Ariba puts Diageo's supply chain online

Ebusiness procurement specialist, Ariba, has won a multimillion pound contract with food and drink giant, Diageo, to set up an Internet market for its suppliers.

Diageo, which runs Burger King, Guinness, Haagen Dazs, Pillsbury and Smirnoff among others, will use the system to create savings in its business procurement processes. Only Burger King will initially be exempt from the system.

The system links Diageo's suppliers over the Internet, thereby enabling the company to benefit from easy ordering and automatic connection with preferred suppliers. Diageo plans to make massive savings by aggregating suppliers to those with negotiated arrangements.

Keith McLeod, e-procurement programme director at Diageo, said Ariba was chosen because it offered a faster deployment than rival, Commerce One. He also said it integrated more effectively with the company's existing ERP package from SAP.

He said putting the system on the Internet also allows Diageo to take advantage of the potential to negotiate in consortiums. "We want to be able to share information with companies with similar requirements to us, to negotiate en masse and get a better deal," said McLeod.

Hasnain Merali, analyst at Datamonitor Technology, said Diageo can expect to save between 40 per cent and 65 per cent on its procurement costs through the system in the first year.

Merali predicts the online procurement market will generate $7.9bn of business between 1998 and 2004.