Using Organizational Control Mechanisms to Enhance Procurement Efficiency: How GlaxoSmithKline Improved the Effectiveness of E-Procurement

Susan L. Kulp (), Taylor Randall (), Gregg Brandyberry () and Kevin Potts ()
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Susan L. Kulp: Harvard Business School, Soldiers Field Road, Morgan Hall Room 369, Boston, Massachusetts 02163
Taylor Randall: David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112
Gregg Brandyberry: GlaxoSmithKline plc, One Franklin Plaza, Philadelphia, Pennsylvania 19101
Kevin Potts: Emptoris, 200 Wheeler Road, Burlington, Massachusetts 01803

Interfaces, 2006, vol. 36, issue 3, 209-219

Abstract: Like many organizations, GlaxoSmithKline (GSK) implemented e-sourcing tools only to find that the realized savings fell below predicted levels due to an abundance of noncompliant purchases (purchases made outside contractual arrangements). GSK estimates that it loses between $80 and $120 million dollars of procurement savings because of noncompliance. GSK changed its information and compliance systems and obtained various benefits. Its implementation of compliance techniques improved purchase compliance by 50 percent in some areas of GSK. Companies can use a three-phase process for solving problems of noncompliance: (1) gathering data, (2) identifying causes of noncompliance, and (3) designing conformance mechanisms. Organizational control mechanisms misaligned with supply chain strategy caused friction.

Keywords: accounting; industries; pharmaceutical; incentives; information systems (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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