Betapharm Corp Case Analysis A, B, and C

Summary & Analysis

Group Members
1. Amer Saeed
2. Ahmad Rafique
3. Vinod Kumar
4. Ahmad Khan

LOGISTICS & SUPPLY CHAIN MANAGEMENT

The Current situation
Concerning the hotel contracts' sourcing strategy and malic acid, George Brannigan, the vice president of
procurement, had a big choice to make (a raw material ingredient for Exelon drug). Betapharm made the
decision to consolidate the procurement division, making it in charge of practically all purchases. The
pharmaceutical sector, including Betapharm, was under pricing pressure from the government and
managed care at the time this was done. Additionally, the sector's success was being stymied by the
switch to generic medications because the business was experiencing an increase in patent expirations. As
a result, Betapharm chose cost reduction and efficient procurement management as some of the answers
to assist it prosper in the current industry environment.

Major Faults
The cost of covering administrative expenses is one of the main problems Betapharm is experiencing.
This may be seen in the booking of hotels around the world and the contracting of the malic acid
provider. Employees at Betapharm, a multinational corporation, spent most of the year travelling.
The management decided it would be wiser to negotiate prices up to 80% with the service providers in the
key markets in the U.K. and North America because they spent more money on the costs of the rooms.
However, their plan never seemed to succeed because they disregarded the potential savings that other
nations providing the same services could give. However, the management of the company had to make a
low-cost arrangement with another supplier of malic acid.
Betapharm's management was satisfied with Tao but believed Tao was overcharging them for the malic
acid (145 Euros per 650 Kilograms).
As additional time was needed to certify the new supplier, they decided to hunt for another supplier
covertly and without Tao's knowledge in order to prevent messing with the current supply chain. In
conclusion, the following graph illustrates the problems that Betapharm is having in both the hotels and
the lab where the malic acid is produced.
Other Solutions
To lower the cost of hotels and housing, Betapharm would need to hire a travel agency. Costs are
expected to rise if the employees are given the freedom to stay at any hotel they like. Therefore, the
management should take charge of the situation. However, in terms of cost-cutting, the management
looks for a low-cost supplier to avoid utilizing Tao, whose prices seem expensive now. Tao bills €145 per
kilogram for processing malic acid. Finding an inexpensive supplier would therefore allow the company
to make some savings. The organization is also considering using the Emptoris ePass system to save
expenses (especially those related to booking hotel rooms). The system can make it possible for
management to conduct reverse auctions and procurement activities. The e-procurement method would
produce excellent results. Despite the advantages, there is a chance that the management of reverse
auctions will face constraints. For instance, the size, level of service quality, cost, managerial features,
and other factors of the hotels on the market differ substantially. Kulp and Randall report that the firm
never had any control over hotel prices. As a result, Betapharm management may experience various
challenges in relation to prices. It would be up to the management to assess each hotel and choose the
right one. Embracing the Emptoris ePass system is likely to solve the issues of the company as far as
overspending is concerned. This is a risky process considering that the company already has a dependable
supplier. However, having a new Asian supplier might benefit the company in terms of malic acid supply.
Currently, Tao’s price is quite high for Betapharm. Striking a contract with a new supplier would save the
company lots of money, probably up to 50% of what they earn. In a nutshell, the following table provides
a summary of the pros and cons of each alternative.

Suitable solution
The National Association of Purchasing Management in the United States said that using an e-
procurement system would reduce the purchasing expenses, resulting in significant savings for
businesses. For Betapharm, which was trying to save expenses, this would be a superior option.
According to a critical viewpoint, the corporation would avoid utilizing paper to print bids that would be
delivered to suppliers by employing electronic procurement. In other words, e-procurement can result in a
lean supply chain with a low number of wastes likely to cause carbon emissions to contaminate the
environment. Additionally, e-procurement has a tool for sourcing optimization. This would ensure that
the business buys the right number of things in the most effective way feasible. The corporation may also
avoid the expenses associated with excess inventory. The accessibility of information that comes with
electronic systems is yet another factor indicating that e-procurement is a superior option for Betapharm.
Businesses always pay a price for not having the information they need. Electronic data eliminates the
need to go through numerous files to find information like a list of vendors and their contact information.
Additionally, sending documents in PDF format for the processing of bids can be simple.
This would result in an immediate review of the bid, reducing the vendor's waiting time for a bid from
days to a few minutes. This will be covered in more detail in the implementation section. The cost-
spending issue would require an implementation strategy, and it would take a few weeks to resolve. Both
the company and the vendors would have easy access to information with the e-procurement system. In
fact, the approval process for bids can be shortened from months to a few weeks or even days.
The bids would be returned more quickly, and without an effective analyzer of each proposal, it would be
difficult for the vendor and product to fulfil their standards.
As a result, getting recommendations for whom to choose from would also be challenging. To enable
effective bid selection, bid analyzing tools must be installed as part of the e-procurement system
implementation process. The implementation process's schedule is displayed in the chart below.