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Building an Online Exchange

Over the past three years, new Web-based business models in the medical industry have caused a domino effect, touching every organization from distributor to manufacturer. An upsurge of digital exchanges promised to make product purchasing more efficient by providing an alternate means for pairing products with customers.

When the exchanges started living up to their promises, one of the industry's largest business-to-business health care manufacturers, Kimberly-Clark (KC), resolved to take advantage of the new Web marketplaces. Kimberly-Clark Healthcare is part of the business-to-business sector of KC, a $14 billion company. Healthcare makes up $1 billion in sales, 90 percent of which comes from distributors. KC Healthcare has significant market share in the products it sells—95 percent in sterilization wrap, for example.

Rob Hoctor, director of e-business for the healthcare sector of Kimberly-Clark explains that, as public exchanges formed, KC felt pressure to join them. "All the research we looked into shows that people buy brands on the Web," says Hoctor. "We wanted a way to control our branding, and we wanted a system to be able to present all of this rich content we have." The time had come for KC Healthcare to tie its back-end catalog data to a global site. "Everybody started to realize the basis for everything is an electronic product catalog," added Hoctor.

Build Your Own

In healthcare, most products are sold through a contract with a group purchasing organization (GPO). The GPO combines the buying power of its members and the contract for given products, and charges the manufacturer a fee for the service. When GPOs began to demand that companies conduct business via online exchanges, Kimberly-Clark's e-business sector had no choice but to integrate this new business model into its plans.

Rather than compete in an uncertain exchange, KC decided to create a new site at (see Figure 1) to help purchasers find and buy their products. "We wanted users to be able to punch out of the exchange site onto ours—right to the catalog information they're looking at," says Hoctor. Once on the KC site, business customers could "decide whether to buy [the product] based on the rich content on our site, and then add it right to the shopping cart." The shopping cart then takes buyers right back to the original exchange. Kimberly-Clark Healthcare has filed the paperwork for a Business Methods patent on this process.

FIGURE 1: gives hospitals an easy way to order new supplies.

Conservative in business, KC opted to spend a year researching the subject, as the dot-com business models kept changing around them. KC spent that year defining its goals and learning about the various products it would need to integrate. The e-business group joined an internal committee of twelve corporate directors from MIS and other sectors. The committee agreed that it first wanted to consolidate the company's myriad data stores of product information, and to jettison the inefficiency of batch processing changes to each catalog.

Hoctor wouldn't comment on which vendors the company considered, but notes that the committee initially made a hasty purchase. When the KC Healthcare e-business group assessed the viability of a Toronto-based catalog company, the committee took this interest as a cue to buy. "They didn't even tell us and went out and bought that software," says Hoctor.

It turned out that Requisite, the chosen vendor, didn't fit the bill for the healthcare project. Requisite's catalog software, now used in SAP procurement software, was originally designed as a procurement tool and didn't allow for rich branding, or for document attachments at the code level. The software also wasn't flexible enough to let developers update the out-of-the-box templates with KC's own look and feel.

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