E-PROCUREMENT

AT
CATHAY PACIFIC AIRWAYS
MEGHANA
PGP/24/160
1.What are the benefits of the e-procurement systems for the Airlines Purchasing Department?

 Improved supplier and spend information

 A more efficient supplier sourcing process that generates value-added
 Reduced “Request for Proposals” and “Request for Information” costs
 Freeing up of purchasing staff to engage in strategic tasks and managing performance of suppliers
 Strengthened negotiating muscle with suppliers
 Reduced procurement administration costs
 Shortened req-to-cheque cycles

2. Mention the concerns of key managers in Cathay Pacific regarding the e-procurement system implementation?

• CXeBuy lacked the inventory management function that was previously supported by EMPACS
• Cataloguing – Terms for maintenance of the catalogues had to be negotiated with suppliers
and the e-marketplaces
• Incorporating the spend Authorization Protocol – To ensure that the requisition-to-payment
process could be electronically executed in an efficient and timely manner
• Streamlining Number of Suppliers – Decisions had to be made to forgo supplier relationships
with those that were of less value in terms of the range of product offerings and price
differentiation
• Business Process Reengineering of procurement practices – Continuous process development along with change
management should be ensured
• Systems Integration – CXeBuy should be completely integrated with EMPACS and FMIS such that the purchase
requisition process could be linked with the goods-receiving and goods-payment processes
• At the end of Phase 3, it was found that CXeBuy would not be an appropriate or cost-effective system for certain
items, such as housing spend and government charges, i.e., those expenditures not contracted via a Purchase Order
• The exchanges (Aeroxchange and MartPOWER) had not reached the level of maturity that could support services
such as the aggregation of orders. could provide only limited visibility of airline spares and allocation at common
ports. The issue was as much to do with the technology (full airline-exchange system integration) as it was with the
business value proposition.

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

• Reductions in procurement administration costs

• Savings achieved as a result of increased bargaining power with suppliers
• Reduction in transaction costs
• Inventory and carrying cost savings
• Future potential for improvements, value creation and adaptability to change
• Reduction in “Request for Proposals” and “Request for Information” costs
• Decreased staffing costs
4. How can Cathay use the Balanced Scorecard technique to measure the short term and long term benefits
delivered by CXeBuy?

Balanced Scorecard technique can be used to look at the performance of CXeBuy against enterprise, project and process
level targets.
Short Term:
1) Financial Gains: savings in terms of process efficiency, cost reductions (staffing, inventory, etc.)

Long Term:
2) User satisfaction: reduced time in routine and mundane tasks, better time management, greater control over working
environment would lead to better service
3) Procurement process alignment with overall business objectives
4) Future potential for improvements, value creation and adaptability to change

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

Cathay’s e-procurement strategy is an e-business initiative, which is part of its corporate mission to be Asia’s leading e-
business airline. Cathay has decided to invest US$256 million over three years in Internet-related technologies. E-
procurement is one of the 30 projects that Cathay has planned to implement towards this mission. Through these projects,
Cathay expected to generate a substantial increase in revenue and achieve significant cost savings. Most of the
savings were expected to come from online purchasing, including a substantial reduction in inventory and its carrying
costs. It is expected to strengthen Cathay’s position and leverage its purchasing power as a procurer of a variety of supply
items across the globe.
Following are the six business benefits that e-procurement can offer:-
• Reduced procurement administration costs
• Improved information intelligence for reporting purposes
• Improved compliance with corporate spend policies and supplier contracts
• Shortened req-to-cheque cycles
• Strengthened negotiating muscle with suppliers
• Freeing up of purchasing staff to engage in strategic tasks