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

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.