Optimizing Payment Terms in the Pharmaceutical Sector

One of the largest pharmaceutical companies in the world contacted Calculum with a clear set of requirements. They wanted to benchmark themselves against their peers. They wanted to identify opportunities to unlock free cash flow. They wanted to give their procurement team data-driven insights on each supplier to support better negotiations. And they wanted a structured rollout they could track from start to finish.

What followed is one of the clearest demonstrations of what market data does when applied to a large, complex supply chain.

Matching, Normalizing and Cleaning the Data

To optimize payment terms and the overall Cash Conversion Cycle, Calculum analyzed over USD 2.2B of the client's spend across 5,844 of their suppliers. Leveraging the Ada Platform, Calculum performed comprehensive credit scoring and analyzed spend distribution by geography, industry, commodity, and existing payment terms. The match rate was 96.7% of total spend.

The platform enabled the client to normalize and cleanse its data, providing enhanced visibility into trading partners' financial health and identifying high-impact areas, such as the top 100 suppliers, to prioritize payment term improvements.

Identifying the Free Cash Flow Opportunity

The Ada Platform identified an opportunity to optimize the current weighted-average payment terms from 63 days across 1,256 suppliers to 84 days. The increase of 21 days represented an alignment to the market standard for each individual supplier, based on commodity, country, industry, and buyer leverage.

The total opportunity identified: over USD 127M in additional free cash flow.

The client also harmonized payment terms across its 5,844 suppliers, moving from 43 different terms down to just 12 standard terms. Programs were organized by procurement category manager, harmonized payment terms group, financing group, industry, commodity, country, supplier size, ESG score, and women and minority-owned business status.

Taking Action

The client built two rollout plans, one for US-based suppliers and one for European-based suppliers. The US plan was broken down into four phases based on supplier credit score. The European plan was broken down into four phases based on country. Each phase lasted three months.

Using the 9-Box model in the Ada Platform, the team focused on the suppliers with the highest probability of acceptance and the largest cash flow impact. Procurement managers received customized deployment plans and began contacting each supplier directly, with negotiation arguments tailored to each individual relationship.

One of the most powerful arguments was the Supplier Standard, showing each supplier what payment terms they were already accepting from other customers in the market. That single data point reframed the conversation from a unilateral demand into a market-based discussion.

Results

The client successfully negotiated new terms with 1,189 out of 1,256 suppliers. A 94% acceptance rate.

The result was USD 86.3M in additional free cash flow unlocked. No new financing facility. No ERP integration. Just market data applied to negotiations that were already happening.

The Underlying Principle

Most finance and procurement teams already track payment terms. Fewer benchmark them. The gap between what a company has done and what the market actually supports is where working capital opportunities accumulate, silently, year after year.

When that gap is made visible, the conversation with suppliers changes. It becomes a market-based discussion grounded in real data, rather than a demand that suppliers feel blindsided by. The data does not replace the negotiation. It turns assumptions into facts.

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