Define the Issue

The Betapharm sourcing team needs to make an urgent decision whether products that are as diverse as raw materials (Malic Acid) and hotel contracts can be electronically sourced by using their already acquired ePass sourcing system. The aim is to find ways to better control costs and to remain competitive.

Analysis The global hotels issue is that the cost on hotel spending is high. The annual total spending in 2003 was €70M. Although Betapharm has a global travel agent, employees are acting as independent agents when making hotel reservations. Each employee has his own set of preferences and criteria. The company has a large supply base of over 1,500 hotels currently being used. If Betapharm changes to
Other disadvantages are the complexity of specifications and requirements for the hotel and suppliers aren’t bidding for the same market or for volume leverage.

The second alternative is to not use ePass for either Malic Acid or for global hotel suppliers. Betapharm can negotiate with Tao to lower their current costs and Betapharm can create a travel budget for its employees. The advantage of using this alternative for Malic Acid is that there is already a built relationship between Betapharm and Tao. Betapharm is satisfied with the Malic Acid currently produced by Tao and there would be no additional cost to pre-qualify other suppliers and set up fees. The disadvantages are that the present cost with Tao is significantly high and there is a possibility that they won’t negotiate to Betapharms desired price making it not the most competitive for cost advantage. Also, by negotiating with Tao, there is a risk that they could end their supply to Betapharm as it may be viewed negatively, thus impacting their relationship.

Advantages for using a travel budget per trip for hotel spending are that there is control of employee spending by covering only a specified amount per destination. Employees are already acting as independent agents and are familiar with booking hotels on their own; therefore, there wouldn’t be resistance to implementing a standardized system. The disadvantages to creating a travel, hotel budget is that