisitions and flows right through the Projects sub-ledger into the General Ledger by full account string. It can even enforce rules and approvals to ensure non-preferred vendors are not used for a given trial. EBS Project Accounting can also ensure only expenditures which are actually received and meet the specified quality level are paid.
Don’t have Oracle as your ERP system? No worries. A good system integrator should still be able to extract your spend by project from your Accounts Payable system. This, at least, enables comparison of Actual to Planned expenditures by project and category. The key is to make sure you are tagging each of the expenditure lines by project number. This, of course, requires a little process discipline, but is well worth the benefits, which include:
- Enabling and automating the comparison of Actual to Planned expense by trial and vendor
- Preventing/reducing maverick spend/use of non-preferred vendors
- Driving spend accountability by project
- Prevent purchasing dollar leakages due to unplanned or inappropriate charges
Last in the 3-step Management Cycle is the ’Measuring‘ process. Unless you establish a reporting/measuring process, you will likely be destined to repeat the same mistakes. While Oracle EBS is an appropriate ERP system for Project Accounting and Hyperion Financials (or PBCS) is an excellent financial planning tool, accelerating the understanding of variances from our financial plans calls for a robust Business Intelligence (BI) reporting solution. Standard row/column reports just don’t cut it.
At Apps Associates, we have developed a cloud-based Financial Analytics tool which integrates actual ERP financial expenditures with Hyperion (or PBCS) based financials plans. This solution can be deployed on Oracle’s BICS (Business Intelligence Cloud Service) platform or other platforms as well. This tool includes some very powerful features such as:
- Variance from Trial Budget or Forecast by amount or percent
- Spend and Variance trend reporting by Project, Expenditure Type, Cost Center, Therapeutic Area, Vendor, Project Manager
- Project forecast accuracy trend reporting – by month, quarter, year
- Ability to drill down from high level project variances to expenditure type, cost center or vendor, invoice to discover root cause of budget or forecast overruns
- Graphical visualization of forecasts and variances for quick problem identification
The Apps Associates BI Clinical Trials Analytics solution provides deeper understanding of opportunities for improvement, as well as wider audience visibility that results in better spend management and company-wide buy in. This should close the loop on ’The Management Cycle‘ and using new tools to more wisely manage precious Clinical Trial spend dollars.