Competing in the global biological and pharmaceutical market requires shrewd cost control and strategic sourcing across all areas of spend. That’s exactly what Novozymes A/S, a Bagsvaerd, Denmark-based biopharmaceutical company, realized in 2004 when it decided to increase its global spending control through e-procurement for its indirect purchases.

Novozymes had been using a European e-procurement tool since 2001, but needed to find a provider that had strong contact with suppliers in the U.S. and China, as well as Europe.

Torben Skov, project manager of executive buying at Novozymes, says the company negotiated a contract with SciQuest of Cary, N.C., in late 2004, based on its reputation in the biotech industry and its list of suppliers. Novozyme’s new e-procurement system launched five months later in 2005.

One of the major benefits Novozymes has seen since implementing e-procurement for indirect, is that its procurement staffers can now concentrate on other buying areas, notably the direct materials spend. Skov says the ease of use and transparent cataloging system in the SciQuest tool drove widespread adoption among buyers of energy, mobile phones or lab equipment.

“People are thinking about what they’re buying now because they actually see the price in the catalog,” says Skov. “By instituting this we’re don’t need a large organization to handle all this indirect procurement because today people are doing it themselves. Now we order automatically.”

Regardless of company or industry, getting a handle on the indirect materials spend at a large company is always a challenge. Though Novozymes is channeling about 22% of its indirect spend through e-procurement thus far, Skov says that he already sees vast improvements in spend control and analysis.

When it comes to Novozymes’ direct buy, done outside of e-procurement, all transactions are created through its manufacturing resource planning (MRP) system, and handled manually with orders sent by executive buyers to suppliers.

Due to the nature of its products (enzymes and microorganisms) maintaining quality levels of supplies—mainly sugars and starches—is a top priority for Novozyme’s purchasing team. “One of the major challenges that we have is the approval of new suppliers,” he says. “It takes a very long time to get new suppliers approved because we have so many quality issues, regulations, and corporate responsibility initiatives, which act as barriers to getting suppliers into our network.”

Skov also notes there can be pushback from production lines when trying to introduce new suppliers. Procurement may understand that a new supplier is crucial to keeping costs down, but production may not have the full picture in focus.

“A purchaser has to have a broad approach because they know what is going on in the market,” he says. “We have to know the new trends and be able to sell that into production, because otherwise production will say that they have good materials already and fight the change.”

Skov says the decision on where to locate production is dependent on associated cost, of course, but just trying to figure out which location to source to, especially in China, requires some new tools.

“It can be difficult for us in Denmark and the U.S. to know what is going on in China, so we’re setting up new IT systems for better supplier surveillance,” he says. Novozymes' e-procurement in China is expected to be up and running in two years.