Philadelphia April 1, 2002 ICG Commerce, an e-procurement services provider, announced last week that it has facilitated one of the largest online auctions of PC equipment ever on behalf of Novartis International AG. Leveraging ICG Commerce's Enabled Sourcing solution, the global healthcare leader was able to save 17% on the purchase of 49,000 new computers.
The project, which stretched across ten countries and was completed over four weeks, represents Novartis' first foray into sourcing PCs through an online auction.
"When looking at the highly competitive PC market, we saw an opportunity to generate significant savings for Novartis by using the Internet to evaluate suppliers and negotiate a favorable contract," said David Clary, president of Delivery for ICG Commerce. "But we recognized that the success of this project -- particularly one of such size and scope -- would be dependent upon more than just the use of auction technology.
"We brought decades of category experience to the table that enabled Novartis to quickly develop a sound, global sourcing strategy," Clary continued. "Our team helped Novartis negotiate the best possible deal by taking a total cost approach that factored both price and service into the selection process. The result speaks for itself in terms of the significant, positive impact on Novartis' bottom line."
One of the major issues Novartis grappled with was gathering the necessary data from suppliers to ensure that they were bidding against the same specifications and requirements. This challenge was exacerbated not only by the global nature of the project and tight time constraints but also the high level of importance Novartis placed on service.
ICG Commerce and Novartis identified and evaluated a number of suppliers through a rigorous strategic sourcing process and the utilized ICG Commerce's online reverse auction tool to facilitate final price negotiations. The comprehensive approach took into account the suppliers' ability to coordinate efforts across multiple divisions around the world and serve as a true global distributor. Novartis' service requirements also included disposing of all the old PCs as well as tracking and registering the new equipment and loading basic software onto each PC.
"For an auction to be effective, a company must be able to compare suppliers on a like-for-like basis," Clary said. "That's part of the fundamental value of strategic sourcing to the overall project. The greater number of service requirements, the more challenging that becomes, of course. Through our deep domain knowledge and category experience in IT, we were able to establish immediate credibility with the suppliers, which translated into a very smooth sourcing process and successful results for Novartis."