GlaxoSmithKline saves more than £1bn with e-sourcing

Pharmaceuticals company GlaxoSmithKline (GSK) has saved more than £1bn through an electronic sourcing project.

Pharmaceuticals company GlaxoSmithKline (GSK) has saved more than £1bn through an electronic sourcing project.

With 700 staff, the buying team at GSK spends more than £7.4bn a year, spread across more than 1,000 categories.

Electronic sourcing began with a single online auction and expanded to more than 2,000 events  by 2004.

Lora Cecere, research director at AMR Research, which investigated the project, said the initial electronic sourcing implementation paid for itself with the first three events. Within three years the company added £1bn in savings to the bottom line.

"The savings were equal to the sales of a new blockbuster drug," she said.

AMR Research said 40% of GSK's total spend is now tendered using electronic events. The pharmaceuticals company operates a shared service model run through a centre of excellence to support more than 1,400 internal customers using hosted technology from Emptoris.

The Emptoris system was installed in 2002, initially for electronic sourcing and then for spend management and rating supplier performance. 

Cecere said, "There is a lot to learn from GSK about how to do a sourcing project right. The savings are substantial and auditable, and the business transformation is sustainable."

The company also established a 15-person core competency team, each of whom was assigned to support different buyers by sector of business. As a result, GSK has been successful in the deployment of spend analysis and electronic events to the major buying categories of indirect spend, direct materials, capital projects, corporate support for finance, marketing services, and IT and engineering, Cecere said.

The success of GSK's e-sourcing project was in part due to its IT department's high degree of collaboration with, and support for, the company's lines of business, she said.


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