Assignment: e-Procurement at Cathay Pacific Airways

Submitted by: Agnik Dutta (PGP/22/003)

1. What are the benefits of the e-procurement systems for the Airlines Purchasing
Department?
1. The e-procurement system was envisioned to bring a multitude of benefits to the
Airlines Purchasing Department by achieving efficient purchasing and best in class
capabilities in the industry. These are summarized below
a) The e-procurement system streamlined and enhanced the procurement process for
non-technical spend categories.
b) It helped the airline better manage and control its expenditures.
c) It contributed to standardising and simplifying the airline’s procurement processes
across five spend categories and departments.
d) The system provided greater visibility on company-wide expenditure and supplier
performance for better corporate decision making.
e) There were plans to build a data warehouse to bring together spends and supplier
information, providing extensive business intelligence in the purchasing function.
2. Mention the concerns of key managers in Cathay Pacific regarding the e-
procurement system implementation?

2. Some of the concerns of key managers are summarized below

a) Streamlining suppliers: This proved to be a difficult exercise as suppliers of lower

value were cut out from the CXeBuy platform.
b) Cataloguing: Cataloguing proved to be a cumbersome process with an extensive
supplier induction programme and 3 phases. 400 electronic catalogues were
required to be created for the system.
c) Incorporating the spend authorisation protocol
d) BPR of procurement practices: Cumbersome mapping of As-Is and To-Be process
with implementation was carried out.
e) Systems integration: Complete integration of the three procurement platforms was
necessary.
3. What kind of financial metrics can be used to quantity the benefits?
3. Some possible financial metrics are mentioned below
a) Financial gains from reduction in req-to-cheque times.
 b) Cost reductions from shorter and more streamlined procurement procedures.
c) Average cost per supplier contract, an indicator of purchasing power, which could
serve as a lagging indicator of the performance of the CXeBuy system.
d) Cost reductions from reductions in time engaged in routine activities

It is worthwhile to note that none of these metrics can adequately capture the business value
generated by the platform. A holistic and long term approach tailored around the achievement
of strategic goals would serve as a better measure of performance.

4. How can Cathay’s e- Procurement strategy contribute to its mission?

4. The e-procurement strategy should provide significant business value through reduced
costs, time spent on routine activities (freeing up time for strategic planning and activities)
and opportunity costs. However, the e-procurement system is also in line with Cathay’s
philosophy of investing in providing a differentiated offering even in times of thinning
margins and external distress. The e-procurement system gives the airline considerable
business intelligence, bargaining power over its suppliers, and a distinct digital edge over
its competitors, thus allowing it to achieve its strategic mission.