InformationWeek

November 17, 1997

Drug Firm Shifts Procurement To The Net

But buying specs meet skepticism

he movement of corporate purchasing to the Internet will gain another convert next month when German drug makerBoehringer Ingelheim's U.S. subsidiary begins buying maintenance, repair, and operations (MRO) supplies over the Net. The company's move adds to the momentum of Net-based procurement, which is growing despite skepticism about a set of proposed standards for online purchasing.

Boehringer buys about $200 million MRO supplies annually, making it one of Internet-based procurement's largest converts. Boehringer will start a pilot in December with high-volume suppliers such as VWR Corp. for lab equipment and Corporate Express Inc. for office supplies.

The drug maker will implement the Operating Resource Management System application from Ariba Technologies Inc. in Sunnyvale, Calif. Other companies using Ariba's Java-based system are Advanced Micro Devices, Cisco Systems, Octel Communications, and Visa International. "If we save only 1%, that's $2 million a year, so the payoff is a no-brainer," says Holger Huels, chief financial officer at Boehringer, in Ridgefield, Conn.

One-quarter of U.S. corporate purchasing managers say their companies will move MRO procurement to the Net by 1999, according to a survey released last week by distributor W.W. Grainger Inc. That interest is occurring despite a lack of enthusiasm about the Open Buying on the Internet (OBI) set of Net and EDI standards proposed by an American Express-led consortium.

"We'll be OBI-compliant," says Ariba VP of marketing David Rome, "but OBI has a very rigid model and we expect that a lot of suppliers won't want to make that technology investment."

"Our large suppliers want to stay flexible," adds Hemant Phadnis, a special projects manager implementing Net-based purchasing for Citibank's corporate support services department. "We're sourcing experts; we shouldn't be setting technology standards."

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