Cathay Pacific Company’s E-Procurement System

This recommends the implementation of e-procurement system (CXeBuy, namely) by Cathay Pacific due to the benefits that should be experienced by the company with the course of time. As the focus is made on the improvement of the purchasing process and capability, there is a necessity to develop an e-business valuation as well, so that the results of the change can be measured.

Background

Cathay Pacific Airways is an organization that operates in the airline industry for more than 50 years already. Being founded in Hong Kong, it soon became one of the best carriers in Asia and expended globally, serving more than 70 countries. The company is willing to be admired by the clients that is why it implements various changes that are likely to benefit its customers. After the events that have happened on September 11th, Cathay Pacific Airways as many other airlines faced the economic downturn.

In order to overcome it, the organization considered the possibility of e-procurement implementation. Even though such alteration is likely to reduce expenses and enhance capability, the Project Steering Committee (PSC) is highly concerned about the necessity of redeployment and possible adoption issues. Thus, the implementation of e-business valuation is recommended to measure benefits.

Recommendation

The company expects to reach an inventory reduction of $10 million per year. In addition to that, CXeBuy is likely to be used in 35%-50% of purchases, which allows to gain almost $400 million faster than usual. Considering this and other advantages, the implementation of e-procurement system and e-business valuation should be maintained by the airline. If adopting this change, the company is likely to observe benefits in three perspectives regardless of possible challenges (Exhibit 1).

Its user and airline purchasing department, as well as suppliers, will notice operational enhancement. In addition to that, the company will have an opportunity to meet its main organizational goal and to be admired by customers due to the innovative purchase opportunities provided due to CXeBuy and feedback opportunities maintained under e-business valuation. Such approach can also be used by other companies that offer their products and services directly to the customers. This change is made to cope with the economic downturn due to technological innovations, which is a rather universal approach.

Basis for Recommendation

Cathay Pacific Airways is expected to benefit from the implementation of CXeBuy and e-business valuation. Even though additional costs will be needed to pay the staff who is working on the project, the company will get payback and obtain other advantages when using this innovation routinely (see Exhibit 2). Of course, there is a possibility that its competitors will reach a similar improvement. However, the airline is likely to win the competition, being the pioneer.

Discussion

Cathay Pacific Airways can offer the heads of the departments to implement CXeBuy and e-business valuation on the voluntary basis or to avoid this alteration at all. However, it will be better for the company to apply the change so that it can overcome the economic downturn (see Exhibit 3). What is more, an increase in productivity, streamlined operations, and reduced costs are likely to be observed.

Next Steps

After the successful implementation of the discussed initiative, the company is willing to focus on the non-inventory contractual spend. In addition to that, further implementation of CXeBuy is likely to be observed in other locations if the ports maintain enough transactions to prove the necessity and benefits of the deployment.

Exhibits

Exhibit 1

Possible Challenges:

There is a possibility that the money is saved not directly due to CXeBuy but under the influence of another initiative.
Department heads may be unwilling to maintain redeployment of staffing and resources.
This change may fail to meet initial project benefits and organizational purpose.
The adoption of the initiative and its proper utilization on the regular basis may be time-consuming so that the company will not be able to enhance its competitiveness when needed and will fall behind other airlines.

Exhibit 2

Advantages of CXeBuy.

For Airline Purchasing Department	For User Departments	For Suppliers
More accurate information considering suppliers and expenses	Easy to use	Enhanced access to clients
Enhanced supplier sourcing procedure	Product information can be easily accessed and is more expended	Reduced costs of sales
Reduced costs needed to request information and proposals	Both individual and departmental needs can be fulfilled. Customized product offerings are aligned with supplier information	Expended targeted market
Better market visibility	Orders are processed faster	Improved order-handling procedures

Exhibit 3

Options Grid

	Option 1	Option2	Option 3
Description of Option	Implementation of CXeBuy and e-business valuation with the redeployment of staffing and resources.	Voluntary implementation of CXeBuy by the user departments to evaluate the influence of this initiative on the company’s performance and customer satisfaction	Avoidance of the implementation of Internet-based technology
Overall Assessment	Recommended due to the possibility to streamline the procurement of goods and services in three main spend categories and reduce costs	Not recommended because it is likely that only a limited purpose will be fulfilled so that no valid assessment will be reported. Thus, it will be impossible to observe real influence of CXeBuy on organizational operations	Not recommended because no changes that can help the company to deal with the economic downturn are considered
Strategic Fit (Core Competencies)	Innovative technologies that currently benefit different businesses and appeal to clients. Increase in productivity, streamlined operations, and reduced costs are likely to be observed	Innovative technologies will be implemented only partially and, possibly, for a limited period of time. Only a few departments may be willing to adopt a change so that the implementation of e-business valuation will be in vain, end expenses will not be approved	The company does not have any critical issues that require internal changes but the overall problem of the industry affects its income greatly. Thus, the company needs to apply some changes that can give it an opportunity to be competitive
Financial Attractiveness	Project costs are focused on the salary for people who are working on it while inventory reduction of $10 million annually is expected. In addition to that, CXeBuy is likely to deal with up to 50% of purchases, which is almost $400 million	Project costs that include the salary for the staff who is focused on the initiative will be required. However, reduction of expenses and increase of income can be extremely limited because only a few departments can be willing to adopt a change	The company will not deal with any additional expenses but it will remain in the state of downturn
Noteworthy Risks	The implementation of this initiative is likely to be time-consuming. Competitor’s reaction is not considered	If the majority of the departments reject the initiative, costs needed to develop it may exceed benefits	No competitive reaction will be observed

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