MBM|PGP/19/046

eProcurement at Cathay Pacific Airways: e-Business

Valuation

1. What are the benefits of the e-procurement systems for the

Airlines Purchasing Department?

Reduction in the purchase price

Reduced inventory cost as lesser inventory is stocked now
Reduced Request for Proposal and Request for Information cost
and hence reduction in transaction cost
Reduction in order cycle time
Improvement in order accuracy
Time saved in procurement
Real-time availability of standard & ad hoc purchasing
information
Improved supplier data and price visibility
There is more information on product in a more accessible format
Personalized information to meet individual/departmental
requirements
Negotiation of prices done centrally from preferred suppliers
Improved supplier and spend information in accessible format
(info on new suppliers)
A More structured supplier-management
A more efficient supplier sourcing process that generates value
addition
Increased market visibility

2. Mention the concerns of key managers in Cathay Pacific

regarding the e-procurement system implementation?

Major concern regarding how to Find a suitable inventory

management system for CxeBuy (previously supported by
EMPACS)
The External system integration with the e-marketplaces
Building a database like spend and supplier preference data,
sales and inventory data

Obtaining approval of all the procurement departments for the

new systems.
The Streamlining of number of suppliers was a highly time
consuming process which involved various parameters to be
taken into consideration
Placing Proper demarcation of ability to access catalogues, spend
limits etc. and also authorization structure which was to be
decided
There was an issue of varying ordering and restocking process
for different categories or also between items of the same
category
Smooth integration of CXeBuy with the EMPACS and FMIS was
reqd. for the purchase requisition process to be linked with the
goods-receiving and goods-payment processes.

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

benefits?
One can try to weigh the benefits with cost (cost-benefit analysis):
Cost

Benefits
19 external consultants
and Oracle specialists to
be posted
Internal and external
communication
channels
8 Cathay staff and 8
PWC staff required fulltime for 9-14 months
Hardware and software
required

Inventory reduction (about

US$10 m)
Thre is integration of
requisition and payment
process
Automation of the nontechnical purchases
(US$385 m)
Easier for user to use and
understand
Corporate buying power
can be leveraged
More information on
expenditure and the
supplier performance is
available
Faster order cycles

One can quantify using the amount of time saved in the ordering
process for different departments separately and aggregate for the
whole firm

4. How can Cathay used the Balanced Scorecard technique to

measure the short term and long term benefits delivered by
CXeBuy?
Balanced scorecard method can be used to assess the benefits
delivered by CXeBuy in following ways:

Evaluation of the financial gains in terms of cost reductions in

Staffing, Inventory etc.
Integrating the procurement process with the overall business
process
Measuring the satisfaction levels of system users in terms of time
taken in routine mundane tasks.

5. How can Cathay's e- Procurement strategy contribute to its

mission?
Mission To implement a 14 month project aimed at applying Internet
based technology to build the most efficient purchasing process and
capability in the industry
Cathay e-procurement strategy can contribute to its mission by the
following way:

Being used as a tool to automate and speed up requisition process

Reduction of any form of delay via printing, signing or handling

Central budget can be decided by top management and allocated in

the beginning to the different departmental heads

No raising of tickets for orders, i.e. decentralization of the process

with better control in the hands of respective departments

A few purchasing staff is now freed to engage in other strategic

tasks

Streamlining of delivery of goods for respective departments, hence

eradicating the need for employing a distribution control separately

The overall cost per transaction reduced by 59.66 % and the avg
time for the entire P O transaction is to reduce (by 58.09 %), thus
adding value to the company