Bayer Taps CombineNet

Pharma giant using decision-guidance system to optimize sourcing processes for complex categories

Pittsburgh — April 11, 2003 — Pharmaceuticals company Bayer, an early adopter of e-sourcing technology, is using a decision-guidance system from solution provider CombineNet to optimize its sourcing processes in highly complex and strategic areas of its global spend.

According to CombineNet, Bayer's decision to engage the provider follows a successful pilot application. In July 2002, Bayer used CombineNet's technology to source ocean freight, a major initiative for the company, and the results significantly exceeded expectations across a variety of fronts, including reported savings and speed-to-solution.

Bayer's traditional ocean freight sourcing methods allocated four to six weeks for the bid-analysis phase alone. Using CombineNet technology, Bayer reduced its bid-analysis (and award determination) time to just three days, limited transship use to 20 percent of the total volume and ensured that individual lane prices did not exceed targets, generating final allocation savings in excess of 10 percent. All of Bayer's carriers participated in the bid process.

"To strengthen our e-sourcing process, we needed to expand our ability to explicitly consider both price and non-price factors, such as numbers of carriers and individual carrier capabilities," said Robert Rudzki, chief procurement officer at Bayer. "Our goal was to decrease the complexity of the overall process so our procurement decisions more effectively reflected our global business requirements."

To gain full value from an event of this nature, Bayer worked with CombineNet as a strategic partner to develop the model in just two days' time, going from concept to launch, resulting in a solution that utilized richer, more expressive carrier offers.

"CombineNet's combinatorial optimization technology enables our suppliers to submit more creative — and conditional — offers, such as bundled bids, volume discounts or rebates, to give us greater insight for conducting follow-on negotiations during bid rounds," explained Tom O'Neill, vice president of professional services and logistics procurement at Bayer. "CombineNet provided us a decision guidance template that allowed our ocean freight experts to build, optimize and evaluate dozens of candidate-award scenarios in a couple of days. The technology provided a way for all of our process stakeholders to understand the hard dollar trade-off costs we evaluated, thereby accelerating our decision alignment and move to execute carrier contracts."

Based on the pilot results, Bayer elected to integrate CombineNet's technology into its global e-sourcing program.

"With the success we've achieved using CombineNet's combinatorial optimization technology," Rudzki said, "it's clear that we have an additional tool — customized to the way Bayer does business — to generate substantial impact across key segments of our business."

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