Aventis Taps FreeMarkets

Pharma giant, moving toward global sourcing process, expands use of provider's tools

Pittsburgh — April 16, 2003 — Pharmaceutics giant Aventis is deploying a supply management suite from FreeMarkets as the company moves to implement a global strategic sourcing process across its organization.

Strasbourg, France-based Aventis is a $19 billion company employing some 71,000 people in its core business. The pharma firm has been using FreeMarkets FullSource offering under the terms of a multi-year agreement that began in 2001.

Now the company is moving to adopt ES — the recently released addition to FreeMarkets' offering that provides a suite of applications targeting supply chain collaboration, knowledge management and process flow — in the United States and QS in Europe.

ES, which includes various software modules built on a core platform, is intended to let companies perform key supply management activities. The solution provides modules for requirements management, supply relationship management, sourcing process and decision management and contract management.

QS is FreeMarkets' sourcing application, offering reusable templates for requests for quotes and information, tools for collaborating with and managing suppliers, and capabilities for creating and running a variety of competitive bidding and other negotiation activities.

Aventis' move to adopt the solutions is part of a broader initiative to deploy a standard six-step sourcing process throughout the organization, according to Mike Flanagan, e-sourcing champion at the company. "We wanted to put in place, as a company, our strategic sourcing process, and to underpin this, we felt that the introduction of QS in Europe, in parallel with the ES introduction in the United States, would allow us ... to measure our progress toward compliance with our six-step sourcing process," Flanagan said.

According to Flanagan, Aventis' intention is to migrate all its sourcing onto one platform, which will happen when the necessary language capabilities are incorporated into ES. In the meantime, QS will give the European organization exposure to the new way of working through e-sourcing tools and processes, with ES deployed later as Europe adopts the company's six-step sourcing process.

The company's global transition to the new sourcing process is expected to take the company through 2004. "By the end of next year, we're trying to put a stake in the ground to say that anything that we source will go through this process," Flanagan said. "We spend about $6 billion a year, and we source probably one-third of that, so we would expect to be addressing a large percentage of the addressable volume through this process by the end of 2004."

The e-sourcing champion said that Aventis looked at nine different solutions available in the marketplace but selected FreeMarkets' ES as the closest fit for the company's six-step sourcing process.

Flanagan noted that Aventis sources in upwards of 30 different spend categories, and each category has its own subtleties that will require the company to adopt its sourcing process to accommodate the conditions in that market segment. "With ES, we see a configurability that will allow us to put in place a standard sourcing process, but also to adapt that to specific market needs for whatever we're sourcing," Flanagan explained.

To date, Aventis is seeing about a 20-to-one return on its investment with FreeMarkets, according to Flanagan, who added that the company is expecting to see an increase in the returns as it takes advantage of the functionality within ES to work more efficiently with its suppliers.

The company, which Flanagan described as a "federated, decentralized organization," has completed training of U.S.-based buyers on FreeMarkets' solutions and has seen some buyers "engaging with the tool" and others not doing so. Currently Flanagan's team is following up with the latter to determine why they are not using the tool, and he said that eventually he expects some justification will be required for why the tool isn't being used to source a particular category, good or service.

Gary Smelko, FreeMarkets' product line manager for ES, asserted that the Aventis win, coming shortly after the launch of the ES offering, validated the providers approach of combining software, services and domain expertise into solutions.

"It's not about just a service play or a technology play, but rather how we can blend those key elements to effectively help our customers be more effective in their global supply management initiatives," Smelko said.