Managing Business Markets

Name – Shrutika Kamble

Roll no. – PGP/25/231

Case - E-Procurement at Cathay Pacific Airways: E-Business Valuation

1) What are the benefits of the e-procurement systems for the Airlines Purchasing
Department?
Ans: a) Inventory reduction costs that result in cost savings
b) Price reduction for purchasing the item Increased spending due to CxeBuy
c) The cost of transactions will go down
d) Ordering process time reductions
e) Time that may be dedicated to doing tasks that provide value. Cost-cutting via
sourcing
f) The time saved during the buying activity
g) Better and more reliable data on expenditures and suppliers
h) A reduction in the costs related to "Request for Proposals" and "Request for
Information
i) A more efficient technique for identifying possible suppliers that provide value.
j) An expanded presence in the market
2) Mention the concerns of key managers in Cathay Pacific regarding the e-procurement
system implementation?
Ans: a) In its earlier incarnation as an e-procurement platform, EMPACS was
responsible for providing support for the function of inventory management, which
was absent from CXeBuy.
b) Not everyone would be capable of adapting to new situations and being flexible.
Because different suppliers may have priced their products at different prices, price
differentiation would become a worry; but, due to the centralised procurement
structure, such suppliers would not be delighted.
c) Terms for the upkeep of the catalogues had to be agreed with suppliers and the e-
marketplaces before they could be implemented.
d) Incorporating the expenditure authorisation protocol in order to guarantee that the
requisition-to-payment process may be electronically carried out in a way that is both
effective and timely. Business Process Reengineering of procurement methods should
be ensured, together with continuous process development and management of
change.
e) Integration of Systems: CXeBuy should have full integration with both EMPACS
and FMIS.
f) The issues that need to be addressed include capacity, run time, efficiency, and
adaptability.
 g) Establishment of an infrastructure for electronic procurement This initiative would
need for a significant amount of infrastructural support.
h) Integration of old markets with the new e-procurement system is the primary cause
of worry. The question at hand is how to accomplish this integration. It would call for
a significant shift away from the traditional methods of purchasing things. One of the
primary issues regarding the new system is its rate of adoption.
i) Streamline a significant number of providers. A significant number of suppliers
needs to be streamlined, which is a worry.

3) What kind of financial metrics can be used to quantity the benefits?

Ans: The following is a list of the six most important benefits to a company's
operations that can be attributed to the implementation of an electronic procurement
system:
1) Time : Improved information intelligence for reporting purposes Improved
compliance with corporate spend policies and supplier contracts Shortened'req-to-
cheque' cycles
2) Savings in financial resources : Lower costs associated with the procurement
administration Improved ability to negotiate with suppliers

In the case, the category has already been suggested.

1) Time savings – as a financial metric, and presents a sample calculation in Exhibit
10 demonstrating the decrease in transaction cost from HK$ 205.8 to HK$83.0. This
is shown as a reduction in the total cost of the transaction. In addition to time, two
additional viable metrics, based on the classification we presented earlier, could be:
2) Opportunity Cost: the worth of other strategic objectives that can now be
completed with the workforce that has been freed up by CXeBuy 4
3) The amount of money that can be saved as a result of reduced administrative costs
and the amount of money that can be saved by negotiating better deals as a result of
increased bargaining power.

4) How can Cathay used the Balanced Scorecard technique to measure the short term
and long term benefits delivered by CXeBuy?
Ans: The method known as the Balanced Scorecard could be utilised to evaluate how
well CXeBuy is performing in relation to the following target categories:
A. Enterprise level
B. Project level
C. The level of the process
Within a relatively short period of time, conducting an analysis at the process level
would produce quick estimates of benefits and savings in terms of:
1) Monetary Gains Through Decreased Expenditures (staffing, inventory, etc.) Long-
term project and enterprise-level examination of the entire bigger system — not just
CXeBuy on its own — would indicate gains in the following areas, among others:
 2) Customer satisfaction: a reduction in the amount of time spent on routine and
tedious duties would free up more time that could be spent exercising greater control
over the working environment and providing superior customer service.
3) The procurement process's congruence with the organization's broader business
objectives
4) The possibility for future enhancements, the generation of value, and the flexibility
to respond to change

5) How can Cathay's e-Procurement strategy contribute to its mission?

Ans: Through the utilization of the internet, Cathay's e-Procurement is able to
facilitate the acquisition of products and services for all five of the spend categories
that are associated with the airline (inflight service, cargo, information technology,
and marketing and office supplies). In point of fact, thanks to Cathay's e-Procurement
strategy and valuation, we have been able to establish six significant economic
benefits that demonstrate how they contribute to the airline's mission:
a) Decreased costs associated with procurement administration
a) Decreased costs associated with procurement administration
b) Strengthened negotiating muscle with suppliers
c) Increased levels of compliance with corporate spend policies and supplier contracts
d) Improved information intelligence
f) Reduced required times before cheque cycles
g) Increased levels of compliance with corporate spend policies and supplier contracts
h) Improved information intelligence
i) Decreased costs associated with procurement administration