The recent layoffs, shutdowns, project delays, and funding challenges plaguing the biotech industry have impacted every aspect of research. Going from inventory shortages in 2020 to increased manufacturing in 2022, to a downturn in 2023, lab suppliers now find themselves with excess inventory and weakened demand. Although the biotech outlook is looking up with January 2024 fundraising at a high since February 2021, the industry remains cautious. That’s why understanding lab supplier performance trends is crucial for biotechs seeking to control supply chain costs in uncertain times.
To help guide purchasing strategies for the remainder of 2024 and beyond, ZAGENO’s webinar, How to Optimize Lab Supply Spend & Foster Supplier Competition, offered procurement leaders, lab managers, and finance decision-makers access to exclusive data gleaned from hundreds of thousands of biotech and pharma lab supply purchases made through the ZAGENO marketplace.
Note on this article’s data source: As the leading lab supply marketplace, ZAGENO serves as the Amazon of the life sciences industry, covering 5,300+ brands and 40 million+ different product SKUs. The breadth and depth of products offered provides ZAGENO with unique insights into best practices and changing market conditions, empowering R&D to make informed lab supply purchases that enable both resource optimization and scientific choice.
Supplier Performance Trends: 2020-2024
ZAGENO’s insights demonstrate the significant fluctuations in lab supply demand of recent years and how they are poised to impact the industry for years to come.
- 2020-21: Confirmation was key. Due to lab supply inventory scarcity brought on by the COVID-19 pandemic, customers experienced difficulties getting their orders confirmed. Securing purchase order (PO) confirmation was critical to ensure customer placement in the queue to receive product as soon as it became available. As such, PO confirmation times (exhibit A) became a major industry key performance indicator (KPI), as did back order volume (exhibit B).
- 2022: Product availability improved. To the relief of researchers, suppliers increased their manufacturing capacities and improved inventory positions, easing supply chain concerns. Consequently, PO confirmation times (exhibit A) began improving in 2022, as well as back orders in 2023 (exhibit B). A reduction in capital expenditure (CAPEX) investment also helped, to a lesser extent.
- 2023: Improved SLAs, lower spending. Lower spending and postponed experiments left suppliers with an excess of inventory. As such, supplier fulfillment service level agreements (SLAs) improved substantially. According to ZAGENO’s data, suppliers’ PO confirmation times began notably improving in Q1 2021, plateauing in the second half of 2023 (exhibit A),* another indicator of healthy supplier inventories and technology investment. Throughout this period, ZAGENO achieved the best SLAs in the company’s history through collaboration with suppliers.
Suppliers with the best-performing SLAs leverage technology to seamlessly integrate with ZAGENO’s systems. Some suppliers confirm orders within minutes, offering real-time updates. Conversely, smaller suppliers often rely on traditional, slower methods, such as emails and phone calls. ZAGENO expects PO confirmation times to improve significantly as smaller suppliers reinvest in technology and integration efforts.
Unlike research firms, suppliers haven’t yet experienced significant waves of headcount reductions in their operations. Adequately-staffed and well-inventoried supplier fulfillment centers are operating faster than ever before, continuously improving the time from PO confirmation to shipment (exhibit C). However, if lab supply spend does not increase, it is possible that suppliers could undergo layoffs, which would impact turnaround time.
Suppliers have so far responded to the downturn by decreasing investment in technology and enforcing more aggressive return and cancellation policies as a way to compensate for losses (exhibit D).
- 2024: Early indications. Many biotechs currently lack sufficient personnel in lab management and operations to support increased lab supply spending and supplier account management, yet are reluctant to expand headcount. Consequently, customers are prioritizing time savings over product savings, shifting towards a centralized approach. As a result, biotechs are turning to platforms like ZAGENO to enhance operational efficiency. In response, suppliers are broadening their focus beyond direct-to-customer sales, investing more in technology to integrate with platforms like ZAGENO, thus improving the overall customer experience.
How lab supply marketplaces use supplier performance trends to drive customer value and best-in-class SLAs
Lab supply marketplaces, such as ZAGENO, aim to accelerate research by providing a single solution to shop, track, and control lab supplies, reducing both overhead and time to phase one clinical trial. Access to a vast product selection from a broad supplier base offers cost-effective, comparable alternatives, which strengthens supply chain resilience.
Recognizing suppliers’ hesitance to upgrade technology amid the downturn, ZAGENO further made significant investments to improve SLAs via enhanced process improvements and automation, including:
- Integrations with key ERPs like ARIBA, COUPA, NetSuite, Microsoft Dynamics 365, and Tungsten
- AI predictive tools for estimated ship dates (ESD)
- Dedicated teams to support customers throughout the entire lab supply expenditure cycle, from purchasing to receiving
- Consolidated master billing, 3-way matching, and other time-saving opportunities, to aid now smaller accounting departments.
Looking ahead, ZAGENO is intensifying its focus on the customer experience, with plans for expanded product coverage, price transparency, and improved usability. This includes the introduction of AI-driven Request for Quote (RFQ) functionality, quicker quote upload and parsing, and increased integrations with lab inventory, billing, and PO solutions. The ZAGENO search engine will undergo further enhancements with additional AI capabilities for expanded product recommendations and alternative options.
ZAGENO remains committed to nurturing both customer and supplier partnerships by sharing marketplace performance insights, industry trends, and best practices. Take a deeper dive into how to optimize lab supply spend and foster supplier competition with our free eBook, How to Optimize Lab Supply Spend and Foster Supplier Competition.
*Custom and made-to-order products, such as biochemical reagents, remained affected by noticeable delays.
