6/28/2018 Managing Business Market

eProcurement at Cathay Pacific

Airways

Ankita Gupta
PGP/21/370
1. What are the benefits of the e-procurement systems for the Airlines Purchasing Department?

Solution: The benefits are listed below:

 Due to less stock, the inventory cost is reduced

 Request for Proposal and Request for Information cost is reduced and so is the transaction cost
 Market availability in increased
 Improved order accuracy
 Reduction in order cycle time
 Reduced procurement time
 Reduction in the purchase price
 Real-time availability of standard & ad hoc purchasing information
 Improved supplier data and price visibility
 Improved format of product with more information as well
 Personalized information to meet individual/departmental requirements
 Centralized negotiation of prices from preferred suppliers
 Improved supplier and spend information in accessible format (info on new suppliers)
 A More structured supplier-management portal
 A more efficient supplier sourcing process with additional value addition

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

Solution: The concerns of the key managers regarding the e-procurement system implementation are
listed below:

 Major concern- How to find a suitable inventory management system for CxeBuy
(previously supported by EMPACS)
 Integration of external systems with the e-marketplaces
 Creating a database- for example; spend and supplier preference data, sales and inventory
data
 Obtaining approval from all the procurement departments for implementing new systems.
 Streamlining of number of suppliers involved various parameters to be taken into
consideration, hence it was highly time consuming
 Setting Proper demarcation of ability to get to indexes, spend limits and so on and
furthermore approval structure which was to be chosen
 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?

Solution: Cost-benefit analysis can be used as a tool to quantify the benefits.

Costs Benefits
1 9-14 months of 8 Cathay staff and 8 PWC Inventory reduction of about US$10 m
staff required full-time

2 19 external consultants and Oracle Integration of requisition and payment

specialists to be posted process

3 Internal and external communication Automation of the non-technical

channels purchases (US$385 m)

4 Hardware and software required Leveraging of corporate buying power

5 More information on expenditure and the

supplier performance is available

6 Quantifying the improved order cycles by

improved order accuracy, order time etc.
7 Easier for user to use and understand

4. How can Cathay use the Balanced Scorecard technique to measure the short term and long term
benefits delivered by CXeBuy?

Solution: Balanced score card method can be used in the following ways:

 Integrating the procurement process with the overall business process

 Analysing the financial gains in terms of cost reductions in Inventory, staffing, etc.
 Measurement of 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?

Solution: Cathay can contribute to its mission in the following given ways:
 Reduction of delay of any form via printing, signing or handling
 The overall cost per transaction reduced by 59.66 % and the average time for the entire P O
transaction is to reduce (by 58.09 %), thus adding value to the company
 Tool to automate and speed up requisition and procuring process
 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
 Availability of few purchasing people to focus on other strategic tasks
 Streamlining of delivery of goods for respective departments, hence eradicating the need for
employing a distribution control separately