Procurement at Beta Corp Essay Example

into working with the lowest bidder across various items. The sourcing group accounted for the total cost of owning the product, which encompassed technical troubleshooting, performance management, and process improvements. The sourcing group evaluated prior experiences to estimate the expected time required to meet standards and the number of resources necessary to bring a supplier up to speed before choosing a preferred supplier. If switching suppliers was expensive for BC, then the sourcing group favored the incumbent by specifying an internally determined price reduction to consider sourcing from an alternate supplier. This internal discussion was not disclosed to either bidding suppliers or the incumbent.

BC had implemented an e-procurement software system which facilitated the issuance of request for information (RFI), electronic reverse auction and sealed bids. The system permitted suppliers to provide innovative bids by specifying a specified amount along with quantity discounts or other configurations in their bid. Two different suppliers' bids for the same product are presented in Exhibit 2. The product specifications were transparent to all suppliers as they were incorporated into the auction details and shared electronically, ensuring uniformity in supplier responses.

During auctions, sourcing teams must decide whether suppliers will be assessed based on their current ranking and prices offered by competitors, or solely based on their relative prices. Being in first place does not guarantee a contract, as other factors are taken into consideration. Participants are generally unaware of the competitive field, including the names, locations, and quality standards of other players. The sourcing team determines the level of information provided during the auction based on various factors, including the number of suppliers and the initial spread between quoted

obtained during RFIs.

The Prequalification Process involved technical and quality audits conducted before sourcing from suppliers. The timing of audits was dependent on the type of product being sourced and the number of competitors participating in the bid. A supplier needed to pass a successful audit either before the bidding process or as a prerequisite for winning the business. Due to BC's global operations, its employees traveled to numerous locations all year round, necessitating the sourcing of hotel rooms.

During 2003, BC had reserved around half a million hotel room nights and had a spending budget of about €70 million. Traditionally, BC staff would choose hotels that were near their work site. Each employee had their own preferences and would usually have three or four hotels to choose from. Employees often booked rooms for themselves or visitors based on their personal preferences rather than through BC's global travel agent. The prices for rooms within a city varied considerably, sometimes by up to 75%, but the reason for this discrepancy was unclear - whether due to a shortage in supply or other factors.

In 2004, BC had predicted roughly 450,000 room nights amounting to €65 million in expenses. The sourcing team had the task of creating an auction design for this service. Additionally, they were tasked with finding a low-cost supplier of malic acid - a crucial ingredient in the production of the Exelon drug. BC's current supplier, Tao Pharma Lab, charged €145 per kilogram and the company believed that an alternative source in Asia would be the best option.

During the search for potential suppliers for the malic acid business, five candidates were identified. Some had past experience delivering

other chemical compounds to BC, albeit in smaller quantities. The crucial requirements for these suppliers were advanced quality control standards and technical capabilities that could ensure the delivery of consistent and necessary product amounts. An evaluation of quality and technical standards was yet to be carried out. The potential business opportunity was communicated to the suppliers during the Request for Information (RFI) stage, where they were invited to submit a sealed bid for the supply of 650 kg of malic acid for validation purposes within BC (refer to Exhibit 3). Successful suppliers would later be requested to deliver 20,000 kg of malic acid in the next three years.