Assignment 2

eProcurement at Cathay Pacific Airways

What are the benefits of the e-procurement systems for the Airlines
Purchasing Department?
Benefits of e-procurement system are:
 Improved supplier and spending information
 Increase in value added by a more efficient supplier sourcing process
 Reduced requests for Proposals and Request for information cost
 Increased market visibility
 More product information in available with different departments
 Customized product and supplier information to meet individual and
departmental requirements
 Faster order fulfilment

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
 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:

Time

 Improved information intelligence for reporting purposes

 Improved compliance with corporate spend policies and supplier contracts
 Shortened ‘req-to-cheque’ cycles

Money

 Reduced procurement administration costs

 Strengthened negotiating muscle with suppliers

Opportunity Cost

 Freeing up of purchasing staff to engage in strategic tasks

Case already suggest using category

 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:

 Money – amount saved from reductions in administrative costs, and the money
saved by negotiating better deals due to the extra bargaining power.
 Opportunity Cost – value of the other strategic tasks that are now accomplished
using staff freed up by CXeBuy

The Balanced Scorecard technique could be used to look at performance of CXeBuy under
the following target categories:

 Enterprise level
 Project level
 Process level

In the short term, process level analysis would yield immediate valuations of benefits and
savings in terms of: 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:
How can Cathay's e- Procurement strategy contribute to its mission?

Cathay’s e- Procurement manages, thanks to the web, to enable the procurement of goods
and services for five of the airline spend categories (in- flight service, cargo, information
technology, and marketing and office supplies).

Indeed, through Cathay’s 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