The case study presents the decision by Betapharm Corp. to centralize procurement and e-sourcing. Additionally, the many incentive and control issues that subsequently arise will be discussed.
Susan Kulp; Taylor Randall
Harvard Business Review (105030-PDF-ENG)
March 15, 2005
Case questions answered:
- Betapharm Corp. centralized the procurement function and delegated almost all purchases company-wide, to this centralized department. What are the pros/cons of this centralized organizational form for procurement within the context of Betapharm?
- What are the potential benefits and risks of Betapharm using reverse auctions to negotiate global hotel contracts? Would you recommend that Betapharm use reverse auctions or another sourcing strategy for the hotel contracts?
- What are the potential benefits and risks of Betapharm using reverse auctions to negotiate with and select new, Asian suppliers for Malic Acid? Would you recommend that Betapharm use reverse auctions or another sourcing strategy for Malic Acid?
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Case answers for Procurement at Betapharm Corp. (A)
Betapharm Corp., a global pharmaceutical company, had outperformed its industry competitors between 1996 and 2003. During this time, the industry benefited from increased demand and projected future growth due to a growing elderly segment, increased average life expectancy, and a rising incidence of chronic diseases.
However, during 2002 and 2003, one of Betapharm’s top-selling drugs lost its patent protection, which caused sales growth to slow. With the increasing pressures within the industry, many pharmaceutical companies looked to procurement for ways to better control costs and remain competitive. Betapharm recently implemented the ePass system which facilitates eProcurement activities, especially reverse auctions.
Since the ePass is designed to centralize all of the procurement functions for Betapharm Corp. into one location, there is a dramatic shift in the information flows. This can lead to a streamlined process while reducing costs, but may also have some issues handling this new information.
This organizational form would allow for an economy of scale, or in other words, make it easier to efficiently bulk package orders and shipments. It would also give…