Supply Chain Management and Global Hotel Contracts
Betapharm Case Analysis
Centralized department for Betapharm procurement
Table 1 in Appendix summarizes the advantages and disadvantages of using a centralized procurement function. In this section, the main pros and cons will be discussed:
Cost savings – Due to the nature of the centralized procurement e.g. volume discount, less staff, centralized records, transportation costs leads to significant cost savings for the company.
Easier spend analysis and monitoring – As you have a centralized department where all company – wide purchases are delegated it’s easier to create and maintain a consistent database with all the spend data in it. Based on Spend Analysis reading1, “a core issue surrounding spend analysis is the poor quality of spend data…”. Having a centralized function, spend analysis could be run frequently to “identify and forecast savings opportunities1”.
Reverse auction2 – Reading mentions that this solution is vital to have better, faster and cheaper acquisitions as well as promoting competition and economic opportunities. Having a centralized system the implementation could be easily supported.
Nevertheless, every function, also centralized procurement, has its disadvantages as well:
People aspect – Employee might feel disappointed as less decision power is in their hands and only certain people in the company could make purchasing decisions. Motivation, creativity could be affected.
Productivity – When production needs to wait for parts to arrive or manufacturing needs to be re-scheduled due to wrong amount of items ordered cost benefits of centralized function are eroded. Flexibility and operating dynamics are not supported by this function.
Reverse auctions to negotiate global hotel contracts
A direct reversed auction open to all hotels is not the preferable approach to negotiate global hotel contracts. Traveling and lodging is a service used by most companies but it is not easy to forecast the upcoming demand on travel. In addition to volume
Centralized department for Betapharm procurement
Table 1 in Appendix summarizes the advantages and disadvantages of using a centralized procurement function. In this section, the main pros and cons will be discussed:
Cost savings – Due to the nature of the centralized procurement e.g. volume discount, less staff, centralized records, transportation costs leads to significant cost savings for the company.
Easier spend analysis and monitoring – As you have a centralized department where all company – wide purchases are delegated it’s easier to create and maintain a consistent database with all the spend data in it. Based on Spend Analysis reading1, “a core issue surrounding spend analysis is the poor quality of spend data…”. Having a centralized function, spend analysis could be run frequently to “identify and forecast savings opportunities1”.
Reverse auction2 – Reading mentions that this solution is vital to have better, faster and cheaper acquisitions as well as promoting competition and economic opportunities. Having a centralized system the implementation could be easily supported.
Nevertheless, every function, also centralized procurement, has its disadvantages as well:
People aspect – Employee might feel disappointed as less decision power is in their hands and only certain people in the company could make purchasing decisions. Motivation, creativity could be affected.
Productivity – When production needs to wait for parts to arrive or manufacturing needs to be re-scheduled due to wrong amount of items ordered cost benefits of centralized function are eroded. Flexibility and operating dynamics are not supported by this function.
Reverse auctions to negotiate global hotel contracts
A direct reversed auction open to all hotels is not the preferable approach to negotiate global hotel contracts. Traveling and lodging is a service used by most companies but it is not easy to forecast the upcoming demand on travel. In addition to volume
References: 1. Limberakis, Constantine G. (2012) "Spend Analysis: Lessons from the Best-in-class," Supply Chain Management Review, March/April: 10-19. 2. Wyld, David C. (2013) "Reverse Auctions: Creating Winners through Acquisition Innovation," Contract Management, January: 36-47.