Even a colossal research pharmaceutical company that spends more than $550,000 every hour to develop new medicines to treat diseases such as asthma and diabetes has every day office needs using multifunction products (MFPs). And even a multibillion dollar company like GlaxoSmithKline (GSK) needs to think about cost savings when it comes to that equipment. It's just that when you have a company of this size, the size of the savings can be significant.

GSK plans to garner $1.2 million in savings over 36 months through a strategic sourcing project for MFPs. The strategy includes awarding a contract to one supplier to provide the devices which include copying, printing, scanning and faxing capabilities all in one piece of equipment. Now, instead of numerous types of equipment across two facilities in two states, GSK has one supplier supporting more than 500 pieces of standardized equipment in those facilities. The company achieved this success by developing a business requirements document with cross-functional teams.

After Glaxo Wellcome and SmithKline Beecham merged to form GlaxoSmithKline in early 2001, the company realized that it was spending millions of dollars on copying equipment. With North American facilities in Philadelphia and Research Triangle Park, N.C., the company was working with multiple suppliers in this area supporting various types of equipment. Consequently, procurement was tasked to come up with a cost-cutting strategy.

"Management began taking a look when they understood how much money is expended by the company on not only the equipment, but on the consumables, and then the print itself," reports Margaret Edwards, sourcing group manager, engineering and facilities procurement. "It used to be that if someone had money in their budget they could buy printers, copiers and faxes. Now we have control with policy and senior management approval to limit the types of equipment being bought. We're moving toward specific equipment and putting specific policies in place, and senior-level management is supporting those policies. Right now we have a strategy for North America that is moving toward a global strategy." Edwards reports to Gregg Brandyberry, vice president, global procurement systems and operations, and a member of Purchasing's editorial advisory board.

When procurement was charged to determine the requirements of the new MFPs, the first step was establishing cross-functional teams that included employees from different departments such as internal document services, IT, and finance.

The next step was to develop a beneficial business requirements document. The team benchmarked other pharmaceutical companies to understand what types of equipment they were using, for example, and spoke to internal customers to ascertain what they needed, not just wanted, from the technology.

"We did a survey of the people who would use this equipment to get what they thought was needed in the new copy equipment—whether it be speed, convenience, or paper sizes," explains Edwards, who has been with the company for 21 years, and is responsible for purchasing for maintaining various areas of the facilities, such as audio visual equipment, landscape maintenance, security, document center/reprographics and hazardous waste. "You're not leaving anything to chance. It's not just procurement saying this is the lowest cost so this is what we'll purchase. We want input from our customers and user groups."

GSK also gathered input from suppliers to ensure it was making the best decision. To select its suppliers, GSK follows a process that helps evaluate companies for specific qualities: assurance and supply, quality, service, cost and innovation. "I'm a sourcing group manager; we have a Sourcing Group Management (SGM) process that we go through with any large area of spend," explains Edwards. "This is a very robust project and we're very proud of the process we go through."

When GSK sources MFPs, one key requirement is to lease the equipment and to do so from a disadvantaged small business—a business using the Small Business Administration's HUBZone program (a program that assists distressed communities).

"We're very pleased that we could award the leasing to the minority partner and that the equipment will be serviced by the large company," says Edwards.

To receive the lowest equipment prices, GSK finds it advantageous to enter into competitive online bidding, or use reverse auctions. GSK did cut back on the number of pieces of equipment, but expects to improve its level of quality and service.

"As part of the SGM process we have a continuous improvement area, so suppliers are reviewed at least annually," says Edwards. "They're measured against metrics that we put in place in the contract. With this project, suppliers must provide on-time service, repair equipment on a timely basis, deliver supplies when necessary and support the reliability of the equipment."

GSK also relies on its preferred suppliers to continuously offer value to its organization through innovative ideas, products, and process improvement. "I'm expecting suppliers to make sure that we're constantly improving either by decreasing costs or improving certain areas," says Edwards. "If they see a better flow for the way our equipment needs to be set up, or the type of equipment in an area, we expect companies to bring that to us without us having to ask. And suppliers that don't add value tend not to survive in our market any more."

The MFP contract was just awarded to the supplier in May and the implementation is expected to take about 120 days. The biggest challenge, says Edwards, was committing the time to the team and to the project, in addition to everyone performing their daily jobs.

"Senior management is very pleased with what they see," says Edwards. "It was well worth the time and energy it took the team to work together to come to this solution."

"I think our customer satisfaction is going to go way up," she says. "The equipment we currently have is older and mismatched, and now with standardization across the company, if someone goes to a different site, they're going to see the same types of copiers anywhere within our business units in North Carolina and Pennsylvania."