E-Procurement at Cathay Pacific

E-Business
Anand Singh (PGP/19/004)

Questions
1.

What are the benefits of the e-procurement systems for the Airlines Purchasing
Department?

There were a lot of benefits expected for Airline Purchasing Department. Some of
these are:
1.
2.
3.
4.

2.

Better and improved supplier and spend information

A more efficient supplier sourcing process that generates value
Reduced Request for Proposals and Request for Information costs
Increased market visibility

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

CXeBuy, as an e-procurement system, lacked the inventory

management function that was previously supported by EMPACS
Streamlining the 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
Cataloguing Terms for maintenance of the catalogues had to be
negotiated with suppliers and the e-marketplaces
Incorporating the spend authorisation protocol To ensure that the
requisition-to-payment process could be electronically executed in
an efficient and timely manner
Business Process Reengineering of procurement practices
Continuous process development along with change management
should be ensured

Anand Singh (PGP/19/004)

Case Analysis

3.

Systems Integration CXeBuy should be completely integrated with

EMPACS and FMIS
What kind of financial metrics can be used to quantity the benefits?

The six key business benefits from implementing the e-procurement system
could be classified under the following heads:
1) Time
a. Improved information intelligence for reporting purposes
b. Improved compliance with corporate spend policies and supplier
contracts
c. Shortened req-to-cheque cycles
2) Money
a. Reduced procurement administration costs
b. Strengthened negotiating muscle with suppliers
3) Opportunity Cost
a. Freeing up of purchasing staff to engage in strategic tasks
Case already suggest using category 1) Time savings as a financial metric, and
gives a sample calculation in Exhibit 10 showing the reduction in transaction cost
from HK$ 205.8 to HK$83.0.
Apart from Time, two other possible metrics, from our above classification, could
be:
2) Money amount saved from reductions in administrative costs, and the
money saved by negotiating better deals due to the extra bargaining
power.
3) Opportunity Cost value of the other strategic tasks that are now
accomplished using staff freed up by CXeBuy

4.

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

The Balanced Scorecard technique could be used to look at performance of

CXeBuy under the following target categories:
1) Enterprise level
2) Project level
3) Process level
In the short term, process level analysis would yield immediate valuations of
benefits and savings in terms of:
1) Financial Gains: cost reductions (staffing, inventory, etc.)
In the long term, project and enterprise level analysis of the larger system, not
just CXeBuy as a standalone would show benefits in:

Anand Singh (PGP/19/004)

Case Analysis

2) User satisfaction: reduced time in routine and mundane tasks would lead
to more time for greater control over working environment and thus 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?

Cathays e- Procurement manages, thanks to the web, to enable the

procurement of goods and services for five of the airline spend categories (inflight service, cargo, information technology, and marketing and office
supplies).
Indeed, through Cathays e-Procurement strategy and valuation we can
identify six keys business benefits that show they how contribute to its
mission:
Reduced procurement administration cost
Improved information intelligence
Improved compliance with corporate spend policies and supplier contracts
Shortened required times to cheque cycles
Strengthened negotiating muscle with suppliers
Freeing up of purchasing staff to engage in strategic tasks

Anand Singh (PGP/19/004)

Case Analysis