Evolving Procurement Landscape in Middle East

Supply chain disruptions during Covid-19 have enhanced the need for greater coordination and collaboration between procurement agencies. For instance, the German-Arab Chamber of Industry and Commerce and the Egyptian Authority for United Procurement, signed a cooperation protocol. German companies in Egypt have increased localized manufacturing.1

In response to rising cases in Israel, it has also received vaccine doses from China, Russia, Israel and the United Arab Emirates for an immunisation program that includes Palestinans. In addition, doses have been given by the global Covax vaccine-sharing initiative.2

Procurement Challenges and opportunities in Middle East

Being import-dependent, the supply chain risks are high in the region. For instance, in Saudi Arabia drug shortages have been frequently reported over the past several years. Despite the fact that SFDA’s pharmaceutical pricing policy ensures a reasonable profit margin for pharmaceutical companies, based on a basket of reference countries, there have been several shortages reported. 

Covid-19 led to prioritising the implementation of new technologies, in order to improve healthcare delivery.3 Recent initiatives of digitalisation could help gain transparency and reduce complexity. In addition, duplicated services would disappear if there was a longitudinal patient record containing all the radiology images, lab tests and an AI algorithm to check the reimbursement billing. 

Active engagement is now being encouraged for regional and international organizations. For instance, the Dubai Health Authority has constructed an initiative called the Awtaad initiative. Their aim is to train healthcare professionals on change management and culture transformation, in order to deal with the shift towards VBP.4

Issues for suppliers

As a result of Covid-19’s Omicron variant, global supply chains that were thought to be recovering, including those in the Middle East, are once again unsteady. Throughout the course of the pandemic suppliers have faced bottlenecks, delays, shortages and increasing pricing pressures.5

A lack of transparency has also been an issue for suppliers. Regulations are not always easy to navigate; for example, ‘International suppliers used to common law legal systems can find the UAE’s civil law system challenging’. Failure to comply can result in sanctions, such as disciplinary actions and monetary fines, posing challenges to suppliers.6

Furthermore, some of the centralised procurement procedures are extremely difficult to comprehend (not user friendly in the case of digital platforms). Lack of right intelligence and pricing constraints has resulted in very few bids. Many suppliers are unable to estimate demand and identify opportunities in the relatively opaque markets. 

Agencies, like NUPCO, Rafed etc. are taking considerable steps in digitisation to minimise these risks. However, for most suppliers the profit margin is significantly eroded in the tendering process, i.e. the price can be 70% lower. 

Conclusion

Given the incremental challenges highlighted by Covid-19, centralised procurement is currently being supplemented with direct purchases, resulting in higher procurement costs and higher supply chain disruption risks. Procurement organisations / teams are now moving towards digitisation by using technologies like AI and Machine Learning. Harmonised data, better demand forecasting, reference pricing, reduced dependency on single suppliers etc. can address these challenges.

Both buyers and suppliers are likely to benefit significantly from AI based digital procurement platforms. Currently, procurers struggle to find reliable suppliers to maintain prices, consolidate demand and reference pricing. Suppliers, on the other hand, struggle with difficulty in identifying opportunities, pricing the products, penalty clauses, and lack of market intelligence.

Vamstar’s AI based platform is an ideal solution that creates a win-win ecosystem for both buyers and suppliers. We are partnering with several buyers and suppliers in the Middle East to address the challenges of a complex procurement scenario. Vamstar’s novel, AI-based, procurement insight scans millions of sources every day to enrich buyer and supplier data, and match buyer needs with supplier portfolio.