Drug company triples cost savings via e-procurement

15 March 2001
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15 March 2001 | Geraint John

Pharmaceutical giant Bristol-Myers Squibb has tripled its cost savings since implementing an e-procurement system, according to a senior company executive.

Of its annual US spend of $3 billion, the firm is now saving around $300 million - 10 per cent - compared with just $100 million previously, said Jack Cooper, chief information officer.

Speaking at the Ariba Value Chain Summit in New York, Cooper said compliance on a wide range of direct and indirect goods among 20,000 US-based staff with access to the system had more than doubled in the past two and a half years.

"We did the sourcing and got the cost reductions, but didn't get the participation," he told SM. "It was only 30 per cent. Then we bought in Ariba and now it averages 60-70 per cent. We've forced the mavericks into compliance. If you buy something indirect without an approved purchase order, there's an excellent chance the vendor won't get paid."

Around 10,000 items can now be purchased online, said Cooper. They include most indirect goods as well as paper, packaging and some production chemicals, though not bulk chemicals, which involve large orders but small numbers of transactions.

On PCs, Cooper said savings of over 30 per cent had been achieved by reducing approved specifications and putting one big contract through a reverse auction. The company now spends around $40 million a year with two suppliers - IBM and Dell - compared with more than $60 million in 1998.

Compliance in this category was now "almost 100 per cent", according to Cooper.

Bristol-Myers Squibb plans to roll the system out to 35,000 non-US staff in Europe this year and Asia and Latin America in 2002.

Worldwide, the company claims to have cut its costs by $1.75 billion a year since 1998, $600 million of it through better procurement.

SMmar2001

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